An Upgrade to Mental Models: To Avoid Hidden Cost to Our Financial Future

“Money doesn’t just move through wire transfers and vaults. It moves through belief systems, stories, and social signals.”

In a world driven by data, technology, and rapid change, one might assume that financial success hinges solely on knowledge, strategy, or market trends.

But there lies the real gap:

A growing body of research in behavioral economics reveals that our financial decisions are profoundly influenced by deep-seated psychological patterns—mental programming as we call it—that play a role in what, why and how we take money-related decisions and actions.

So if you think your mental scripts, shaped by early experiences, societal conditioning, and childhood, just affect your emotions. Stay with me as we uncover the tangible, often long-term consequences they have on our financial goals and outcomes

MONEY AS IDENTITY

Money is our everyday reality and there is no denying that. While not all change is directly related to money, the reflections on financial relationships often play a supporting role in the broader journey of inner growth.

In India (across the globe, really) money is more than currency. It:

provides security in chaos
determines influence and power in society
guarantees a certain confidence in decision-making

From my earlier podcast conversations with subject matter experts who have also undergone their own personal growth arcs – Vidhya Srinivasan (CFO of Bata India Limited) and finance expert Sanchita Mukherjee – there are broadly two types of people in reference to finances. One, who are fully in control of their money matters while the other are those that step up only during adversity. This is what needs to be bridged for it to have a compounding effect on our money habits and vision.

“Taking control of finances starts with an honest analysis of the kind of relationship you currently share with money,” Sanchita aptly highlights because there's a whole world of finance that can be simplified as you want it to be.

So let’s nudge ourselves in that direction. But how?

Money habits are like muscle memory. The routines and decisions you build as a teen will shape how you handle money for the rest of your life. Whether it’s learning to budget, save, or say “no” to impulse spending, these habits are the foundation for long-term financial success. And the best part? You don’t need a full-time job to start building them.

Money shouldn’t be a taboo topic

Earlier, I used to ask my guests to give their hot take on their relationship with money. Not only did their diverse descriptions make me think about where I stand, but they were also a reaffirmation of the fact that our perspective on money is as personal and unique as our career journeys. The bottom line: Your relationship with money is ever-evolving.

SPEAKING TO YOUR YOUNGER SELF:

If #SowjanyaSpoke to her teen self: “Hey, younger me… Understanding money early is like getting a cheat code for life. If I could sit across from you, I’d tell you one thing loud and clear: Financial independence = freedom. The kind of freedom where no one gets to tell you what you can or can’t do for your goals and dreams, and the lifestyle you want. And yes, money gives you options and choices.”

The Cognitive Framework: How we Make Financial Decisions

Our financial choices are shaped by how our brains work — and sometimes, by how they misfire. We often rely on mental shortcuts, called cognitive biases, to make decisions quickly. But these shortcuts can also lead to mistakes. A quick understanding of these mental habits can help you recognize when your brain is steering you off course — and help you make better, more confident financial decisions.

Here are some quick, interesting picks that play on our cognitive thinking around money:

We tend to fear losses more than we value gains. Losing Rs 1,000 feels worse than winning Rs 1,000 feels good! Because of this, we might hold onto investments that aren't doing well, just because we already own them. This is called the endowment effect.

When we hear about a friend’s bad investment or see news about a market crash, we might believe these events are more likely to happen to us too. This can make us overly cautious – called the Availability Heuristic

Making many choices in a row tires our brains. By the end of a long day, we might spend money impulsively or put off important financial decisions. When decision fatigue sets in, we tend to choose what feels easiest in the moment — not always what’s best for our future.

Resetting money mindset

Outdated mental habits don’t just stay in your head — they affect your long-term wallet, too.

Here’s how:

Missed Opportunities: Fear of loss can keep you clinging to bad investments and missing chances to grow.
Financial risks: Emotional decisions can leave you vulnerable to decision fatigue and impulsive spending.
Poor Planning: Old beliefs like "I'm bad with money" can block budgeting, saving, and smart investing.

The good news? You can break the cycle.

Mindfulness: Pause and notice your emotional triggers before making money moves.
Financial Literacy: Learn the basics — knowledge builds confidence and better choices.
Cognitive Shifts: Challenge old money stories and replace them with empowering ones.
Growth starts with awareness. A new mindset can lead to a new financial reality — one step at a time.

ACTIONABLE ITEMS for your Attitude Makeover

Start noticing how money works around you. How do people earn it? How do they spend it? Who always seems to have enough, and who’s always struggling?
Ask questions—about bank accounts, credit cards, and investments. The more you know, the more control you’ll have.
Make it a habit to check where your money goes (even if it’s just your allowance).

Saving money is important, but saving alone won’t make you rich. The real game-changer? Investing.

That’s how money starts working for you, even while you sleep. Rajnish Bharti, a full-time F&O trader, can help you get started with a masterclass on investments and getting on track of making numerically driven money management an everyday exercise.

Start small. Ask, “If I had ₹1000 today, where could I put it so it grows?”
Learn about compounding—it’s like a money snowball that keeps getting bigger.

Not just as something to spend, start thinking of money as a tool: What do you want to achieve with your money?

REFERENCES