Our emotional associations with people, places, things and experiences can be deep-set. They can also be damaging, restricting and tough to override.
Why do we like the things we like?
Our likes and dislikes are a complicated mix of nature, nurture and neuro pathways, but modern psychology’s Approach / Avoidance Theory sums it up nicely.
Think of a magnet: a magnet attracts certain things, like metal, but repels other things, like plastic (it’s true). Humans, in the same way, are drawn to things we like and make us feel good while we push away things we don’t like or believe may cause us harm.
So if you like ice cream, you’re drawn to the ice cream shop – it makes you happy. If you don’t like vegetables you might swerve them because, well, they don’t make you happy.
Let’s talk money
Approach / Avoidance Theory features in our behaviour with money and attitudes to risk.
Plenty of people associate spending money with pleasure and excitement so they approach it with glee, despite the risks of overspending and debt.
Conversely, some people are so risk averse – often the result of a bad experience – that they avoid certain things. Food poisoning = no more oysters. Bad flight = no more planes.
Lost money = no more investing. No more risk-taking.
Essentially, we use past experiences, good and bad, as an indicator for future outcomes. If spending is an established path to joy, we spend. If investing equals failure we avoid. These deep-set pathways are there to enrich and protect, but that’s not always a good thing.
The brain’s not at fault here — it simply uses the data it has — but if we’re to change behaviours, or wriggle free of our hang-ups, we need to give our on-board computers some new information.
Associations for overspenders
If you overspend too much or too often then think about what role it has has in your life. What hole does it fill? What emotional and / or social nourishment does it give you?
It can be helpful to write an honest list of the pros and cons and see it in black and white. It might look something like this:
Pros: spending is a buzz, makes me feel good and gets me out the house.
Cons: the buzz doesn’t last, I’m in debt and I’m losing my confidence / self-esteem.
Though damaging, overspending does a job. You get something from it. The next step could be finding the same relief or satisfaction through other activities.
For the buzz – try exercise. Feelgood factor – spend but only in charity shops. Socialising and self-esteem – learning a new skill could be a more sustainable route.
Retrain the risk-averse brain
Being risk-averse can be a good thing, but you’ll limit your financial growth if you see only risk and never opportunity.
Here’s some tricks and ways to start a healthy relationship with risk.
1. Refocus
Instead of viewing risks as scary or threatening, try to focus on the potential rewards. Imagine the excitement of making a smart investment. Imagine the emotional satisfaction of hitting a new financial goal.
2. Enforce the positivity
If the risk-averse brain is to open up it needs positive examples so seek out stories and people who have stepped ahead by taking calculated financial risks. Learn from others and let their good experiences inform your own associations.
3. Reframe failure
If you feel you’ve been burned before then try to reframe that event. Instead of perceiving it as a catastrophic failure, see it as a learning experience. Learn from it, change your approach and recognise that yesterday’s failures can inform wiser decisions today.
4. Focus on your values
Most of us want to live a happy and satisfied life in line with our values and what we deem important. Perhaps it’s time to see taking calculated risks as a way to accelerate towards those goals. Risk can facilitate bringing your values to life.
5. Visualise
Instead of visualising negative outcomes, visualise what’d happen if a calculated financial risk led to a positive outcome. Forecasting tools are a great way to help you assign a monetary value to your vision so you stay the course with your investments.