How to handle stress when making choices regarding money. Why is it difficult for us to start saving money? What makes us perceive a certain financial service as reliable? A conversation with Adam Dabrowski, a business psychologist, co-owner of three companies and advisor in managing people and change.
It is not rare that when making financial decisions people are under the influence of strong emotions. Do they always cloud our judgement?
It all comes down to two things: the type and intensity of the emotions. Picture a scale representing the scope of our emotions: -10 is a total depression, a mixture of sadness, grief and anger. On the other hand, +10 is enthusiasm, joy, and a satisfaction in life. Zero is the state of suspension, neither here nor there. Through our lives, all of us move on a similar emotional scale. +10 can be described as too enthusiastic to make financial decisions for some. As it turns out, too many positive emotions can obscure our perception of a situation.
An over-the-top-optimism?
Young people call it hype. This is fixating yourself on the success of a project - a strong conviction that it is easy to make a great start-up, make a lots of money in the stock exchange or via foreign exchange rates. People can buy a lot while feeling this over-the-top-optimism, but those who make important decisions in such a state often end up disappointed. If we assume that +10 or more on the scale is too positive of a state of emotions to make decisions, then a healthy level of emotions is somewhere between +5 and +9. As for the emotions on the left side of our scale, for some people a bit of a negative state, to a level of -2 or -3, might paradoxically be good. A person this type of state will often make themselves reflect on what to improve or change. It can be said, then, that this intensity and type of emotion is desirable when it comes to making important decisions. It is important not to go further down this scale.
How to describe such emotions?
There are some who call -2 being rational, while others might say: ‘Man, you are just spreading defeatism, you’re thinking negatively, I can’t talk to you!’ Therefore, those are very individual issues. Most importantly, everybody should define for themselves what emotional level is optimal for making choices. If we are not able to understand and put our emotions in a simple hierarchy, then even if we are sensing mild distress, on the level of -2 or -3, we won’t take risks and might miss out on good opportunities. Relatively small risk might be perceived as overwhelming.
So even of the risk isn’t big, we won’t make a step forward?
Yes. In that case, in the mythology that I’m working in - the so-called Change Value Process - we say that making decisions is really just managing anxieties. Everyone is anxious to some extent, even if they don’t admit it. My experience as a psychologist, entrepreneur and coach confirms this in its entirety. Many people, even those in high positions, such as executives and officers, won’t admit to uncertainty and anxiety. This can be a good indicator that something will raise our temper and, after some time, overwhelm us. It is quite often that we see that not being able to manage our fears, even an intelligent, experienced and wealthy person can make irrational and childish decisions.
Let’s talk about decision making, then. When choosing a financial services provider, e.g. a foreign exchange office or bank, to what extent are we led by cold assessment, and to what extent by the image or reputation of the given institution?
The less we are prepared, the less attention we give to reflect on what we need from what company we are moving to and what we are about - the more we’re vulnerable to emotional decisions and being used by an experienced salesperson. Some might call them manipulators. Others might indicate, that they are just doing their job well by managing the client. On one hand, we should have precise expectations from an institution, so we simply know why we are going to contact that specific one. On the other hand, one should remember to not be to skeptical about it. People often have a preconceived negative opinion on advisors or representatives of financial institutions, perceiving them as manipulators or even frauds. Of course, a part of these opinions is based on some proper life experience.
Do you think it’s justified?
Having run trainings in dozens of companies, I see that people who are reliable and honest in their jobs dominate the market. It’s obviously hard to tell what percentage of salespeople or advisors are oriented to take advantage of their clients. The honest ones, however, are a vast majority and this is surely a positive trend. Also, the conciousness of clients is growing. This has two sides: one, clients ask more and more questions and are more educated. Two, there is a group of clients so overloaded with negative prejudice, that they are not able to trust anyone.
You emphasize the value of trust as being most important in business. What does the process of building trust of the clients by a brand look like?
There are a few levels of trust-building by a company. The first one is what I would call an internal activity. If a brand is recognizable and well-known and people recommend it, the so-called mass client is sure to trust it. This happens thanks to a rule called ‘I know, therefore I trust.’ The second level is before having experienced the product, but I already know it works. The trust comes from the fact, that a company presents its results, people and companies it helped, and explains how it did it. This can be by not only educational forums, e.g.introducing commercials showing not only recognizable people, but also by regular clients who often use these services.
It resembles writing a testimonial for ourselves. How can we be sure what clients really think of our brand?
Nowadays we can get immediate feedback from our clients via social media. Quick reactions to clients’ suggestions and ideas helps the brand bring its users closer and build trust. The next level of trust is when the client has direct contact with the product or service of the brand. In the case of your services, a customer experiences Cinkciarz.pl in two ways. The first is the contact with the website, a tool to exchange foreign currencies. The second is contact with people behind this tool, for example, customer service. When I have contact with the website, with the technical side, I can assess the so-called usability, so if everything works, doesn’t freeze, etc. The other layer is the reaction of customer service to my questions or encountered difficulties. How easy is it to receive a quick reply to my doubts? There is another level, which occurs after I use the service. You advertise many different values, e.g. competitive exchange rates, low prices of currencies, and as a user I can verify for myself that these advantages are, in fact, as described.
It all seems very easy. As if there was an algorythm for liability…
Entering into contact with company representatives, this trust is affected by the quality of this contact: do people, who gave me advice, know what they are talking about? Are they professional when it comes to the scope of services offered by the company that they represent? Did they take care of me as a customer? Was the attention I received generic, or did they me as a person? The brand gains the highest level of trust when I, as a client, have a problem of a technical or essential nature, and the company’s representative not ony responds in a fast and friendly manner, but will also want to take care of some additional advantages, values that are important to me. Which is something that would surprise me in a positive way.
You mentioned prices. What is the difference between saving money and hunting for promotions from a psychological point of view?
Psychologically speaking, saving money and sticking to it is harder than hunting for discounts. The advantage in looking for promotional rewards is here and now. Saving money demands looking into the future, carrying on a conscious process that will have its advatages not here and now, but even in a few years. According to the observations of psychologists, only around a small percentage of people are able to think in terms of the future. Many go on for years living ‘here and now’ and aren’t able to set out long-term goals for themselves. Successful people differ from so-called ‘regular people,’ who live on a medium level, by the very ability of reflecting on the future and planning for it.
What ‘a regular person’ can do to direct their thinking towards future? How to make the first step?
The first step is reflection: why do I need long-term planning? What values can be brought by functioning like that? We don’t need to start saving money and investing in them right away, but it is worth thinking about. Step two is a reply to a question: what are the real advantages of reevaluating my situation in the long term? Sometimes it is worth taking this sort of a trip to the future and realize that three years from now is not far off. If we accept this point of view in 2016, then 2020 is around the corner. By realizing that thee years is a small amount of time, we start to realize that it is worth it to save money because the advantages will affect our lives positively, and they will come soon. Sooner that we might think.
Right, soon… When looking for savings with currency exchange, e.g. having a debit account in foreign currency or running a business, it is quite often that a decision needs to be made at the spot. This sometimes creates pressure and stress. How do we stay rational in such situations?
I would divide solutions into external and internal. External are those that we need to have planned in our calendar. This is a time that I call a moment of oasis or peace. We are going to a place of solitude: to our office, for a walk, to exercise and turn off our phone. Another external solution is regular work with a person we trust: with a friend, coworker or an official coach or mentor, with whom I can discuss any subject.
What can this discussion bring?
People who need to make many decisions, e.g. by permanently investing money or managing teams of people, don’t have anyone to talk to about their challenges, and can feel very lonely and overwhelmed. A possibility to lay it all out on somebody is very underpreciated, and can very often be observed working with executives and officers. The other sphere of solutions is the internal one. Everybody should ask themselves: what is my internal battery?
Why do we need motivation to work, other than the financial aspect?
Everyone should find out for themselves. If our main drive is the money itself, then there is a high probablity that our ego treats pursuing the money like a drug. We can fall into a trap where it turns out that the only reward is higher revenue, and a lack thereof results in a sense of nearly narcotic hunger, defeat and suffering. We need to have at least one other drive, the other battery, that keeps our motivation for work running. We need something that lets us realize that higher revenue is important, but so is building a brand for our company, the welfare of our families and coworkers, and fulfilling higher ambitions.
Everything we discussed leads to one conclusion: know yourself…
This is relevant for everybody: starting with junior salesmen and advisors and finishing with the executives of the largest companies. The lesser our self-conciousness is, the harder it will get in later stages of our professional growth and when making any decisions - not only those of a financial nature.
Thank you.