What are personal values and how do they effect our behaviour? When do these values conflict with each other? What does any of this have to do with financial wellbeing?! Come and have a listen to the guys as they take a deep dive into, previous podcast guest, Tim Kasser’s principle ” the idea that a person who holds financial success as one of their primary values will be less happy than they might otherwise be.” With Bage’s Biases and the money saving staple #tightasstommo, the guys have an interesting episode for you . . .
Welcomes & Introductions
What is todays podcast all about? – Why a person will be less happy when they see success in financial terms, than they might otherwise be.
episode, Behavioral Finance expert, Neil Bage is going to be giving us his
money behavioral tip. Exploring and thinking a little bit about the behavioral
traits we have towards money can inform us, so we can make better money
decisions going forward.
– Link to Episode 36 – Understanding our attitude to risk
– Link to Episode 21 – Financial capability
– Link to BeIQ | Beam App
This episode – Herding Bias
Featuring anti-financial wellbeing tips, watching the cricket when you are working and how to save a little money when working from home.
Todays topic – The Schwartz Circumplex
Catch up with the podcast episodes featuring Professor Tim Kasser:
Founding principle from Kasser’s book – the idea that a person who holds financial success as one of their primary values will be less happy than they might otherwise be.
What is value as opposed to a belief of a goal?
Can we have more that one value?
Our values are ordered into a certain priority, which then directly influences our behaviour
Challenging our behaviours example – Honesty vs politeness
Can our values change?
What are the values in the Schwartz Circumplex?
Values in conflict
Values and our personal goals
How are Self-acceptance and Financial Success correlated?
- Intrinsic Motivation = we do it because we want to do it / creates wellbeing
- Extrinsic Motivation = we do it for someone else, such as to please or impress someone / has no effect on our wellbeing
Although the value of Financial Success is an extrinsic motivation, it is also a grey area
The importance of self-awereness, reflect to see whether our actions are aligned to our values
Conclusions from the guys
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 – firstname.lastname@example.org
If you would like to purchase a copy of The Financial Wellbeing Book please click on this link to visit Penny Brohn UK shop
Transcribe of the Podcast Script:
(scroll to the bottom to listen to the episode)
Hello everybody and welcome to another one in our long running series now on financial wellbeing podcasts. In recent times we’re all spread out in separate places. My name is David Lloyd I’m here at to Lloyd Towers. Joining me is Chris Budd over a Budd Mansions, and Tom Morris is also joining us from a shed somewhere on the A370. So welcome guys how are you, Chris?
I’m very well thank you David I’m in my cabin in the garden, with the rain drumming on the roof. So it’s not that, that’s the background noise we have today. Other than that, very good thank you.
Yeah, Tommo, and yourself?
Producer Tommo 0:46
Yeah, I’m doing okay, actually. It’s almost six months of working in my study which doesn’t have a window. So, I think I’m slowly going a little bit, a little bit mad but yeah yes okay I’m all good.
I had a realisation a couple of days ago that essentially I’ve been on holiday for eight months. It’s just essentially felt like one long holiday and I suddenly realised that I needed to break that state of mind if thinking, that’s alright, I’ll do some more gardening. So, I’ve been yeah, I’ve been trying to reengage myself with work. But anyway, good to catch up with you guys. Now what’s on today’s podcast Chris?
Well today David, we are going to look at why a person who sees success in financial terms, they will be less happy than they might otherwise be.
Ah, well now given the whole basis of these podcasts is financial wellbeing, as explained in the excellent book of the same name by the excellent Chris Budd, that’s a very interesting notion. So, are you linking happiness with wellbeing, or is that perhaps a slightly separate thing?
No, the same thing. I mean that’s an interesting question in itself, is there a difference between happiness and being happy and wellbeing? And I would say the difference in the two is that well being is more state of mind and long term thing, whereas happiness is a kind of moment in time. But, so yeah it is wellbeing really, although the two words are interchangeable, but yeah we are we are going to go as far as to say that if you are somebody who see success in money, if you if you chase money then you will be less happy than you would otherwise be and that’s what we’re going to try and prove today.
Excellent, well I look forward that should be very interesting conversation. Well, we’ll let our our listeners decide how interesting it is, but I’ll enjoy it anyway. But before we do that, it’s time for the first of our regular features, and we’re going to kick off with Bage’s Behavioural Biases. So this is where old friend of the podcast behavioural finance expert Neil Bage intoduces one minute introduction with different behavioural bias the effects how we make decisions about money, and this week Neil is going to tell us about Herding.
Unknown Speaker 2:50
Herding Bias is the inclination for people to mimic the crowd, without taking into consideration their own judgments, and therefore making independent decisions. To explain what this means, we at Be-IQ created an online investment club game. Users had to invest certain amounts of money on a monthly basi,s which was a free choice, no influence at all. However, before their chosen investment amount was invested, they got got to see not only how other people in the club predicted the market would perform, but also how much money the other people were investing. Now, at this point, the users were offered a choice. Stick with your own decisions or instead, follow the crowd, based on their prediction, and the amount of money, the crowd, on average, we’re investing. Now the game offered people seven distinct chances to change their mind, or stick with their own choice. And it turns out that 12% of people do indeed stick with thier initial choice. They weren’t swayed at all throughout the entire game by what the crowd were doing. 4% of people change their mind every single time. So even though they made their mind up initially the power of the crowd was just too much. And each time they opted to run with the masses, rather than stand alone and go with their own choice. When you explore the broad findings, 84%, of people change their mind at least once. With most people, 37% of people, changing their mind, at least four times out of seven. Now this is a staggering amount of change based on nothing more than what other people are doing. And even though we know that this was just a game. It is a perfect mimic of what happens in real life investing.
There we go. Isn’t that interesting.
That’s really interesting stuff and actually it mirrors human behaviour in so many other ways, doesn’t it? How often have you been to a meeting where somebody gives a keynote speech and at the end they will say right who wants to ask the first question? And everybody sits there and nobody says anything. But eventually, somebody puts their hand up. And that somehow gives permission for everybody else and you could then end up with what’s quite an interesting conversation. So yeah that’s that’s a very interesting tip from Neil.
In investment terms we do tend to, you know, we tend to follow everybody else is doing. It’s a truism of investment that you should get in at the bottom, and out at the top. But if you look at the statistics of money going in and out of the market it actually is the opposite way around. Most people get in at the top, because they’re feeling nice and confident, because that’s what everybody else is doing. And they get to the bottom when they have a bit of a panic. So, Herding is a really important bias for investment but also just financial wellbeing and happiness. In general, there’s Theodore Roosevelt said “comparison is the thief of joy.” So I think Herding is fascinating. Anyway that’s that. Tommo, we’ve been we’ve been using Neil’s tools for quite a while, haven’t we? The Beam App and you must have done this game with lots of clients?
Producer Tommo 6:22
I have, and it’s something you can get online it’s the Beam App. And we have a, we have a back office system that sees these results. And it’s really telling that you go through this or gamified approach in different areas different biases some of these that that Neil has already talked about in previous podcasts, and the Hearding one is strong. It’s strong, and when you talk about it, they go oh yeah. And I look at where we see this in in real life I think marketing. All of this marketers really tap into this sort of thing they sort of get this groundswell of momentum and then everyone goes oh yeah let’s do that. But I look at Sunday supplements financial wise, they’re always latching on to the latest craze that just perpetuates all of this. So it’s really important to, what we, the way we approach things at Ovation is yes we need to understand these biases that we have. But really important to what’s the plan? Why are you investing? And stick to it and try your best to ignore the fads that come along. And that’s really important.
Producer Tommo 6:22
Excellent, thanks for that. So let’s move on then to our next regular feature one that’s very important listeners. And if you want to contribute to this, it’s Tight Ass Tommo obviously it’s what I’m talking about, where cheapness Tom Morris comes up with a money saving tip. And if you want to contribute anything and your own Twitter #tightasstommo, and let us have your suggestions. But in the meantime, Chris if you’ve got one for us today?
Well I’ve kind of got a reverse tip this time because I was looking for, I’ve got to be honest, I went on the internet to see if I could find any tips. I’ve asked me mum, I’ve asked my wife, I’ve asked the kids. Now I’m on the internet and there’s a lot of blogging, these days now. Internet influencers they call it that. And there’s a lot of wellbeing and money sites cropping up, and some of them have got some really good things in there, some of them, not so good. And I saw one, which had 50 tips how to save money, and quite a few of them were almost anti financial wellbeing. For example, one said, don’t go to parties and weddings with people that you don’t know very well, or more distant family members, such as cousins. They won’t really miss you, and you can save money. What an awful tip. How depressing is that. Of course you should go to because you meet new people and you have fun and social wellbeing is the most important part a wellbeing. Setting themselves up as a money expert and telling you not to go to the weddings of cousins.
Well said, Chris well said indeed. Right what’s our Master of Meaness got for us today then Tommo?
Master of Meaness, I like that. So, a lot of us at the moment are working from home. And what a lot of people don’t know is that when you work from home, you’re able to get some tax relief, based on some of the things that we have to use more on a daily basis so a lot of us are using more electricity, using in broadband, etc more of that at home than we would do if we were in the office and paid for by our employer So, and unless your employer gives you an allowance to cover some of this, what you’re actually able to do is get some tax relief on it. And that works out that you can claim up to about six pounds a week. As this electricity utility bill usage, and then get tax relief on that particular amount. So, quickly gets the calculator out because I can’t do the math that quickly in my head, and make sure it’s right. So that works out about 300 quid that you can put towards your tax bill as a write off, which would save you somewhere in the region of 60 odd quid a year.
Having worked from home myself pretty much all my working life that’s what I’ve always done use a home as an office is what they categorise it. I know my account deals with it all. But yeah, no, it’s very good and you do at least get some money back as there are more costs, but particularly in the winter, you’ve got heating your lighting and on the sports on TV that you have to watch . . .
Producer Tommo 10:26
Yeah well quite, quite. As we’re recording this, the second test, Pakistan v England is going to be on in about half an hour’s time so that. But But seriously, a lot of people who are self employed or do these tax returns, it’s naturally second nature because accountants have them a lot of people are paid by PAYE are either payslip painful they’re tapped. So there is a form for you to fill in to claim this. So, if you type in HMRC P87 you’ll be able to see the form, very simple, fill that in send it off. And you know, it’s not a huge amounts of money, but it’s tax relief tht’s for the people who are working from home who wouldn’t, usually.
Tommo saving small amounts of money, is what you do best.
Producer Tommo 11:12
You know it!
There’s no one better at it in the world. Right. And let’s move on, Chris, why don’t you introduce our subject for today. The Schwartz Circumplex. Which I think was running the 2:30 at Chepstow yesterday. Could you tell us a little bit more about it?
Yes. So, the Schwarz Circumplex, which really needs to be said slowly, regular listeners will remember that the podcast we did with Professor Tim Kassar of Knoxville University
They were numbers, 42, and 46, I believe from memory, as uf if I don’t have a script
My script now says thank you Tommo, but . . .
I just jumped in, he was supposed
Producer Tommo 11:55
Sorry, sorry, can you do that again. Sorry I was daydreaming.
I’m keeing that in! Thank you Tommo. Professor Kassar has written a great book called Hyper Capitalism. And if you’re interested in an alternative look at economics, it’s absolutely fantastic. If you’re not, it still contains a lot of insight into our relationship to money and the pressure’s on us to spend money and accumulate stuff.
Producer Tommo 12:23
And it’s in comic form, it has pictures of it so it’s really a really easy and fun read and those who know me know that I’m not an avid reader I’m an audiobook kind of guy but I have read this front to back, and it is a good and fun read.
Now, one of the founding principles that Professor Kasser introduces is the idea that a person who holds financial success as one of their primary values will be less happy than they might otherwise be.
That’s pretty strong statement.
So it comes from that Schwartz Circumplex model so I thought we might spend 10 minutes looking at this fascinating bit.
Producer Tommo 12:59
Well, if you don’t mind me just jump, jumping in here I think it’s worth just mentioning that Tim Kassers book does have some political bias to it so it might not be for everyone, I’m just warning you that there is a slight bias there but I think some of the stuff that you’re saying does ring true.
But if you read anything and you understand the bias you’re at least then able to frame it in your own terms of reference, I guess we all have biases. Anyway we’re turning into a Neil bage. Back to the circumplex model. Before we go on and look at this theory Chris. You talked earlier about how one of somebody’s holding financial success as a primary value. What do you mean by the word value in this context what is a value as opposed to say a belief or a goal?
So that’s a really good starting point because a value, according to Schwartz, is I think of it as like our own individual standards, and he uses the word cherished a lot when he talks about values and I think that’s a really revealing word. So for example, he says that values is something that we’re not necessarily aware of, but we do become aware of them, when we are being forced to take an action which conflicts with our cherished values. So we’re not always aware of our values but we are aware of our beliefs. So in some ways you could say that beliefs are values that are put into practice.
Okay could can you give an example of that?
Producer Tommo 14:27
Shall I jump in here Chris? I think, as I see, quite often, with the conversations I have with with clients that Ovation, talk quite a lot in depth about their values and I can think of a client who significantly strong Christian values. And this turn, this in turn leads to a belief that they should be helping others. You know as a result, an important part of their financial plan was philanthropy, or is philanthropy. So we follow the principles of philanthropy that we’ve talked about on the podcast before. Regular plan giving to causes that means something to you, rather than you know that instant gratification to try and assuage guilt. So planned regular giving to causes that, that means something, you know, you also allowed to see the impact of that giving. In, in this way they’re able to fulfil their beliefs, which are based on their values. Now if we suggested the client invest into a fund, for example, that was invested in arms manufacturing, that’s going to counter their values as well. So not only are we looking at the financial plan. How are they spending their money but also how are they investing their money is another thing, another action that is aligned to their values.
Great, but presumably we have more than one value because we talk about a set of values, don’t we?
Yeah, and that’s a very important part of the story, we order our values to assistant priorities. So when we need to take an action, it’s going to affect more than one value, and it is the trade off that we choose between the values that forms, our attitudes, and our behaviours.
Gotcha. So we have lots of values, we don’t know them there. but they lead to our beliefs, and the values are ordered into a certain priority, which then directly influences our behaviour.
Yeah, exactly. I’ll give you an example just to illustrate how this works in practice. I am a trained business coach and I was trained by a chap called Jan Bowen Nielsen, who many of our listeners who are in the financial services world will know, he trains a lot of advisors on coaching skills, and I was talking about this with Jan and he gave me an example of honesty, versus politeness. Now most people will say that they are honest that they hold the value of honesty as being really really important, but they will also hold the value of politeness. So how we order those two values will determine our behaviours. So if somebody asks you something personal perhaps when a new hairstyle suits them or do you like my shirt, the value of politeness to not offend very often will override the value of honesty and that therefore leads to our behaviour.
So you’re suggesting that is something we don’t necessarily know about until they’re challenged and, and if so, does this mean that values are set and constant or can they change over time?
Yeah, they can change for sure that I think as we go through life some values remain remain constant but others are bound to be affected by our experiences. The Kolb’s Cycle of Learning that we described the financial wellbeing book is all about how experiences affect behaviours and values.
Producer Tommo 17:34
Yeah, I can give an example as to what I’m sure quite a few people can relate to. My values have definitely changed since becoming a parent. I look at things very differently. My wife may argue with this but I’m certainly some of my values are less self absorbed. And so yeah there’s definitely a shift and and I think moments and events in your life, do, do shift it.
I think that is very true and I’m just sticking with the parenting example, I always got on well with my dad as a kid, but we weren’t particularly close. But when I became a dad myself, I began to understand the sacrifices that he’d made in order to bring up me and my three brothers in terms of his own life. And the values that he held dear in order to be the best dad that he possibly could be, and therefore I think there’s a result of that insight, a personal insight that I opened myself up to my values and began to change. As a result,
Producer Tommo 18:34
I just gonna check in, for example, if I may, and I’ve actually gone through the last month or so. About certainly a Kolb’s Cycle of Learning. I’m watching a really lovely show on Amazon Prime. Yes, I’ve got Amazon Prime what that says about my values, I don’t know, but it’s a show called This Is Us. And there is a character on there, the father and his name’s Jack and, you know, he’s a complex character like an awful lot of us are but a lot of what he does as a father. And as a man I look up to go Wow, what a great example. And so maybe there’s, you know my beliefs in there that I see that it’s a great example but some of the things you see him do. Oh, well maybe I should be thinking about being a little bit better and, and you see that you see that example and maybe that affects my values and the way I should do things I don’t know, just something that I’ve been watching and seeing and maybe that is that fair reflection of what Kolb’s Cycle of Learning
Absolutely, experiences affecting your actions which create new experiences which affect your actions and so we form values. Absolutely and therefore values can change. How our values relate to each other, and how they match with our behaviours, the matching of values and behaviours is a really important key to happiness and wellbeing. There’s so much pressure on us to live in a certain way from employers, partners, from society, from TV shows, that often our behaviours and our values do not match. And when that happens, it can cause real issues including mental health problems addiction and bad money behaviours
Are there common values that we all share. I think Tommo mentioned one caring for others which I hope is something that we do. But what other the values are there?
So under the Schwartz model, you’re caring for others is called Benevolence, and there are nine others so 10 in total. I won’t go through them all but to give you some examples, you’ve got Conformity, where you restrain your own actions to not accept others, upset others. Power, all about social status and prestige and control. Heddenism, which is obviously pleasure for yourself. Universalism, tolerance and protection for everybody in for nature. And Security, harmony and stability of society of relationships and of yourself.
Okay, so they’re all quite clear values I think I understand those things as you explained them but some of them sound like they could easily be conflict with each other. So, for example, someone who’s got a strong Power value like to be in control his surely unlikely to have a strong Conformity value?
Yeah, exactly. And that’s where this whole subject starts to get really interesting I think because some of these values are very closely, closely correlated conformity and security for example, where people will go along with society’s expectations in order to preserve harmony and Schwartz puts all of these 10 into a neat circle the Circumplex referred to in the title of this podcast, which puts values that are closely aligned, next to each other, and values which conflict with each other on opposite sides of the circle.
Producer Tommo 21:36
And we put a copy of this diagram in the show notes if any listeners want to want to have a look, go on the website, www.financialwell-being.co.uk and click on the podcast tab, you’ll see in full show notes probably not, going up in in the apple podcast that’s my producer bit by the way guys, it’s about the only producer bit, that I’ve done today so. But yeah the diagrams there.
So, just looking at it now and it’s rather a splendid thing.
So, another good example of conflict can be Universalism, tolerance for all people, which is directly opposite Power on the circle as they are conflicting values.
Okay, so this is all beginning to make sense so we have 10 basic values some conflict with each other some complement each other, but bringing it back to the purpose of these podcasts, what does this have to do with how we spend our money?
Well this is where Professor Kasser’s work comes back in. He created a link between these values and our personal goals. He surveyed some 1800 people asking them for a rating of various statements such as ‘I will be financially successful,’ and ‘I will have many good friends.’ And He therefore kind of refined the Schwartz model, more aligned to personal goals. Now some of his findings might not be a huge surprise for example Heddenism and Spirituality, were in conflict on opposite sides, whereas Self-acceptance and Community were very closely related.
Okay, I could see where you’re leading with all of this Chris, I think anyway. So Professor Kasser has come up with a bunch of values which into Self-acceptance and Financial Success, surely the punchline here is going to be the extent to which these two are correlated?
Exactly right, you’re way ahead of me. So what he found was that the values of Financial Success and Self-acceptance were opposite each other. In other words, someone who holds Financial Success as one of their important values is unlikely to have high Self-acceptance. And also on the other side from Financial Success and therefore in conflict, are things like Physical Health, Community and Safety.
Producer Tommo 23:43
We can also bring an intrinsic and extrinsic motivation into this argument which is something Tim Kasser talks about at length.
Yeah, our old friends, yes remind us what they are Tommo . . .
Producer Tommo 23:54
Wow, here we go, I’ll give it a go. Okay, so extrinsic, extrinsic motivation is one that we do for other people. That results in a reward for someone, perhaps financial or praise or admiration. And intrinsic motivation is one we do, just for ourselves for the inner satisfaction. So there’s no external factor we do it or ourselves. The research shows that achieving an intrinsic motivation increases wellbeing. Whereas achieving and extrinsic motivation, does not.
Absolutely. And let me get the value of Financial Success is an extrinsic motivation.
Producer Tommo 24:35
Correct. Although there’s a little bit of a grey area, certainly what you’ve given a good example there David but when he’s doing it for other people that can have, it can be like an extrinsic but it’s intrinsic. We think of family, you’re doing something for your family. It could be seen as extrinsic, you’re actually doing it because you’re intrinsically motivated to help those close around you so there’s a little bit of a grey area that I just wanted to clarify that
Yeah and you know that there is a line between that there’s that it’s not you are either extrinsic or intrinsic and you know there’s a line where you’re a little bit but that for the purposes of this argument the logic is the evidence if you like that a person who sees money as a measure of success who holds the extrinsic value of Financial Success highly are placing it above the intrinsic value such as Self-acceptance and will therefore be less happy than they could otherwise have been. Drumroll please . . .
Which would suggest that reviewing those values and understanding where they’ve come from, is going to be a pathway to increasing our wellbeing?
That would seem logical.
Producer Tommo 25:43
Now what are the parts of the financial planning process is to really understand ours or a client’s motivations. It’s that Know Thyself process that runs through the financial wellbeing book and throughout all of these podcasts. So at the beginning of the financial planning process that we need to take time to make sure that really understand two things. Our relationship to money. And our values around money. So for example, if a client tells us that they are worried about the planet and want to use their money to look after their family, using social good. But they’re spending their money on expensive cars and spending all their time to work to win approval of others. Then we can see that their values and their behaviours are in conflict. So you might have worked with this client to help them understand themselves better and to reach their own conclusions about whether they are using their money to increase their well being and put simply, the way to do this and this is where it’s quite challenging to do ourselves. We just need to ask, good open questions. And just allow somebody to answer. Then push again. So we can start to get what’s deep seated about what’s important to someone and be brave enough that if we spot these conflicts that we raise it with them, because there might be a moment of self awareness, that they didn’t realise that these conflicts were going on. We’re busy aren’t we, our lives are busy and we don’t get time to reflect on what’s truly important whether our actions are aligned to that.
And ultimately, as ever, it’s all about our financial wellbeing. So I hope you’ve enjoyed this little delve into the world of the Schwartz Circumplex I’ve certainly found it quite fascinating. And I hope that you will be fascinated yourself enough to join us next time as we revisit, another one of our financial wellbeing podcasts.