Self Worth – Psychology of Personal Finance

As an economist who has always held an interest in the behavioural side of things, I thought it would be interesting (& hopefully useful) to produce an article or two on the psychology of personal finance. A lot of problems people face when talking personal finance is due to their self worth.

What do you mean by self worth?

Self worth is described by psychologists as the way in which you feel about yourself. If you feel good about yourself, you have a high self worth. In contrast, if you feel bad about yourself you are said to have a low self worth. Self worth is linked to many factors in your life as it can impact how you act.

How does this impact your finances? Well, if you feel bad about your personal finance situation then you will not handle your money in the best way. For example, if you believe you won’t be successful with your finances you will act in a way which makes this true – a self fulling prophecy. Instead of doing the logical ideas of saving, investing, etc. you will avoid them as you have predetermined you will not be successful. This creates a problem – you are the cause of your own failings. To stop this, you need to change your mindset.

Money mindsets

The reason we have a low or high self worth when it comes to personal finance is tied to a core belief. With personal finance, these are called money mindsets. You may believe in phrases such as:

  • Time is money
  • Money doesn’t buy happiness
  • Money talks
  • and many more

The important thing to do here is find a money mindset which matches your beliefs and see how it impacts your personal finance behaviour over a span of a month.

These mindsets can often help explain buyers remorse. For example, if you believe in shopping when you are stressed (retail therapy) then you will shop for happiness. However this creates a cycle. After buying you will plan to save tomorrow, but tomorrow doesn’t come and the purchase will not have brought you happiness, so you repeat the process.

What can I do?

In order to change the issue your money mindset needs to change. It is easy to say you need to believe in yourself, but much harder to say how you do that. My best advice is to research. Find out information about how to control your finances, gain an understanding of what you are doing so that you become confident in your ability. Seek out the help. Take those steps of investing and saving, if it fails then it is a learning curve – keep trying and learning and you will see success. Realise that finance is important and pick up a money mindset which matches this better. It’ll take time, so be open to failure but make continuous improvements along the way.

Do you like this sort of article? I am really interested in psychology so it was a nice article to write. If you would like more of these types of articles please let me know below.


  1. Lyn

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