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Beliefs and


Compounding our money beliefs are our
decision-making flaws

In contrast to classical models of economics which assume consumers to be rational financial decision makers, behavioural economics uses insights from psychology and sociology to create a much more realistic picture of the factors affecting our behaviour in financial matters.

Behavioural economists draw on the long list of “heuristics” – mental shortcuts or biases in the way we think – developed by cognitive psychologists. The interaction between many of these has been shown to undermine our financial decision making, especially in relation to events which are in the future.

Loss Aversion: We weigh losses twice as much as gains of the same value

ASIC Report 2308 listed more than 30 of these biases that were thought particularly relevant to financial decision making, although for our purposes, the work of Furnham9 in distilling them down to the ‘7 Deadly Sins of Investing’ is a more practical demonstration:

Table 2 The Seven Deadly Sins of Investing

Cognitive Bias

Looks like

Results in

Confirmation bias

We only look for information and news in favour of our ideas

Make poor decisions due to incomplete information

Optimism bias

We believe we are better, more capable than we actually are, and that misfortune is more likely to befall others

Taking on riskier positions than we should; not taking out insurance.

Illusion of control

We overestimate the control we have over our economic affairs, thinking we can always influence the outcome

Overactive trading and assuming we can replicate success easily

Overconfidence in prediction

Either being too cautious to invest or not wanting to get out (sunk cost fallacy)

Take a more concentrated position, based on pessimism or optimism

Risk and regret aversion

We overestimate the control we have over our economic affairs, thinking we can always influence the outcome

Missed opportunities and being locked into bad investments

Group think

Responding to conformist pressure to think like others

Choosing poor investments or ones which don’t align with risk tolerance. Getting into opportunities too late.

Memory distortion

Selective forgetting and memory

Repeating investment ‘mistakes’

Source: Furnham

Money archetypes

The various combinations of these different money scripts, behaviours and decision making – overlaid with our current economic and social circumstances – manifest as money types.

While there are various money type methodologies, the ‘8 type’ model – developed by the Money Coaching Institute 20 – is preferred by many local advisers. The types are explained in more detail below.

Delivering any kind of financial advice effectively requires an understanding of which type – or types – a person exhibits at a point in time (they may exhibit different types at different points in their lives and can be coached out of, and into, different types).

The Innocent

As children we start of as Innocents. The ‘Innocent’ archetype is one of the most common money types in women. This type feels overwhelmed, and reacts by burying their head in the sand, avoiding bills, superannuation statements, bank and credit card statements, indeed anything relating to money. They feel powerless and anxious, and will be

Immobilized around money matters without the opinions and guidance of others.

The Victim

The victim blames their money challenges on some event or combination of factors from earlier in their life (money wounds). The recognition that they need help is countered by the shame of believing they can’t help themselves.

They may feel entitled to a rescue of some form – because of all the wounds they have had to bear.

Addictions, such as gambling, shopping, or substance abuse, are common signs of this Money type and can sabotage their sense of financial well-being and security.

The Warrior

The Warrior sets out to conquer the money world and is generally seen as successful in the business and financial worlds. Warriors are adept investors, focused, decisive, and in control. Although Warriors will listen to advisers, they make their own decisions and rely on their own instincts and resources to guide them.

The Martyr

The Martyr is also one of the most common money types present in women. People of this type are often so busy taking care of others’ needs that they neglect their own. Financially speaking, Martyrs generally do more for others than they do for themselves. They often rescue others (a child, spouse, friend, partner) from some circumstance or other. They may even take on a higher-paying job that they don’t like, so others around them can live well.

The Fool

The Fool is a blend of the Warrior and Innocent money types – combining bold moves and risk taking without real thought about the true risks or consequences involved.

They typically have a strong desire for financial success, but resist doing the consistent, backend work to get there. A search for financial shortcuts such as lotto wins or ‘get rich quick’ schemes may be a part of their plan! They tend to be eternal optimists regardless of the circumstances and are more focused on the ‘here and now’ rather future outcomes.


Creator/Artists have a conflicted relationship with money, believing it undermines their desire to be on a more spiritual – less materialistic – path. This money type is often seen in creative entrepreneurs, spiritualists, non-profit employees, and people on a creative, artistic, or spiritual path. They love money for the freedom it buys them, but paradoxically, their negative beliefs about materialism act as a block to the freedom they so desire.

The Tyrant

Tyrants hoard money, and use it to control people, events, and circumstances. They may experience feelings of never being at peace with money, never having enough, and never feeling complete or comfortable with what they do have – even when they have an overabundance of money and all that you desire. Successful entrepreneurs often exhibit this type.

The Magician

The Magician is the ideal money type, exhibiting a spiritual-like awareness around the energy, the flow, and the deeper roles of money in their life. They are adept with their feelings and interactions with money, having previously become conscious of the patterns and behaviours preventing them having a healthy relationship with money. Magicians are confident they can create the financial reality they desire, growing money in ways that are aligned to their values.

Our money behaviours and attitudes drive our financial - and mental - wellbeing

Whilst there are many definitions of financial wellbeing, they typically all include some reference to the following components:

01  Able to meet financial commitments.
02  Have resources to enjoy life; and
03  Have an ability to cope with unexpected financial shocks

Extensive research has shown that behavioural and psychological factors are the biggest drivers of financial wellbeing, collectively explain around 60% of variations in financial wellbeing between individuals, whereas knowledge explained only 9% of variations 11.

Figure 2 Drivers of Financial Wellbeing

Source: ANZ

UK researcher Elaine Kempson12 , whose work fed into the long running ANZ Financial Wellness survey, identified the key behaviours positively correlated with financial wellbeing as:

    • 01 Planning expenditure against income
    • 02 Prioritising spending on essentials
    • 03 Disciplined spending
    • 04 Living within means/not borrowing for essentials
    • 05 Keeping track of money available for spending
    • 06 Active saving
    • 07 Planning for unexpected expenses or an income fall
    • 08 Planning for retirement
    • 09 Proactively seeking information and checking product features before buying a product
    • 10 Gathering information before making a financial decision

Financial Advice

To find out more about Milford



Stress and Wellbeing, how Australians are Coping with Life, Stress and Wellbeing Survey 2015, Australian Psychological Society.


The New Psychology of Money, A. Furnham, Routledge, May 2014.


The Eight Money Types Defined, Money Coaching Institute, https://moneycoachinginsti , accessed July 2021.


The Eight Money Types Defined, Money Coaching Institute, , accessed July 2021.


Financial Wellbeing, A Survey of Adults in Australia, April 2018, ANZ Banking Group.


Financial Wellbeing, a conceptual model and preliminary analysis, E. Kempson, A. Finney & C. Poppe, Consumption Research Norway – SIFO, 2017.

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