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How Human Nature Can Lead Us Down the Wrong Financial Path

Human nature can govern how we handle money. Most of the time we focus on what we perceive to be our immediate needs. This can affect how we think about money and how we manage it. Our attitudes can also reflect our upbringing and our learned skills. All these factors can influence our spending and impact our personal finances.

Money and Human Nature

The way we handle money can be emotional. Our peers, the people we admire, and the fear of missing out can keep us in a spending cycle. These cycles can break our budgets and lead to money problems.

Our social group

Our social groups can influence how we spend our money. We may spend money to have the same experiences or purchases as our friends. “Keeping up with the Joneses”, buying things that are the same or better than those in our peer group.

We might see this as a necessary part of fitting in with the group. However, you may have different financial circumstances than your peers. Or you might want to spend your money on something other than the things your friends do.  And it’s also possible your friends may be going into debt to fund their lifestyle. You can not compare your financial state to others.

Social Media Influencers

Being influenced by others to spend money isn’t new. Advertisers have been doing this for centuries. But what is new is the explosive growth of social media influencers on various social media platforms. 

The ones that appeal to your interests may also influence you to aspire to a particular lifestyle or spend money on certain products. If the influencer is someone you trust and admire, you may be tempted to spend your money to be more like them, or buy things that they recommend.

Fear of missing out (FOMO)

Nobody likes to feel left behind or miss out on a great experience or important event.  Seeing our friends or favourite influencers posting fun outings or buying a fantastic product can make us want to do the same. Of course, wanting to have or experience the same things as our friends is natural. Sometimes, this can lead us to spending more money than we have and makes a mess of our finances.

Not all financial paths are right for us. We can be swayed by our social media networks and other outside factors. Here’s a look at what influences us. 

The impact of human nature on personal finances in Canada

Canadians have access to many kinds of credit, like credit cards, overdraft protection, loans, and lines of credit. These can all be useful, but they can fuel overspending.

It’s easy to end up with a lot of debt if we’re using credit to “keep up with the Joneses,” imitate a social media influencer, or because of a fear of missing out. If you use credit regularly, it’s important to know the warning signs of debt so you can make changes before you end up in financial trouble.

Debt can become a serious problem, leaving us unable to reach our financial goals. If you become insolvent, you might need to get debt relief by filing a Consumer Proposal or filing for Bankruptcy. In Canada, debt loads are causing an increase in financial difficulties. In March 2023, the insolvency rate in Canada for consumers increased by 28% from March 2022.

Getting Human Nature to Work For You

The good news is that while our natural tendencies can lead us into financial trouble, they can also help us get into great financial shape. Most people want to fit in with our social group, be like the people we admire and not miss out on amazing life experiences. Fortunately, it’s possible to do these things while creating financial security for ourselves. 

You can do both by:

  • Identifying what you value.
  • Achieving financial literacy.
  • Working with a financial advisor.  
  • Getting help with your debt.

Identifying what you value

Deciding what matters to you can help you curb your spending. You could be wasting money on things you don’t value if you’re buying things to fit in with your friends or because you fear missing out.

Finding out what’s important to you can help you match your spending with your values. If you decide paying off your debt is important, you’ll be less likely to spend money on things that don’t align with that goal.

Financial literacy in Canada

Becoming financially literate will help you manage your money well. Learning about the interest rates on your debt, the amount you have to spend each month, and how to save money to reach your goals can help you enjoy your money while saving for your future.

November is financial literacy month in Canada. The Financial Consumer Agency of Canada (FCAC) puts together a series of resources and events you can access to learn more about personal finance in Canada. You can access many of these resources anytime to become financially literate at your own pace.

Finding a financial advisor

Sometimes there’s no substitute for professional advice. A reputable financial advisor can help you develop a financial plan. You might want to pay down debt, save for an emergency, or set money aside for other financial goals like your kids’ education or your retirement. 

Of course, it’s essential to check the qualifications of the professional you want to work with. Not all financial advisors have the training or licensing to help you make the best decisions. 

Getting debt help

Using credit to make major purchases is commonplace. Many of us have a mortgage on our home, have car payments, or use a line of credit. Borrowing can help you accomplish goals that might be difficult or impossible without using credit, like homeownership. 

Sometimes, the amount of debt you have can become a problem, causing stress and anxiety. Early warning signs of debt trouble can be:

  • Difficulty making payments and using credit to cover monthly expenses.
  • Making payments, but the amount of debt you have isn’t going down.
  • Some of your debts are overdue or in arrears.
  • Using high-interest loans like payday loans to fill in gaps in income caused by too many debt payments.
  • Worrying about debt interferes with your enjoyment of life.

Where to get Debt Help

You don’t have to struggle alone if you recognize the warning signs of debt problems. At Allan Marshall and Associates, our Licensed Insolvency Trustees have the training and expertise to help you find the best solution for your debts. 

We offer debt relief in Canada by providing options such as credit counselling, Consumer Proposals, and Bankruptcy, to deal with your debt. Call us today at 1-888-371-8900 for a free consultation to get out from under your debt burden and start fresh.

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Francyne Myers, JD, CIRP, LIT

Francyne spent many years in senior positions with the Office of the Superintendent of Bankruptcy. During the course of those years, she also found time to study Accounting at Saint Mary's University and attend the Schulich School of Law (formerly Dalhousie Law School) to earn her degree in law (J.D). In 2012, Francyne left public service life and joined Allan Marshall & Associates Inc. where she completed her education becoming a Licensed Insolvency Trustee in 2013. She is actively involved in her local Trustee Association and enjoys helping others find solutions to their financial problems.