Why is personal finance dependent upon your behavior?


Management of one’s money and resources is very essential. One should have sound knowledge of personal finance which includes saving, investing, managing debt, etc.

Managing personal finance effectively is impacted by the behavior of a person. How the money is managed including saving and spending habits, will have a direct impact in one’s financial stability and well-being.

It is estimated that about 80% of personal finance success or failure depends upon behavior.

Making smart financial decisions like creating and sticking to a budget, saving, investing, managing debt also depends upon a person’s behavior.

Doing well with money has a little to do with how smart you are and a lot to do with how you behave. 

Morgan Housel

Let us take an example:

A person with a habit of over buying or overspending find it difficult to stick to a budget plan. His behavior of overspending negatively effects his saving. Some have a habit of not paying or clearing bills on time. This may incur extra fees or damage their credit score.

These types of behaviors can make it challenging for a person to achieve his/her financial goals such as investing, saving for retirement or buying a property.

On the other hand, good financial behaviors such as saving regularly, investing in stocks,bonds or real estate, and having a good budget plan can significantly improve one’s financial situation.

Also, it is always advised to seek financial knowledge and make informed decisions to improve financial well-being.

Some Positive Financial Behavior

  • Tracking income and expenses and always create and stick to a budget.
  • Saving money regularly, having an emergency fund, plan for retirement, plan for child’s education.
  • Investing in assets like stocks, bonds and real estate.
  • Managing debt.
  • Diversifying one’s investments.
  • Explore the power of Compounding.
  • Seeking financial advice from professionals.


To conclude, an individual’s behavior have a direct impact on their personal finance. Some of the major money management activities includes Budgeting, Saving, Investing, Managing debt, Managing taxes, Managing financial risks, Planning for retirement, and Reviewing and monitoring your finances.

One should always have a positive actions and habits, ability to make smart financial decisions to achieve financial well-being.