How to Improve Your Finances by Bucking Herd Mentality

How to Improve Your Finances by Bucking Herd Mentality

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On a day to day basis, most of us tend to believe we control our destiny. The jobs or careers we pursue. The relationships we seek, how we raise our children. And of course, managing your money, and learning how to improve your finances. When we think about improving our finances, we tend to think of the mechanics behind money management — like budgets, saving, debt, investing, and credit scores. These are the things we manage and can control. To some degree, this is true. Our behaviors and actions become based on our past experiences and beliefs. When we find ourselves questioning our direction, we search for ways to re-enforce and confirm what we already know. Are you familiar with the term – herd mentality?

 

 

How to Improve Your Finances by Bucking Herd Mentality

 

 

Peer Pressure!

In today’s world of high tech marketing, advertising, and social media overload, it’s often easy to become influenced by the things we observe. This environment creates a herd mentality where we can often find ourselves developing habits, following trends, or pursuing the same goals as our peers.

When it comes to money, following our peers can sometimes lead us down the wrong road. To make spontaneous decisions, that are less rational and more emotionally driven.

Age and experience have taught me that when it comes to money, no one person’s circumstances are the same. Following the behaviors and actions of society and our peers can often get us into a whole bunch of trouble. Successful money management is about managing your own financial goals – not trying to mimic someone else’s.

If your feeling stuck with your money, or simply trying to improve your finances, here’s how by bucking herd mentality.

What is Herd Mentality?

Herd mentality, pack mentality, or sometimes called groupthink is a term often used when the majority influences the actions of a few or one. The perspective is that as a society, we tend to follow our peers and adopt behaviors of the group. Regardless of whether those behaviors are sensible or not. In short, we base our decisions on the actions of the “herd” versus what we would normally do as an individual. These decisions are made on an emotional, sometimes subconscious level because as humans one of our deepest desires is to fit in.

 

 

How to Improve Your Finances by Bucking Herd Mentality

 

 

The term herd mentality originated from the animal kingdom. Where herds of animals like Wildebeest and Muskox stick together to survive. I am sure you’ve seen those nature shows that document the long migration of the Wildebeest in Africa, or a herd of Muskox in the Arctic forming a circle to protect their young from encroaching wolves.

Closer to Home

I have watched my five goats move from one section of the pasture to another, following each other to find the best food source. When they get scared or sense danger, it only takes one to start running to the barn, and the rest will follow suit. (Danger for my goats comes in the form of stray cats or an occasional wild turkey.)

In the animal kingdom, a herd mentality is a form of survival. It’s an instinct ingrained from hundreds of years of evolution. Stick with the herd, and you survive. Leave the herd, and you’re likely to get eaten.

Unfortunately for humans, we have this other layer of evolution called emotions. Our emotions tend to drive us in a direction that can sometimes be irrational. We follow the herd regardless of whether it makes sense or not.

Herd mentality as it relates to our finances can often lead us in a direction that is detrimental to our finances. A place where we save less than we want and buy the things we don’t need. Herd mentality can keep us stuck even when we make every effort to improve our finances.

 

 

 

 

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What Perpetuates Herd Mentality – Bigger, Better, Nicer – More

Herd mentality in society can develop for all kinds of reasons. However, as a marketing and sales professional, I can attest to the role marketing and advertising can have on the spending habits of the consumer. All marketing and advertising strategies are based on reaching the emotional aspects of the consumer. To get them to buy something based on desires and wants.

The ultimate goal is to create a trend. A trend where the sale of a product or service is driven based on the fact everyone else is buying it – the herd.

For example, can you identify with these herd mentality examples?

  • Waiting for, then buying the next, newest iPhone model with a larger screen and more features because it’s better than the one, we have right now.
  • Purchasing a larger home with four bedrooms a bigger back yard and deck for grill outs, to entertain our family and friends. A status symbol that we have arrived.
  • Buying a brand new vehicle, because it’s nicer, shinier, smells great and feels good to drive in. It’s the shiny object effect, something we have to have because it boosts our egos.

Getting consumers to buy into these trends and follow the herd is a marketing professionals dream. It’s a way of selling more phones, bigger houses, and cars by simply appealing to an individuals desire to fit in. To not get left out.

Nevertheless, following the herd at the expense of your own financial goals means:

  • Saving less money than you want.
  • Spending more money than you want.
  • Taking on more debt because you want bigger, better, nicer –more.

It’s hard to improve your finances if you’re buying into (no pun intended) the latest marketing and advertising campaign or social trend. Throw in some social media, which reinforces the advertising. Catch your friends doing the same on Facebook, and it’s easy to get sucked into the herd.

In the animal kingdom, running with the herd is a safe bet. In our society, and in regards to money, the herd tells us we need to spend more.

 

 

 

How to Improve Your Finances by Bucking Herd Mentality

If you read stories on individuals who overcame failure and achieved success, individuals like Bill Gates (Microsoft), Steve Jobs (Apple) or Milton Hershey (Hershey Chocolate) you will find a common thread. A perspective and belief that what they were attempting to achieve was more important than what everyone else was doing or believed. They didn’t follow the herd.

If your goal is to improve your finances, consider these ways of bucking herd mentality.

  • Focus on your own financial goals and what you’re trying to achieve first. Herd mentality dictates that everyone’s financial situation is the same. Everyone’s financial situation is NOT the same.
  • Leave materialism behind. It’s the proverbial, “keeping up with the Joneses.” As Dave Ramsey says – their broke.
  • Make debt your four letter word. Bigger, better, nicer always leads to MORE debt.
  • Do the unthinkable. Save a portion of your paycheck for a rainy day or contribute to a retirement plan.

Improve your finances by creating your own definition of success. Leave the herd.

 

 

How to Improve Your Finances by Bucking Herd Mentality

My goat herd. Not as impressive as Bison and Wildebeest, but much friendlier.

 

Finally,

My goats look at life in a pretty simple way. Their herd instinct tells them to stick together to be safe. Follow the group to find the best things to eat. Run to the barn when there is a danger. Herd mentality is their way of life.

Marketing, advertising, and the herd mentality it creates dictate a standard of living and a way of life that does not take into consideration the financial repercussions — leaving many living paycheck to paycheck.

Wouldn’t it be great if we could create a herd mentality – an instinct around money? Where saving cash, minimizing debt was an instinct. Maybe with some education and over time we will.

Until then, if you want to improve your finances, think different, be different, stand out – start bucking herd mentality.

 

Helpful Resources:

 

 

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Kevin is the owner of FTP and the author of the personal finance book series Filling The Pig. He uses his past successes and failures with debt, saving cash, investing and running home-based businesses to educate others about successful money managment and Creating a Lifestyle of Opportunities.

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