Your spending habits are influenced by everything that makes up your personhood – your values, experiences, and culture. Financial psychologist Preston D. Cherry, a certified financial planner and founder of Concurrent Financial Planning, explains that financial psychology encompasses how people think, feel, and behave in relation to money throughout their lives.
Cherry, a member of CNBC’s Financial Advisor Council, emphasizes that your identity plays a crucial role in shaping your financial decisions. He also highlights the impact of social conditioning, such as budgeting, on spending habits.
While budgets are effective in addressing maladaptive financial behaviors and controlling spending, they can feel restrictive. Cherry suggests reframing them as “spending plans” to provide a sense of freedom and flexibility.
Spending plans enable individuals to save for the future while enjoying their present lives, offering permission to transition between different life stages.
Cherry explains that the key is to let your life guide your financial decisions rather than letting money dictate your life.
How to ‘let your life lead your money’
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Preston D. Cherry introduces his “6-A Alignment System” as a method to enhance financial wellness. This system promotes intentionality and self-awareness regarding money-related thoughts and actions.
The first three As involve taking stock and setting intentions:
- Admit where you are in your journey: Start your financial journey by honestly assessing your current situation. Cherry emphasizes that everyone’s journey is unique.
- Acknowledge how you feel about it: Recognize and accept your emotions related to your financial situation with grace and compassion.
- Take action into your life: Shift your energy towards your goals and move forward with a clear vision.
The subsequent three As – align, aspire, and achieve – involve aligning your desires, setting aspirations, and ultimately achieving them. Cherry emphasizes that this process is ongoing.
According to Cherry, practicing financial compassion yields long-term benefits. Starting with compassion, individuals can progress to financial education and ultimately achieve financial literacy – making informed decisions and behaviors.
By letting your life guide your financial decisions, you can attain a balanced state where money serves as a tool for your desired life, rather than controlling it.
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