women and money week8

Identity

The way we see ourselves, and how others see us

Influences leadership, belonging, risk-taking, and access to opportunity

experiencing self

Lives events in the moment

remembering self

Interprets and tells the story of experiences

do the experiencing self and rembering self always agree?

No, these selves often disagree, influencing how we see our lives

what does identity shape

Personal decisions and roles in the community

How can thinking differently open opportunities?

Outsider perspective can be intellectual and an opportunity

Challenging conventional wisdom

Labels and categories affect perception and relationships

Life transitions build leadership skills: adaptability, resilience, courage

what is the foundation of identity shaping leadership

Confidence- use every situation to build confidence

Is identity a limitation or resource

Resource

How does identity influence participation

It influences how we see opportunities, interpret experiences, and participate in communities

What can approaching situations from different perspectives do

uncover insights and alternative paths

Behavioral economics

Blends psychology and economics to understand why people make seemingly irrational financial decisions, deviating from traditional models assuming perfect rationality

Are financial choices always rational?

No, but we can understand what psychological factors influence them and use that to guide citizens toward healthy financial decisions

Nudge

a subtle, low-cost intervention designe dto steer, rather than force, people toward better choices while preserving freedom of choice

what is the default effect with subscriptions

We naturally tend toward the default option with the least friction. Subcription charges are automatic

what is opt in for 401(k) plans

The effort is on the employee to enroll. Fewer employees enroll, but those who do contribute more on average

What is opt out for 401(k) plans

Employees are automatically enrolled and must opt out. Twice as many enroll, but they contribute less on average

How do credit card minimum payment warnings work as a nudge?

they educate consumer sby comparing the cost of making only the minimum payments vs a higher payment, and anchor consumers to a new, higher payment

How do reminders act as a nudge

Help consumers remember to save, be more conscious of spending, and pay bills on time

What are the pros of nudges

Creates positive behavior change, low cost-intervention, maintains individual freedom

what are the cons of nudges

can create unintended outcomes, not always effective, some create inconvenience or too much inconvenience

What is the scarcity marking tactic

Limited time only or only a few left creates creates urgency and nudges us to act quickly

why is spotting scarcity messages useful

It can save us from acting out of urgency and spending on things we didn’t really want

Social proof

When we aren’t sure how to act, we turn to others. Marketers use social proof to transfer trust from an expert or celebrity to their product

what role do reviews and endorsements play

They give us the confidence in a product needed to make the purchase

consumerism

The belief that increasing consumption of goods and services is beneficial for individual well-being and economic growth

How does consumerism shape society

shapes societal values and norms, placing importance on buying goods and services to achieve happiness or status

why is it easier than ever to spend money

we prioritize our current self over our future self

easy access to credit cards to spend money we don’t have

advertising is more targted and sophisticated

4 tips to avoid falling into the consumerism trap

1. Cut out cues to spend (avoid malls, reduce TV/social media, unsubscribe from marketing emials)

2. implement a cooling off period (make an online purchase once a week)

3. consult your budget (set a limit)

4. Look for alternative options

what is FOMO culture among Gen Z

Gen Z is most likely to report feeling financial FOMO; rise in social media exposure increases FOMO; FOMO can create anxiety, low self-esteem, and impulsivity

what are 3 steps ientified for policymakers

Define a specific goal and diagnose the challenges

design interventions that target specific barriers

implement, assess, and adapt

Psychology of money

The study of the emotional, behavioral, and cognitive relationship people have with money

How personal history, emotions, and mindsets drive financial decisions rather than just logic

what does the psychology of money help us do

spot marketing tactics urging us to spend

recognize when emotions are driving decisions

Understand our individual behaviors with money

Build systems that make better choices easier

cognitive biases

Mental shortcuts our brains use to process vast amounts of information and make decisions

can lead us to oversimplify, misinterpret information, or draw irrational conclusions

Present bias

The tendency to focus more on the present situation than on the future when making decisions

Leads to prioritizing immediate rewards over future payoffs

Avoid short-term. discomfort, even if it leds to larger negative outcomes

Loss aversion

a cognitive bias where the emotional impact of a loss is felt more intensely than the joy of an equivakent gain

leads to avoiding investing in riskier investments

feel like we lose money when we save it

Take action on a temporary sale

Mental accounting

how e assign different values to the same amount of money based subjective criteria

Leads to:

• spending cash, bonuses, or tax refunds on fun

• spend money according to mental rules based on how it was obtained, rather than based on goals or priorities

Optimism bias

Our tendency to overestimate our likelihood of experiencing positive events and underestimate our likelihood of experiencing negative ones

Leads to:

• understimating enexpected expenses

• Overestimate future earnings

• assume the market will perform well or bounce back quickly

what is the key truth about our brains and money

Our brains don’t always work rationally, but they do work predictably

Set and forget it automation strategy

automate transfers to savings, bills and debt payments, transfers to investments, and split direct deposit

what does it mean to seek out information

slow down, consider biases at play, and research options before making big financial decisions

check reviews, consider cheaper alternatives, read credible financial articles, consult budget, and automate notifications

why slow down before financial decisions

Slowing down helps us think more critically instead of acting impulsively

wait 24 hours, add to online cart but buy once a week, take time to research

How do you create rules and plans

Define goals and plans, then create systms that make it easy to stick to and hard to diverge from

disconnect credit card from online shopping, avoid stores you overspend at, open savings at a harder-to-access bank

key takeaway about systems vs willpower

To make a difference in outcomes, creating systems and an environment hat supports a goal is easier than relying on willpower

Famous quote about goals and systems

you don’t rise to the level of your goals

you fall to the level of your systems

what did diamond parish say about budgets

budgets changes as values change and the way you manage money changes

what does shame do

Limits you

what should you consider when reflecting on financial decisions

what was going on in life when you made that decisions

How you deal with money is a small fraction of what you’re doing in life

what does consult yourself mean

You can’t implement a system that works for you if you don’t know what you want to do. Find systems that work best for you and be honest with yourself

what makes positive decision-making easier

Awareness of cognitive biases and creating systems