HomeNEWSKnow the concept of Behaviorism and how it affects your financial life

Know the concept of Behaviorism and how it affects your financial life

Behaviorism is a current of psychology studies responsible for evaluating the behavior of living beings, through analyzes carried out by observing practical actions, such as, for example, how to react to external stimuli in the environment.

Recently, several studies have come out that analyze behaviorism with the economy, mainly within the financial market, where they began to observe people’s behavior at the time of stock oscillations. In addition to studying the relationship between individuals and their consumption practices.

To learn more about Behaviorism and how it can affect your financial life, continue reading the article.

What this article covers:

What is Behaviorism?

Behaviorism is a term originated by the English language, responsible for designating the study of behavior: “Behavior”, as it is called in English. The theory of behaviorism originated in the early 20th century?? A suggestion of a psychological current, having behavior as its main means of study, being it autonomously, and not as a derivative of some other component, which would give evidence through its behavioral expressions.

Scholars of this theory claim that the environment was one of the most important components for the evolution of all species, in which the result derived from the genetic endowment of the human being dominates.

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For them, every time the individual is exposed to a different place, he ends up acquiring a behavioral repertoire that can adapt to the most diverse situations. Through the analysis carried out by the effects of the environment, we can predict and control any behavior.

One of the most famous scholars of behaviorism was BF Skinner. Although he was not the first psychologist to study the subject, he distinguished himself by being the first to treat the conditioning of human behavior as a scientific method and not just a method.

Skinner was responsible for opening the way to a better understanding of the subject, not just restricting himself to how individuals act, but also how to interfere and help improve their results.

Finally, he realized that many times we don’t remember the events that originated our behaviors, however, once they are lodged inside our mind, they influence the way we act, most of the time we don’t even notice.

How does Behaviorism affect your financial life?

Behaviorism studies the relationship of living beings in any environment, however, it was only recently that studies of its relationship with money began. Mainly because much of the consumption relationship is guided by people’s behavioral requirements.

Behind every spending action, choice of products and even items to be invested, we can see that there is a certain behavioral pattern that governs this. For example, a person who chooses to buy a shoe from brand X, because it is in fashion, may indicate that he is a type of person whose behaviors are easy to be influenced.

On the other hand, we can see that a person who has greater control over his money, plans how he is going to spend it and where it will be applied, has a behavioral pattern that is difficult to influence, in which he is usually able to better control his actions, consequently, being little impulsive.

In summary, we were able to observe that people’s relationship with other objects and situations can govern how they will relate to money. Being people with impulsive behaviors, they have a greater propensity to be more “spenders” and the less impulsive ones are more thrifty.

Therefore, the study of Behaviorism is essential, especially with citizens who have predominantly impulsive behaviors, because understanding the whole mechanism behind it, means that they can start to have a better relationship with their finances.

The study of Behaviorism fits well with the world of investments, as it can predict what people’s behavior will be in times of upswings or downturns in the financial market.

How does behaviorism relate to investing?

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At times when a stock is rising, we can see how much people are influenced, as sometimes the rational reasons for a given stock to be high are not even questioned. But as many decide to invest in it, consequently, it rises, causing several individuals to fall into the “herd effect” and decide to give part of their assets in favor of a probable future benefit that it will bring to their finances.

This was very evident during the Real Estate Bubble that culminated in the 2008 World Crisis, where several people decided to invest in real estate securities that did not bring any security, but as many people were acquiring them, it influenced many to want to too. In this way, we note that an economic crisis has several behavioral axioms, in addition to mathematical variables.

How to invest using the concept of Behaviorism?

Behaviorism is essential to understand one of the main acts before starting to enter the world of investments, the investment profile. From then on, the person understands his behavior with money, making him know what types of stocks he should invest.

After that, you need to know which financial tools you need to trade and then do a search for stocks that match your type. If the novice investor does not know what his “type of investor” is, just go to the website of any brokerage firm and request a profile test.

Throughout the article, it became clear how essential the study of Behaviorism is for a better understanding of the economy, especially the relationship between people and their own finances.

Furthermore, it can be a huge ally for improving our financial life, because when we identify the behavioral patterns that affect it, we can get around everything and get a better relationship with our finances.

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