How do money habitudes affect successful investment behaviour?

How do our money habitudes affect how we invest?

In this episode,  we’re going to have a look at how important it is to understand your personal emotional relationship with money, and how it may affect your behaviour when you’re investing. Understanding your money habitudes is so important, because a huge factor in being a successful investor is taking planned, deliberate action to avoid common behavioural traps that could lead to bad investment decisions.

As human beings we all make decisions that do not necessarily make sense because we are driven by emotion.

How many times have you purchased another course that you perhaps don’t need when you attend an event because you are driven by the emotion that the event has brought up in you? Perhaps the event has made you feel that you need to be better at something, or that you’re not as advanced as others in a particular area.

These emotional traps are common because we’re human, and we don’t all behave in a logical, rational way. Thinking about investing, these behavioural traps are often called ‘investing biases’ – and they’re 100% emotional.

But, the good news is, once you understand these biases – and yourself – better, you’ll be able to take that deliberate, planned action to avoid the traps.

Understand your money habits.

I do a lot of work with people to help them understand what I call their personal spending profile. A spending profile can tell us a lot about our relationship with money, and how we’re likely to behave when we invest.

When you dig into your spending profile, you discover that you’ve developed things called money habits. We all have them, and there’s no doubt they have a massive influence on our lives.

How we feel about money is shaped by lots of things like our family, our peers or community, our faith, our personality type and, of course, our experience. And this means they’re deep-rooted and mostly sub-conscious.

In my work I use the Money Habitudes software which has been designed by a very clever and rather wonderful lady called Syble Solomon. We have spoken many times on the phone debating the psychology of money!
In the Money Habitudes work, there are six money habitudes, and we all have a combination of some, or all, of them.

Habitudes = a combination of habits and attitudes. In other words, how we automatically feel about money and how we automatically react around money.

Our health can threaten our safety and how secure we feel. As women we typically underestimate our own security for the sake of our children. We forsake saving into a pension, for example, and then fall short in later life when we find that we have a pensions gap.

Often the problem with looking at budgeting or setting up financial products is that our behaviours have remained unchanged. To be more confident with money and build true wealth and financial happiness you have to explore the emotional side of our habits and emotions around money. 

The 6 different money habitudes are;

  • Spontaneous
  • Planning
  • Security
  • Carefree
  • Status – and 
  • Giving 

When these are  combined with investment biases, they can really impact how successful we are when we invest.


This is something I know a lot about, because it’s one of my strongest money habits.

It kind of means what it says – I used to get a thrill from buying something completely unplanned. And often it’s something I’d never thought about buying before. The thrill is great, but the down-side is, if I don’t manage this habit, I can spend money I don’t have. So, either I go into debt, or I end up sacrificing my longer-term goals, because I’ve blown my savings.

Money habits may well link closely with several investment biases. They won’t be the same for everyone, but I’ll use an example to give you an idea of what I mean;

Two investment biases I believe go hand-in-hand with a Spontaneous money habit are the self-attribution and illusion of control biases. These simply mean you’re really over confident. You think that every investing success you have is down to you. Conversely, if things go wrong, it’s somebody – or something else’s fault. You also totally over-estimate the control and influence you have over things that are nothing to do with you.

From an investment point of view, it means you may take far more risk than you should. If you take too much risk, you’re likely to end up feeling super stressed and ironically, more out of control. Because you don’t get the results you expected.

Just like spontaneous spenders.

This is like buying a gorgeous pair of high-fashion jeans without trying them on. You’ve convinced yourself they’ll suit you because they look amazing on the hanger. But, if you really thought about it, you know that low-rise skinnies do absolutely nothing for your body shape.

And did you need another pair of jeans? Not really.

So, with investing, this all comes back to staying true to your goal – what are you investing for? Have you put your money somewhere that’s going to help you achieve it?


This means we’re clear on our financial intentions.

That’s great, but sometimes our focus on the plan means we’re not open to new opportunities and we may not consider things that don’t ‘fit’ what we expect. It also means we may have all good intention but don’t follow through.

I think this habit links closely with an anchoring – or confirmation – investment bias. This means we stick firmly to what we believe, and we look for examples that support our beliefs, and ignore stuff that doesn’t.

The risk for you here is you stick to a limited range of investments and don’t diversify enough. In other words, you have all your eggs in one – or too few – baskets. Ask yourself; do you really want to pass up the opportunity to invest in something new with a lot of potential, that could be a better fit than where you’re invested just now?

This is like limiting yourself to the shift-dress and kitten heel combo that you’ve been wearing since your early twenties. Because it’s become your trusted ‘look’. But the problem is, You may need to try some new looks; mix it up a bit and experiment.

The investing message here is; do your research and make sure you’re aware of all your options.


The upside with this habitude is often you are focused on staying safe and feeling secure.

The problem is, you may avoid risk and save so much, you don’t really enjoy living in the moment. Or you just stick with cash. I associate three different investment biases with a security money habit.

  1. Loss aversion. You’re so keen to avoid losing the money you’ve invested, that you don’t take nearly enough – or any – risk.
  2. Familiarity – A familiarity bias means you stick with – and limit yourself – to what you know.

    So, like before, you don’t spread your money across enough different investments to properly diversify.
  3. Hindsight bias. Hindsight is a wonderful thing – and it’s definitely true with investing! If we had a crystal ball, we’d all be trillionaires – but life’s not like that.

    The problem is, if start believing we should have been able to anticipate and avoid losses, then we get confused or massively worried about our own abilities – so we try to avoid risk.

It all comes down to anxiety about the perceived risk of investing.

How many times have you waited for change because you fear the worst might happen? Worse than trying and failing is failing to try at all. You just have to say yes and think about how later!

So with investment risk, there’s actually more risk to your long-term financial well-being if you don’t take some investment risk. But a lot of this is down to confidence.


The carefree money habit also has ‘lack of confidence’ as a downside – but this is more because you just don’t think it’s important to learn about managing your money. Perhaps money wasn’t serious growing up. Or perhaps it has just never been a priority for you, even though you get frustrated with how out of control your finances might get.

If we use another clothing analogy, many of us use baggy or way-too-comfy clothes to mask body confidence issues. Or maybe we’re just not that bothered about what we wear.

With your investments, You don’t have to let your lack of confidence limit the potential gains you can make.

Do your research. And use the tools and guidance that’s available out there. Start small and stick to some simple rules and you’ll be amazed at what you can achieve.


We’re generous and like expensive things.

Using our fashion analogy – we’re definitely a brand follower and wouldn’t dream of picking up an outfit as we go round Asda. But it can be stressful trying to keep up with the latest fashions. And, we probably buy stuff for appearances sake – not because we need it, or because it suits us.

The trend-chasing investment bias is similar. This means we make the mistake of thinking that just because something’s done well in the past, it’ll do well in the future.

But the fact is, great performance hardly ever lasts forever. It’s like sticking with a particular brand or retailer, just because it has been top in the fashion stakes. I’m thinking here about M&S. For decades it’s been the place to get our undies. And a third of us still buy ours here.

But, M&S’s profits are dropping and it’s really struggled to continue to appeal to every-day women. There are simply more attractive options out there now. But to find them, you need to shake off the old and start looking at the new.

You’re probably seeing a pattern starting to emerge here. We can deal with our money habits and investment biases by understanding how they may have a negative impact on us. And then taking some of those deliberate, planned actions I talked about earlier. And they really come down to three key things:

1. Remembering your goals. Adjust them if things change in your life, but the point is – know what you’re investing for. Giving every pound a purpose.

2. Know how much investment risk or uncertainty is right for you and your goals.

3. Diversifying your investments. Make sure you don’t limit your options and have a good spread of different types. Stick with a core basket of investments and build the sexy stuff later.


I haven’t mentioned the giving money habit yet. This isn’t because it’s not important – far from it – all our habits are important.

But it’s because this is more likely to affect the type of investment you choose rather than the way you choose them.

Let me explain. This giving habit means you’re likely to have strong ethics and integrity and perhaps more likely to save for others before yourself. This is a really common habitude for women. Putting others first. And often we then attach feelings of guilt and shame with money.

When this translates into investing, it means you may want to avoid investing in any companies or funds that have any association with industries like tobacco, fossil fuels or weapons. The good news is, there are loads of ways you can do this by choosing things called ‘ethical’ or ‘socially responsible investments’.

These are company shares or funds that consider social or environmental good as well as making money. You can find out more about these in episode 8 of the series when I spoke with Rebecca Jones from Good With Money.

Exactly the same rules of thumb apply – know your goals, attitude to risk, and diversify. This just becomes another thing to consider when you make your investment choices.

Understanding your money habitudes

I hope this has been a useful introduction to understanding some of the behavioural habits and biases that can affect investment behaviour.

As I’ve said many times – money creates an emotional response in all of us, and our reactions are highly personal. But as long as you’re aware of the potential pitfalls – and stick to our simple rules of thumb, you can enjoy plenty of success!

If you would like to find out more about your own personal habits and attitudes around money and how you can build a plan that you actually stick to, you can find out how you can work with me by heading to my brand new website


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