Episode 72 – Financial Psychology with Anne Abbenes

The Financial Wellbeing Podcast

Episode 72 – Financial Psychology with Anne Abbenes

Why does talking about money cause such anxiety? Special guest Anne Abbenes takes a look at the psychology behind what is happening in our brains when we are dealing with our finances. With a great Bage’s Behavioural Bias and some questionable #tightasstommo money saving tips, we have plenty of takeaways to help you make better financial decisions in this episode. . .

Welcomes & Introductions

• Click here for more information on Chris Budd’s books
• Link to the Initiative of Financial Wellbeing website
• Click here for more information about Producer Tommo
• Link to David’s book

What is today’s podcast all about?

A chat with Anne Abbenes, a certified financial behaviour specialist and president of the Financial Psychology Institute of Europe. We will be looking at how our brains react when we start talking about money and how we can improve our financial decisions.

Bage’s Biases

Every episode , Behavioural Finance expert, Neil Bage, is going to be giving us his money behavioural tips. We are hardwired to make bad decisions about money because we have biases built into us from our experiences through life. We will keep hearing from Neil to help us recognise some of these behavioural biases and hopefully lead us to making better financial decisions.

– Link to Episode 36 – Understanding our attitude to risk
– Link to Episode 21 – Financial capability
– Link to BeIQ | Beam App

This episode – Probability Neglect

#TightAssTommo

Featuring lazy charity shop shenanigans, questionable oysters and helping to avoid food waste.

Click here for more information on Odd Box.co.uk

Interview with Anne Abbnes

What is Financial Psychology?

What happens in your brain when you make a financial decision?

• reptilian/mammalian areas of the brain
• our inner Einstein
• talking about finances with others leads to anxiety

Why does our brain react to a financial question in fear?

• Money is still a taboo subject
• evolution wise, money is still a relatively new concept for our brains to deal with

An illustration on why continuing education about psychology and money is important

Our brains are wired for survival, looking at what comes next, not long term thinking

What can we do to make better financial decisions?

Exploring our relationship with money

• Moneyscripts by Brad Klontz

Is it possible to challenge yourself?

Can awareness be enough?

The Financial Psychology Institute of Europe

Financial behavior is determined by subconscious money beliefs. Sound financial decision making is hampered by unhelpful and sometimes destructive money beliefs. The Institute is helping professionals to stimulate individuals & groups improve their financial health by providing insight in psychological aspects, emotional barriers and destructive financial behaviors that inhibit financial and emotional happiness.

Click here for more information about Anne Abbenes and the institute

Conclusions from the guys

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Do you have any financial wellbeing questions you would like us to answer? Or do you have a #tightasstommo money saving tip you would like to share with our listeners?

If so, let us know by going to Twitter @Finwellbeing or email – [e-mail]

If you would like to purchase a copy of The Financial Wellbeing Book please click on this link to visit Penny Brohn UK shop

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Transcribe of the Podcast Script:

(scroll to the bottom to listen to the episode)

David
Hello everybody and welcome to another one in our series of financial wellbeing podcasts. My name is David Lloyd, broadcaster, writer, actor, man about town and I am joined by Chris Budd, hello Chris . . .

Chris
Your not man about town at the moment!

David
I am stuck at home. Chris tell us a little bit about yourself.

Chris
I wrote a book called The Financial Wellbeing Book. A few other books – The Eternal Business about employee ownership. We’ve got the novels, got another novel coming out soon so we’ll come back to that in future podcasts and chairman and founder of The Initiative for Financial Wellbeing, so financial wellbeing, money and happiness is kind of one of the things I think about quite a lot in life.

David
Well fortunately because that’s what this podcast is all about! And Tom is what expertise, do you bring to the table?

Producer Tommo
Not a lot to be honest with you. No, I have many years as a financial planner, I am a Chartered Financial Planner and also a director over at Bristol based financial planning firm Ovation Finance, and like Chris, I am the director of The Initiative for Financial Wellbeing. So yeah, I’d like to think I have some expertise to bring to the table. I feel it’s quite hard to say that out loud, but I’d like to think that I know a fair bit about this topic.

David
Well, I’d like to think that too, given that you are my financial advisor.

Chris
David, I’ve been doing a bit of thinking recently based on a book called How to Write One Song by Jeff Tweedy, the main man for Americana group called Wilco, and he starts his book off by talking about the difference between who you want to be and what you want to do. And I think that’s just such a fascinating idea because Tommo is undoubtedly an expert in financial wellbeing, and one of the best Chartered Financial Planners in the UK etc etc. But that’s not who he wants to be, it’s what he does. And so we get to judge him because of what he does and we can therefore say who he is being, but he obviously doesnt like to say about himself. I think that’s such an interesting idea. Jeff Tweedy talks about how, when he was nine, he used to tell everybody that he was a songwriter because that’s what he wanted to be. And then by the age of 12 he thought ‘I better actually write some songs’ because he told everybody he was a songwriter but hadn’t actually written anything. So we did. So, what you do and what you want to be is such a fascinating concept, it talk about it for ages.

David
Well I think who Tommo wants to be is Joe Root actually!

Producer Tommo
Time stamp, and we are recording this over and over in India and, yeah, a big cricket fan and this is actually going to be one of my tips in the moment so I shan’t spoil it too much but Joe Root has just scored 100, not out, staggering readiness 300s in 3 tests. Thats . . . anyone who’s not into cricket, you wont know anything about it, I get it. But if you do like cricket, is an outstanding achievement.

David
As a point of information Tommo, you did just say we’re recording this over in India. I think there should have been a comma in there. We’re recording this, meanwhile over in India.

Producer Tommo
Right. Yes, thank you.

David
Let’s move on, then. Chris what’s happening in our podcast today?

Chris
Today, David, we are going to have an interview with Anne Abbenes, who I will tell you a little bit more about later, but she’s very much into financial psychology.

David
Before we move on to that let’s have the first of our two regular features. The first one being Bage’s Behavorial Biases. An old friend of the podcast behavioural finance expert Neil Bage give us a one minute introduction to a different behavioural bias that effects how we make decisions about money.

Neil Bage
Probability neglect. There is a simple truth that underpins this behavourial bias, and it’s that humans are really bad at assessing risks. We are generally so bad at this that we assume that common activities we engage in, like driving a car, are safer and unrisky than less common activities we engage in, like flying in a plane. Now one of the reasons that people brains get messed up like this is because we also have a tendancy to confuse probibility with possibility. So when it comes to financial decisions or investing money, is there a posiblity of me loosing money – of course there is. But that’s not the question you should be asking. You should seek to understand the chance, the probibility of loosing money and potentially how much. This conversation is part of a risk taking discussion that any good financial planner would explore with you in detail.

David
Excellent. Well I have nothing to add to that. The great thing, I think about Neil’s biases he expresses them, you know, within the one minute, so clearly and succinctly. I thought that was great. Okay, let’s move on then to the next of all regular features #tightasstommo. Before we get today’s tip, I’ve got one for you. We’re recording this early February. I’ve come off the back of dry January, I’ve saved myself, without going into the exact details of how much I spend on booze. Myself and my partner both gave up for a month, and I’ve saved myself an absolute fortune. So, if you want to, if you want to save a little bit of money, stop drinking for a month.

Producer Tommo
That would do it, that would do it. Probably bought yourself an extra couple of months, life as well so . . .

David
Yeah definitely, definitely. Yeah, Chris have you got anything for us today?

Chris
I do David, it’s not a serious suggestion. I hope it’s not a serious suggestion! It comes from an Australian website called The Cusp. and they suggest that if you need your clothes dry cleaning, then donate them to a charity shop, wait a week and then buy them back. I’m not actually sure if I would save you any money. I think it is possibly more of a lazy way, a very expensive way to get your clothes washed.

David
I like supporting charity aswell. Tommo, main man, what have you got?

Producer Tommo
I have a couple one that I thought was a bit of a giggle. I got this from a friend of mine Rich Ellis via the Viz comic, and he put this on Twitter – save money on expensive oysters by drinking seawater from an ashtray. Okay, why not. So that did make me chuckle. I do have a serious one, there is a website that is worth going to check out, and that’s called oddbox.co.uk. Concept and this is, something we talked about before, is that there are fruits and vegetables out there that don’t quite look as they should do as we’re used to seeing in a supermarket. And what they do is they get these throw aways is the wrong work. Where they haven’t cut the mustard because there might be a wonky carrot, or a wonky courgette, whatever it might be, but they put these, they package them into a box, and you can get them delivered to your home so it’s saving on food wastage. And a pretty good deal, along the way as well so that’s oddbox.co.uk.

David
Great one. In fact now most of the major supermarkets now will do that they’ll give you the option to buy wonky carrots, you know that might just take a little bit more peeling, but they remain essentially carrots. So I’m all for that, I think there’s a whole load of nonsense around having to present our food. We are wasting an awful lot of food.

Producer Tommo
Absolutely and that’s definitely what they’re trying to deal with. And I will caveat that at the moment it’s London in the southeast, but that’s an awful lot of your country to at least start looking at this so hopefully that will branch out, like, save the planet save money. Fantastic.

David
There’s a positive message to tuck into. Our interview, Chris who have you chatted to this time?

Chris
Right, we have a chat with Ann Abbenes, who is a certified financial behaviour specialist. She is also president of the Financial Psychology Institute in Europe. She’s not a for profit organisation, so just our kind of person. So let’s have a listen to my chat with Ann.

Chris
Ann, thank you so much for joining us on our podcast.

Anne Abbenes
It’s a pleasure to be here Chris. Thank you.

Chris
I think it might be a good idea to just give us a brief introduction to all the things that you do around personal finance.

Anne Abbenes
I work with a combination of finance, psychology and law. And that just happens for me to work like that. And I’m educated as finnancial planner, a psychologist, and also in law but I just make a combination of it.

Chris
Thats a combination that we’re really interested in, how do those two things come together, it’s fascinating. The, the term that you use to put this together is Financial Psychology. So what is Financial Psychology?

Anne Abbenes
Financial Psychology is the integration of finance and the whole field of psychology. I assure you of course you’ve heard of behavioural finance, I read your book. And behavioural finance is based on cognitive psychology. Cognitive psychology is something which is developed in a lab environment. And just about our cognition, that’s part of our brain which is learning, and all those kinds of things. And there’s more psychology to us humans and clinical psychology is the whole field of psychology. So financial psychology is also part of behavioural finance and the rest of it is the whole field of psychology you apply to finance.

Chris
So one of the things that I know you’re, you’re an expert in is neuroscience. Before we start looking at neuroscience and money. What is neuroscience?

Anne Abbenes
Neuroscience here you have the whole definition of a part to keep it simple, it’s just a seeing in, what’s happening inside your brain. And I think neuroscience scientists will kill me if I put it this way, but I always as – it’s how your brain works that are kind of biology in your brain and how the neurons are reacting and acting. And that’s the base of our behaviour, so how the brain is wired. And you can apply that also into finance.

Chris
Okay. Okay, let’s do that then. So, so what is actually happening in your brain when you need to make a financial decision?

Anne Abbenes
It’s with every decision, and with finance, it’s just a little bit more complicated. When your financial advisor or a financial planner is talking to you, he’s talking to your prefrontal cortex. This is where your thinking takes place. If you look at the brain, we have our reptilian brain that’s the oldest part, and our limbic system that’s the reptilian brain, and our mammalian brain. And they are in charge, as well what’s happening, then we are anxious and money, just causes fear. And when we are anxious or when we are have to take a decision. You have to talk to the part of the brain which is in charge, and the part of the brain which is in charge are the mammalian and reptilian brain. And then we are anxious. When we make a financial decision, we just have to know how the brain works, a short explanation is a simplified model that’s the triune brain, the triune brain is our reptilian brain that’s the first part that comes alive. The second part is our animal brain. And the third part is our inner Einstein. That word a professor of me, my mentor told me that clause and I just thought everybody knows what an Einstein is. When we make decisions, and a financial adviser or planner you are for just recently, and with logic and explaining things but that’s the wrong part of the brain, you are approaching. The part which is in charge are the reptilian and mammalian brain, and our brain is just wired like that over a million years. And at the moment, we take the financial decision. A lot of people are anxious because finance is more intimate than other things and it’s real big taboo. So, when a person enters your office as a financial adviser then they are scared. They have a lot of high anxiety. For even talk about money. So, when the level of anxiety increases. Then just inner Einstein, is the captain but he has nothing to say, and the reptilian/mammalian brain takes over. So, you have to speak to that part of the brain and that’s where the emotions are and then our other reactions are. And that brain just doesn’t pick up information and that’s how you could survive as a species, because in the Stone Age, that you hadn’t have any time for is that rope or is that a snake. Is that, is that a bush or is that a tiger, you just have to do something. So you flee, you fight or you freeze. And if you don’t do that, yeah, then you won’t survive. So it’s very important. Just not only to talk to, talk to the Einstein but talk to the whole brain and that’s something which is often forgotten.

Chris
So I’d like to know how we do that in a moment, but first a couple of thoughts or questions. What is it about money that makes it a fearful thing to us, then why does the brain react to a financial question by fear?

Anne Abbenes
That’s a good question, Chris. Money is still a taboo. And what I found out I thought oh maybe it’s because of the heritage of money because I know in Holland a few hundred years ago if you were in debt you’d get literally scaffolded or you went to jail. But money is really a taboo subject. And we also learned from our parents that certain topic to talk about, when people are getting married they talk about everything, we see real life soaps, every day on television, we hear it on the radio, we talk about everything, about our sex life about our, our health, health problems, but not about money. So, it’s our heritage and money is for our brain, money is brand new. The stock market is from the 15 century, so and our brain is millions and millions of years old. So our brain has to get used to the idea of money. So it’s, it’s the only thing to think about, oh I have to go to the financial planner, that’s, that’s all. That alone is increasing our anxiety

Chris
And financial planning is a very new discipline isnt it? Were talking decades only really that financial planning is out in the public so to speak.

Anne Abbenes
Yeah that’s true and what’s also funny what I found out, which is funny. If you ask a financial planners. I had to explain for continuing education programme, I had to explain why emotions and why psychology is important. They said, Oh no, that’s not true and money isn’t a taboo, what are you talking about? And there are four gentlemen in front of me. And they, and I said okay, okay you don’t think it’s too important. Okay, let me do a quick test and they said yeah, that’s okay. And so okay write down the amount which is in your bank accounts, and they just, they did it. And after that, I said, Okay, please, one by one, tell out loud, what’s on the piece of paper in front of you and they just refused. And they said I was rude and how could I ask that. And I said, Okay, yeah, that’s my point. So it’s really a taboo and, yeah, we just have to take that into account when we are giving financial advice to other people,

Chris
Yeah that’s that’s a great illustration, did they accept the point, out of interest?

Anne Abbenes
Yeah, they accepted, than I could do the continuing education, they said it’s okay to make your point!

Chris
Yeah, so that’s a fascinating point that is the one thing you don’t talk to your friends about is your finances isn’t it. You talk about anything else, but not your finances. So, so that means that when you do need to talk about your finances, you’re finding it very difficult, very awkward and therefore, the, the animal part of your brain is the one that’s functioning, not the sensible, thinking part, have I summed that up well?

Anne Abbenes
When your brain is functioning. They are all working together. Without your animal and reptilian brain you just can’t make a decision. It’s not possible, you can’t make a decision with only the prefrontal cortex, so it’s really not possible but if they work together, then you get a sufficient decision.

Chris
So, how then do we get the three of them, two of them, three of them working together when it comes to a financial questions?

Anne Abbenes
Before I tell them about that, the ancient brain, let’s say the reptilian/mamillion brain there are responsible for 90% of the decisions. And working together, just letting the information of the financial plan of financial advisor land into the brain is just to reduce the anxiety of the, of your clients let them know that you’re on the same, same tribe, because our brain is wired like a tribal culture. And so let’s just make it real because saving and futuristic planning, that wasnt, that isn’t an advantage in our survival. That brain only thinks for the, for a short time, and what’s next, what’s tomorrow, what’s, what’s happening in a week. What’s happening in two weeks, and saving, that’s against how our brain is wired.

Chris
I can vouch for that my brain certainly isn’t wired for saving!

Anne Abbenes
And it’s logical because when you just, you had food and then you hide food for the others or just didn’t eat it, you were thrown out of the tribe. So it’s very important to let your clients experience that you are in the same tribe. So that’s very important to do that.

Chris
So, reduce anxiety, make it real, empathy so that you’re feeling, as you said you’re a part of the same tribe, where somebody doesn’t have a financial advisor, what can they do to help themselves to make better financial decisions?

Anne Abbenes
What you can do is just see, just explore your own relation with money and that’s what you can do yourself but also it’s also cool to do that with an advisor. And then you get what are my money beliefs, and you have money scripts and Brad Klontz discovered them, Brad Klontz. And I’ve worked with the money scripts, in the court. And that means I get a lot of divorce settlements and then distress is at the highest point and the money is just very important. And money scripts that are difficult unconscious beliefs, we have about money. They are developed in childhood and they drive all our adult financial behaviours. And they are subconscious beliefs, we have about money, but we don’t talk about that much, because we don’t talk about money, let alone, talking about our beliefs about money. Most of the time we don’t know we have them. And if you look at the word belief, a belief is something that is in your brain so it doesn’t have to be true. Most of the time, they aren’t accurate. And we are developing them when we are children. So when you are a child looking at the world from that perspective. Just an example, I just, was in a place somewhere and I went to the lake. I was walking there with a sister, oh let’s go to the lake we have been here before when we were five years old and in my memory the lake was so big, so big. And we were there and I thought, hmm, this isn’t a lake, just a small pond. So that’s also with money you have money scripts in your head or money beliefs, which are wired there when you are a child. So maybe you don’t need them anymore, but then you don’t know you have them and they drive your financial behaviour. Then is very important to explore this and to discover them and to addressing them and see if they are holding you back from making sufficient financial decisions so that’s very important.

Chris
Do you think it’s possible to challenge yourself?

Anne Abbenes
Challenge yourself?

Chris
If you have these beliefs. Is it possible for you to uncover the self limiting beliefs, yourself?

Anne Abbenes
Yeah it’s, Yeah, of course you can, and to also, the good news is, they can be changed. And some of these money scripts are formed at a deep primal level and become part of our real truth. So, they are developed for survival and protection in that unpredictable world, and they are resistant to change when there’s a strong emotion attached to them. But you can explore it yourself, and just say, what’s your first memory of money. What your parents taught you about money. And something coming from the psychotherapy is when you have a fear of something just go talk with it. So you put a chair in front of you say okay, money, sit down. And you just start a conversation with money, and then write down, what’s in the conversation and then ask the question- What with my mother say about this. What would my father say about this. And that’s a easy way just to find out that money beliefs.

Chris
So, supposedly does that exercise, other commands that’s a very powerful exercise talking to money and and bringing mom and dad into the conversation I’m doing it in my head right now and once you once you do that and you start to realise what your beliefs are around money, then what you do about that?

Anne Abbenes
Most of the time, when you get, awareness is enough. So, most people when they are aware of that. Of that money script they know. Okay, this was this was because this, because that. Sometimes they’re intergenerational. So sometimes the grandparents, in a war developed the money belief. And you know that you don’t need them anymore. So, it just kept aware of them is helpful. So when you know them and it’s also great for awareness. Then you just know, and it’s, it’s just become aware and then you can just make better decisions, you learn to know yourself so that’s a part also of wellbeing learning to know yourself and learning about your beliefs, about your past it’s a very important part.

Chris
And presumably you can then decide which of these beliefs you want to carry on with, it’s a choice isn’t it?

Anne Abbenes
Yeah, it’s a choice and they are, you can rewrite your script, so that’s that’s that’s the good part of it, you just can rewrite your script.

Chris
Ann, we could talk about this stuff for ages and ages I know we only just touched on the surface of this, but perhaps just to wrap up, could you tell us about the Financial Psychology Institute of Europe.

Anne Abbenes
Yes, we want to increase the understanding of how psychological aspects influence financial behaviour and financial decision making. So we’re just embrace all the people who are basically this with, we’re on a mission to get to improve the world’s financial health. And we establish evidence based interventions for it, and we educate financial professionals, mental health professionals and other professionals, so they can work in a better way with our clients. So, that’s our call.

Chris
I think it would seem to me the message that’s coming out of this is, if we understand how we make decisions around money. We will make better decisions around money.

Anne Abbenes
Yes, and if we understand ourselves better, then we just, having informed content there’s something in financial services are working with, just getting information, but getting the informtation of yourself about your own money beliefs. That’s something which is very important to do. So that’s a big part of our financial health and financial wellbeing, getting to know yourself and there’s a lot of attention of exterior finances and with a life planning, there’s also a lot of attention over the interior finances, about your, your present, about your propensity about your awareness, the future, of your dreams, your possibilities. But the past is also a very important part of it and that’s are your beliefs your money scripts, your emotions, your your your unconscious, beliefs,

Chris
Absolutely fascinating thank you so much for joining us really really appreciate it.

Anne Abbenes
Glad to be here. Thank you.

David
Well, fascinating stuff that. I have to say a lot of it, I want to say felt familiar. She gave us a new insight to certain things that we’ve discussed a lot on the podcast over the years. About financial wellbeing of Know thyself, self limiting beliefs that we often have about money.

Chris
I love some of the stuff she talked about that, how our brains havent been used to money within this period of evolution. So the way that we deal with decisions and make decisions around money, just doesn’t come naturally to us. It’s fascinating stuff.

David
Yeah. And also another thing she said that struck me as well, that money or thinking about money can cause fear and create anxiety, and that’s very true as well. If we can find a way of reframing that focusing on thinking, rather than making a scared about how we could make our money feel better is great. And also, her assertion that the self limiting beliefs that we talked about before, can of course be changed. They don’t have to be constant, but you do need to be aware of what it is that’s causing them before we go about trying to change. You know you can you can re-write your scripts as she says.

Producer Tommo
I’ve got nothing to add chaps, I think you’ve summarised it brilliantly. I think it was a terrific interview so thanks for that Chris.

David
We hope you’ve enjoyed that we always find we do something different, and we’ll do that next time we come back with another one of our financial wellbeing podcasts. For now, goodbye.