In Australia, we like to think we tackle things head on, never backing off from a challenge. But the reality is, in financial matters at least, more than 40% of Australian consumers fit the category of “avoider”. What does that mean exactly?
How to spot an avoider: the tell-tale signs
- No strong relationship with any one financial institution institutions - prefer the advice of family and friends
- Less likely to do their own research about products like superannuation and life insurance
- Hold multiple superannuation accounts across multiple providers
- Are underinsured - both in general and life/income protection
- Are risk averse
- Lack confidence in their financial future
As a result, avoiders might struggle more with their finances, and are more likely to have less money when they retire.
To top it all off, avoiders experience guilt - they know they should be more on top of their finances, and feel shame talking about money with other people - especially people in banks, and financial advisers.
So why do many of us avoid taking responsibility for our financial futures when deep down, we know better?
The psychology of avoidance
Organisational psychologist Jasmine Sliger has counselled many corporate teams and individuals, helping find strategies to confront self-defeating financial behaviours.
Jasmine says there are two main factors behind avoidance, the first being fear. “Avoiders are often motivated by a fear of failure or of success; a fear of rejection, or a fear of looking foolish,” she says.
Another factor comes from the past. “You can often track a person's avoidance behaviour back to experiences they've had which have been imprinted on their minds and distorted their financial beliefs.
“These experiences could be their parents fighting over money in their childhood, or being the poor kid at a rich school, or their parents giving them negative messages about money. They may have gone through parents losing their nest egg, or seen their parents become destitute in later life.
“Avoiders who have had these kinds of experiences may have low self-esteem in relation to money, and can resort to behaviours that keep them safe from painful or unpleasant associations.”
This can play out in excessive risk aversion by avoiders. Or finding things to distract themselves - like cleaning the closet, or checking Facebook for hours, instead of doing what they know they need to do. “They will resort to escapism, procrastination - all to maintain a sense of safety,” Jasmine says.
This explains why avoiders prefer to seek out the advice of family and friends, and shy away from talking with banks and financial advisers - or from researching the benefits of one product over another: there's less risk of looking foolish.
“In the end they're being held back due to what their parents did,” says Jasmine.
Simple steps to stop avoidance
When Jasmine works with clients who are being held back in this way she recommends a simple course of action.
“I get them to first identify their past financial experiences, and then we start challenging the distorted beliefs. We start practising healthy financial behaviours like setting up an active savings plan, or taking steps to reduce debt. We tend to start with small steps so that people don't get overwhelmed with their own fears. At the end of three months we celebrate how they are going because for some people as successful as they are, they have never addressed these issues at all.”
Find a trusted someone
Jasmine also strongly recommends buddying up with someone you trust who has no hidden agenda, like a supportive family member or a friend. “Sit down and agree to a plan of action, for instance, putting away $200 a week for 4 weeks,” Jasmine says. “At the end of the 4 weeks, go back to your trusted person and show off your bank statement and how you've stuck to the plan. And celebrate!
“Catching your avoidance and overcoming it can be quite a freeing experience,” Jasmine says.
Looking for your own plan of action? A BT Adviser can help.
* Based on consumer research conducted by FiftyFive5 December 2014. Sized from a national representative sample n = 923
This information is current as at 01/05/2015.
TThis Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.