Attitude and Money PDF

Attitude denotes the opinion of a person towards an idea or 9vont or objects or people. It describ0s how do0s a person seo things in the world (things can be a person he/she meets or a now product on the sholfor oven...

Attitude denotes the opinion of a person towards an idea or 9vont or objects or people. It describ0s how do0s a person seo things in the world (things can be a person he/she meets or a now product on the sholfor oven amovie). Theso opinions or views can be positive, negative or somowhero in botwoon. Consider the following exarnple. Positive Attitud -The Power of Cloth Bags Take, forinstance,our attitude towards using coth bags. Inagine we havs a positive attitude towards thermn. This would likely translate into: Positive Foelings: We mightfeel good about using them, thinking, "We are helping the environnent" or "It rmakes us happy to be reducingplastic wast6."  146 Supportive Behaviour: We always remember to bng ur cioth shopping, actively choosing them over plastic opioms. more s Posítive Thoughts: We mighthhave beiiefs like, Con bags area cifference Way to make a choics," or"Using thernis a simple Associabon, is as An attítude, as defined by the American Psychological tlcS of an object person, group. Ssue "relatively enduring and general evaluation to positive. Amibuces provice SuTa concept on a dimension ranging from negative to be derived from spechc belei evaluations of target objects and are often assumed associated with those objecs ermotions, and past behavígurs Money Attitude on have asgntcant mpact money (money mindiset) People'sattitudes towards proh feelings. Thís mindset shapes how mucCh ininCuais inancial behavíours and aa For instance, someone epenencing spending, and overall financial plannig. saving, financial budget and save more. about money might havea proper infomed financal choics one's money míndset is crucial formaking Understanding can take con beliefs, emotions, and spending habits, incivicuals acknowedging personal aligned with their goals. and develop ahealthy financial approach ís a state of mínd of person about finances which is generalb a Money attítude as environment. It refers to the motivation a resultant of hís background and and financial skills while taking finanei readiness to use the financialknowiedge response or tendency that lead to a finani decisions. Therefore, it is a personal action or financíalbehaviour. Examplesof money attitude include: a) Believes there ís enough opportunityto earn and grow wealth.(Positive) b) Feels there ís never enough money. leading to anxiety and stress (Negatve) c) Values financial stability and prioritizes saving for emergencies or retirement (Positive) d) Does not like thinking about money and might spend impulsively.(Negative) a) Types of Money Attitudes An attitude is a state of the mind, a set of views, or thoughts, regarding some topic (calledthe 'attitudeobject'),which have an evaluative feature (positive,negatve or neutral quality).It is accompanied by an emotional component, and a tendency to act  withh regard to the attitude object, The thought component is referred to as way aspect, the emotional component is known as the affective aspect,and the JANticular calledthe behavioural (orconative)aspect. Taken together, these three to actis pecognitive referred to asthe A-B-C components (Affective-Behavioural-Cognitve have been andency SDOcts of attitude. omponents) and of a attitudesabout money can be divided into cognitive, affective Thetypes also by The attitudes and beliefs are not only influenced by external forces, but behavioural. The money attitudes,specifically, areinfluenced by various factors |innfluences. are some common types nternal culture, and personal experiences, Here ke upbringing, and beliefs people have about to the knowledge Cognitive (Beliefs):This refers people think and feel about money. money. The financial attitude is basically how "I can earn money if work hard," I Someone with a positive attitude, like believíng sormeone who and plan for the future. On the other hand, might be more likely to save or feel anxíous about spending. thinks "money always tight might struggleto save is can influencehow we handle it in The key takeaway is that our beliefs about money real life. feelings people associate with (Emotions): This means the Affective Someone might feel anxíous ii. excitement, or security. money, such as anxiety, about debt or excited about a potential investment opportunity. actually behave with their (Actions): This reflects how people Behavioural ii, like a responsible spender, or avoid and track expenses money. Do we budget altogetherdue to fear? dealing with finances Individual's beliefs about often are inter-connected. These three core elements which in turn impact their feelingstowards it (affective), influence money (cognitive)can "saving (behavioural). For example, someone who believes finances and be how they managetheir when they save (affective) might feel a sense of security isimportant" (cognitive) budget (behavioural). goals and stick to a more likely to set financial b) Classification of Money Personalities personalities. - some people love people have distinct financial Just like fashion choices, Here are some common money styles: comfortable basics. bright colours,while others prefer than they to buy things and might spend more loves Spender: This person the future. but forgetto save for i. might feel happy buying something new, earn. They even though she a latest designer bag using her credit card, Example: Linda buys cannot afford rent next month.  R. Saver: This person is careful with money and likes to save for future, might feel happy seeing their savings on They grow, but might miss out somelun experiences sometimes. Example: Despite wanting to go on a weekend getaway, John opted toput his money towards his savings fund. iii. Security Seeker: This person wants tofoel safe and secure financially, They might save a lot for retirement or avoid debt, even if it means missing oul on investment opportunities. Example:Even with low interestrates, Alice prefers keeping her funds in savinoe account over investing in the stock market. iv.Free Spirit: This person might not like thinking too much about money. Thev might spend what they earn without a plan, which can be risky sometimes. Example: Sumesh quit his job to travel the world, living day-to-day without a budget or long-term financialplan. c) Classification of Money Attitudes Our relationship with money goes beyond simple numbers. It is shaped by a complex web of attitudes, influencing how people earn, spend, save, and invest. These money attitudesarise from thier experiences, beliefs,and emotions surrounding finances.Let us discuss some key money attitudes formulated by Yamauchi and Templer (1982). i. Power & Prestige: For some, money represents a symbol of achievement. status, and influence.They might prioritize high-paying careers and expensive possessions to project success and feel respected. This attitude can lead to overspending to maintain appearances or take on excessive debt to acquire status symbols. Example: The CEO ofa company upgrades his car to a luxury brand every year to maintain his imageof success. ii. Retention of Time: Here, money is seen as a tool to buy back time. People with this attitudevalue experiences and free time over material possessions, They might prionitize saving for early retirement or delegate tasks with money to free up their schedule. Example: Mary invests to achieve financial independence and retire early to spend more time with her family.  ostrust: Past experiences or societal messages can lead to a distrust of manidest in a institutions or the concept of money itseif Jhis can financial to invest, save in traditionalbanks, or engagein financialplanning rekctance Based on a bad experience, John keeps his cash hidden at home instead Example: a bank. of trusting People This attitude emphasizesthe value of quality over quantity N Quality: mindsetmight prefer to buy fewer, but quality items that wil last, even f this for experiences over trends and seek value means spendingmore. They prioritize their money. for several years fhan Example: Aarathiprefers tobuy a leather jacket that will last buying a cheap quality jacket. source of worry for some. This may be V. ADxiety: Money can bea constant difficulties, or a fear of scarcity This aniety due to job insecurity,past financial on anything but necesstes, or difficulty spending canlead to compulsive saving. altogether. avoidance of financialplanning requirements the things that meet his minimum Example: lqbal saves buys only that his job is a temporary one. and savesevery rupee due to the fear Classification of Money Attitudes (Another View) in their Iives,Caroine view money and its role Based onthe different ways people a different classfication for money Coste and Boris Wernli (2019) gave Tristan Hechoz, in different ways people view money and its roie categories highlight the These attitudes. their lives. name suggests, sees Power Attitude: This perspective,as the L Prestige and People with status, and infiuence. money as a symbol of achievement, social and possessions to are motivated by the desire to accumulate wealth this attitude careers, even if They might prioritize high-paying show successand gain respect. experiences to maintain and buy expensive brands and they findthework unfulfiling, up to overspending to keep a certain However, this attitude can lead image. on excessive debt to acquire status symbols appearances, taking approach focuses on financial ii. Money Management Attitude: Fhis to value People with this attitude gives importance responsibilityand security (Theyprigritizelong-iem budgeting. and making smart financial decisions saving, might be financial well-being and are comfortable with delayed gratficationThey have a strong spending. investforthe future, and organised and have control over sense of financial literacy.  BasicFinance For Daily Iic ii. Goal-oriented Atitude: In this category. money is seen as a tool to achieve specific goäls and aspirations, People with this mindset are motivated h experiences, desires. They might prioritize savingfor a passions, or futufe dream vacation, a child's education,or starting a business. They are likely to be go0d at finances towards achieving these well-defined planning and budgeting their goals. Relevance of Attitude in Financial Decision Making Financial decision by a host factors including financial of making is influenced knowledge, financial attitude, financial skills, external factors, etc. However, the attitude plays a crucial role in the The relevance of attitude in financial decision-making process. decision-making process can be understood from the following table. Decision Variablesand Attitudes Decision Variable Positive Attitude NegativeAttitude Spending Budgeting, prioritizing needs over Reckless spending, lack of savings wants Investment Learning, balancing riskand return Fear of loss, lack of interest Borrowing Understanding credit costs, Over-reliance on credit, ignoring borrowing wisely interest rates Saving Regular saving, emergency fund Inconsistent saving, lack of financial maintenance buffer Risk Management Evaluating risks, informed decision- Avoiding risks, uninformed decisions making  Meaning of Numeracy to make informed financial decisions, But this Cinancial literacy empowers individuals ona solidfoundation of numeracy skills. Numeracy is a measure that denotes rests power mathematics in various real-life situations. When it comes to apply ability to the to the capacity toidentify, to understand and to use the in finance, it refers pumeracy in financial decision-makingsituations. s mathematics deals with real number line, time,measurerments, etc. i Basic Level Numeracy- It percentages,proportions, ratios, etc. ii. Higher Level Numeracy -It dealswith fraction, b) Numerical Skills for Finance crucial for financial success: The following points highlight how numeracy is with Mathematical operations: Financial decisions involve constant interactíon , i. numbers. Interest rates, terms of the loan return on investment ,expenseratios - all require interpreting numerical information presented in various financial products and services. i. Calculation and Budgeting:Creating a budget, tracking expenses, calculating interest on loans or investments - these essential financial tasks are based on basic mathematical skills like addition, subtraction, multiplication, and understanding percentages. iii. Comparative Analysis: Evaluating different financial products necessitates analysing data and comparing numerical details. Calculating future returns, fees,and risks associated with various options allows for informed decision-making. iy, Effective Debt Management: Effective debt management requires understanding interest rates, calculating minimum payments, and craftinga repaymentplan. Strong empower individuals to develop strategies to pay off debtfaster numeracy skills can and save money on interest.  Financial Planning :Planning for retirenment, major purchases, ot vohes making ong-term financialforecasting. Numeracy allows educac stimate uture costs, calculate compound interest,and develop individuals financal achieve their goals. plan Thus, by strengthening numeracy skills, individualscan reap the tfull potential heracy making informed decisions for a secure financialfuture. dfinanca The following mathematicaloperations can help in taking financial decisin Numeracy Skills Application in Finance Athmetic Skils -Addition & Subtraction Budgeting. Tracking Expensesand ar Income Savings, etc. Basic numertie sSKillJ Arithmetic Skills -Multiplication & Division Currency Conversion, Calculatins Interest, Computation of Unit t Cost (Divding total cost with number of units) Percentages Interest rate, discount rate,inflation rate credit card fee rate, etc. Ratios and Proportions Calculation of debt-to-income ratio EMI Salary ratio, saving to income ratio, etc. Time Value of Money Terminal Value Computation, EMI Computation, etc. Basic StatisticalConcepts Mean, Median, Mode to calculate averace return on investmentsand Standard Deviation and Variance tomeasure risk of investments Important Note Test of numeracywith regard to compound interestcalculation and EMI determination have been covered comprehensively in module 2 (Unit land Unit ). Evaluation of EMI Offers by Sellers of Products and Services The step-by-step procedure forevaluating EMI offers is given below. a) Understand the Basics of EMI EMI isthe fixedamountpaid by a borrower to a lenderat a specified date each cae morth. t includes both the principal and the interestamount. The customers Shou know the calculation of EMI under flat rate method and reducing balance me (See module llfor formula and calculations]  from Sellers Information Gather Amount: The total arnount of loan offered. Principal L annual interest rate offered by the lender. Rate: The Interest ll. period over which theloan ísto be repaid. The Tenure: the loan. Fees: Any additional fees charged by thelenderfor processing Processing charges, etc. Penalties for pre-payment orlate payment, insurance other Charges: V Offer EMI for Each Calculate by 12. the annual interest rate to a monthly rate by dividing Convert L EMI formula to calculate the monthly instalmentfor each offer. Use the ii. use online EMI calculators for ease and accuracy. Alternatively, jii. Total Payment Amounts Compare d paid over the tenure by multiplying the , Total Payment: Calculate the total amount of instalments. EMI by the number paid by subtracting the principal Total Interest Paid: Calculate the total interest t amount from the total payment. Additional Costs Evaluate e) fees in the total i-Processing Fees: Loans often include any one-time processing cost. penalties for early repayment ii. Pre-Payment Penalties: Customers should consider if they plan to pay off the loan ahead of schedule. i.Insurance Charges: Some loans include insurance policy. 9 Consider Flexibility and Other Benefits i. Flexibility: Check if thelender offers flexible EMI plans, such as step-up or step down EMIs. ii, Benefits:Look for any additional benefits like cashback offers,discounts, orloyalty points. 9) Use Financial Ratios and Indicators i. Debt-to-Income Ratio: Ensure thatthe EMI fits within the budget by calculating your debt-to-income ratio.  Total Monthly Debt Payments x 100 Debt-to Income Ratio: Total Monthly income health. A lower ratio indicates better financial amount to the value theitem being of loan the lo ii. Loan-to-Value Ratio: Compare the / Value terms [Loan Amount theltem] of offer better financed. A lower ratio may Make an Informed Decision and addition total interest paid, based on EMI, total payment, Compare all offers COsts. between low EMl, low total o the best balance Choose the offer that provides and favourable terms. No-cost EMI people a financing option that allows as zero-cost EMI, is No-costEMI,also known the cost of a purchase ove allows to spread on credit and avail goods /services a very popular It is without paying any extra interest charges. monthly instalments to attract the customers. The following are theimportant option offered by the sellers EMI. aspects of No-cost The interest EMI isnot entirely free of interest. No-cost a) Not truly interest-free: a discount The retailer or lender may offer cost is hidden in the product price itself. adjusted into the price bank that finances the loan,and that discount gets to the people pay. no-cost fees: There might be processing fees associated with b) Processing cost. The financial institution chargesa processing EMI,which addsto theoverall of availing this facility.That usually provides an income for the loa fee at the time provider. c) Limited options: No-cost EMI might not be available on all products or from a retailers.