How do you make financial decisions?

**Jascha** · 02-Aug-21, 12:23 PM

Financial planning and financial decision making skills have such a big impact on everyday life! So how do you make financial decisions, from the very small ones on daily basis, to very large ones?

Me and a team of researchers at Columbia University in New York are working on studying financial decision making across 70 countries worldwide. As South Africa is one of the countries we are working with, we would be very grateful to hear from you about your financial decision making. We have a quick 5 minute survey prepared and it would be great if you could help us by filling it out:
https://cumc.co1.qualtrics.com/jfe/f...OVlvslB9vKCUvk

Let me know if you have any questions about the study!

Thanks so much for your help!

**Dave A** · 03-Aug-21, 07:49 AM

An interesting survey.
It would be interesting to see the results. Any chance of that?

**Jascha** · 03-Aug-21, 10:53 AM

Hi Dave,

thanks so much for your reply and interest in the study! Yes, I will be happy to post results here and answer any questions that the community might possibly have about the implications of results for their own financial planning. Obviously with 70 countries involved, this is a very large project which will take a bit to fully complete. We hope to conclude data collection and analysis by the end of summer and then it will go out journals for publication. If everything goes as planned, we should be able to officially report results by the end of the year. I will put a note down that folks in this forum would be interested to hear about it once it is out!

**adrianh** · 03-Aug-21, 11:14 AM

Done.

**Jascha** · 03-Aug-21, 11:15 AM

In the meantime, until these new results are in: Earlier this year our group published results on political decision making across 26 countries. With this new project we are aiming for more than triple the number of countries, across all continents, to reach more generalisable results on global financial decision making!

The link to the Nature Human Behaviour paper is here: https://www.nature.com/articles/s41562-021-01092-x
As I believe the journal might have a paywall, here is a link which has the full manuscript with free access (preprint): https://osf.io/xvksa/

**Jascha** · 03-Aug-21, 12:10 PM

Originally Posted by Jascha

We hope to conclude data collection and analysis by the end of summer and then it will go out journals for publication.

With summer I meant the UK summer by the way, so end of August / September - though given the weather we get here one can easily forget it is summer!

**IanF** · 03-Aug-21, 01:20 PM

Done

**Blurock** · 03-Aug-21, 02:17 PM

Very interesting study indeed. It does not however ask why? E.g. A rational answer would be to take a higher amount at a later date, however, if you can get an immediate better return by buying and selling something immediately, that would be a better option. My broker can still not understand why I would rather invest in my own business than in a risky annuity where I may get a negative return.

Maybe I need some financial advice as I battle to balance my own budget and cannot understand why I am always short.
I exchange R2000 worth of empties every month, but my booze bill keeps increasing!

**adrianh** · 03-Aug-21, 02:59 PM

Another issue is the the baseline i.e. how much money you have at hand every month - if you have nothing then you would probably take whatever you can immediately but if you have enough to get by then the wait is an investment. I don't think that this is the same as taking a cookie now or two next month because you don't need at least one cookie to stay alive for the next month but you do need cash (especially if you don't have any)

**Jascha** · 03-Aug-21, 03:31 PM

Those are excellent points!

Originally Posted by Blurock

Very interesting study indeed. It does not however ask why? E.g. A rational answer would be to take a higher amount at a later date, however, if you can get an immediate better return by buying and selling something immediately, that would be a better option. My broker can still not understand why I would rather invest in my own business than in a risky annuity where I may get a negative return.

Maybe I need some financial advice as I battle to balance my own budget and cannot understand why I am always short.
I exchange R2000 worth of empties every month, but my booze bill keeps increasing!

You are absolutely right that it is interesting to know what motives people have to choose one option over the other. One could easily imagine that a person has a very good open investment opportunity, so that there are individual incentives to get money immediately to then profit of e.g. stock returns. There are two main reasons why we opted to not ask for motives:

We wanted to keep the survey short. In the end of the day we will have to get around 10k responses across all countries and it is much easier to get people motivated to fill out short surveys.
We already had to translate most of the surveys into the countries native language. When recording text based answer we would have also needed to back-translate them into English which can always come with interpretation issues.

Originally Posted by adrianh

Another issue is the the baseline i.e. how much money you have at hand every month - if you have nothing then you would probably take whatever you can immediately but if you have enough to get by then the wait is an investment. I don't think that this is the same as taking a cookie now or two next month because you don't need at least one cookie to stay alive for the next month but you do need cash (especially if you don't have any)

Yes, the baseline will have a huge effect - both within and across countries. This is the reason why we ask for rough income data, to control for those effects. In the final results we will be able to see to which degree the baseline impacts the decision making.