More Than Just Numbers: The Hidden Key to Financial Growth

When we discuss the idea of increasing income, it is necessary to consider two main components: The numbers and behavior.

Numbers

This is the mathematical side of things. We all understand that in order to raise our income level, we need to set numeric goals that are higher than where we currently stand. We must know our current situation of income compared to expenses, and only then can we define new targets. This is obvious to most people.

What’s surprisingly less acknowledged- despite its critical importance- is the second part of the equation: our behavior.

Behavior

Our perspective on life and on ourselves, our responses to challenges, our daily habits across all areas of life, how we deal with temptations and personal weaknesses- all become crucial factors regarding financial conduct in general, and income growth in particular. We can refer to this as “financial behavior.”

A wonderful example of this is given by Professor Dan Ariely in his book Predictably Irrational, where he describes the following situation: You want to purchase a pen that costs 3 dollars. You walk into the store below your apartment and see it selling for 5 dollars. You know that just one street over, another store is selling the same pen for only 3 dollars. Will you go to the other store? Most people say yes.

But now imagine you're buying a suit. One store is selling it for 140 dollars, while just one street over, the same suit costs 138 dollars. Will you go to the other store? Most people say no- even though the amount saved in both cases is exactly the same.

What is really shaping our behavior, and influencing major decisions in our lives?

This article isn’t focused on the answers to those questions, but rather on asking the right ones. It’s about understanding our thought patterns and behavioral tendencies, referred to as behavioral economics. It's not just about numbers. It's about perspective, awareness, self-understanding, and your ability to manage yourself with wise judgment instead of being driven unconsciously by ingrained habits and unexamined beliefs.

When we aim to improve our financial selves, we must pay attention to both the mathematical details and behavioral aspects.

Ze'ev Aran is the author of the book "In the Way a Man Wants."