Behaviour can affect affluence

There are two types of popular behavioural patterns pertaining to financial management that we exhibit. "Acquired behaviour" and "drive based behaviour". These behavioural patterns tend to affect our innate need to first own "money" and then "create more money" and then "create even more money", thus putting us in a never ending cycle.

ACQUIRED BEHAVIOUR

Covert or internal behaviour stems from what we are, what we have learnt, what we have seen and what we have been advised and taught. It is controlled by our skills, knowledge and resources, which we have built over the years. The most important influencer of this behaviour is the environment in which we have lived. The point where things start falling apart is when the environment itself changes.

Need for newer skills, resources, knowledge becomes acute while we continue to hold on to the principles of the past. There is a huge element of personal bias as well which largely stems from the lack of knowledge.

Common mistakes

1. Equity investments are like gambling, therefore risky and hence can eliminate our money is one of the most common notions.

2. Endowment policies are a great idea whether it is 1980 or 2012.

3. Online transactions are an invitation to fraud and thus best avoided.

4. The CA knows everything and whatever he says is right.

5. Investment in gold is never a bad idea. Thus most of our actions are based on our understanding, which at times may be rather shallow.

The fact is that most people do not understand equity investments; endowments were a good idea in 80's and early 90's and they are wealth destroyers now; online activity is highly efficient mode of working plus audit trails become extremely easy; CA is an expert at tax related matters and debt management or mutual fund advisory is just not his forte; gold can be stagnant for many years; that's possible.

... contd.

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