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Personal finance

The hard part: Taking action

November 5, 2021

Nobody becomes a financial expert overnight. You need to give yourself time, establish priorities and set realistic goals so you can make consistent progress. But learning doesn't always translate directly to taking action. We all know we're not supposed to rely on credit, but we can still end up a little deeper in debt than we wanted. Why? Because nobody's perfect and we don't always to make the best decisions for ourselves.

"We all hit a wall when things reach a certain level of complexity," says Sébastien Tremblay, a professor at the Université Laval school of psychology. "And money is a complex topic." People can't control everything in an environment where there are multiple factors that are difficult to predict, like stock market fluctuations, globalization and the price of oil. Not being able to know the impact of our decisions can be paralyzing."

We can also be tempted to take shortcuts (or lean into biases), and make financial decisions based on the most recent information we have in our head. "It's a shortcut based purely on availability," explains Benoît Béchard, a PhD student working with Tremblay on his research. That's how we end up selling all our shares first thing in the morning, because we saw an expert on the news the night before telling us about an eventual drop in the market. We forget that it's better to wait for the storm to pass. There's also confirmation bias, where we only remember the information that reinforces what we already think, and we ignore the information that would question it.

Sébastien Tremblay, professor at the Université Laval school of psychology and Benoît Béchard, PhD student at the Université Laval school of psychology

So how do we figure it all out? The key is to understand that we're dealing with a complex topic. "Understanding our limits and being aware of our biases when we're processing information can help us think and act differently," says Béchard. "Adaptive and smart technologies, which are increasingly common, can also help," says Tremblay, who focuses his research on tools that maximize human performance. 

Breaking the taboo about money
Money is taboo in casual social conversations. A lot of people don't want to tell their family how much money they make, never mind friends and acquaintances. Others though don't have a problem talking about the price they paid for almost anything—their car, their house or even a bottle of wine. But that's probably more about wanting to show off than it is about financial transparency.

Fortunately, younger generations seem to have less of a complex when it comes to money. "Young people speak openly about it, which is partly because families speak more freely than they have in the past. We've started lifting the shroud of secrecy about wealth and how much we make, in our families and in society as a whole. Nevertheless, it remains a delicate topic for many of us. That could be part of the strong religious influence in our educational system here in Quebec, which tells us that being rich isn't something we should want," says François Delorme, a professor of economics at Université de Sherbrooke. 

He says it's unfortunate that men are still too often making most of the financial decisions in the household. For many couples, it's easier to talk about politics or sex than it is about money. But not talking about it at all can negatively impact personal and family wealth. "There are a lot of couples who don't necessarily split expenses equally," says Delorme. "It's better to prorate household expenses according to your earnings when one person makes more than the other, rather than to just split everything 50/50. That way, each person's contribution to the household is calculated proportionally, based on how much they make. However, this can affect common-law couples disproportionately, because one person will lose more than the other if they separate." 

Basically, when it comes to money, silence is not golden!

Learn more about managing money as a couple…
Or after getting separated

The bottom line is that if we don't have a good relationship with money, we can fix it. "You need to be introspective, open, and receptive to certain tools and advice that will help you make long-term changes," says Sébastien Tremblay. Rather than feeling like a prisoner when it comes to money, we can have the freedom to handle our daily finances over the long term and to reach our goals, whether it's quitting a job we're unhappy in, starting up a business or travelling around the world. Now that's true financial empowerment.

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