Some financial advisers, financial "gurus" and the news media proclaim (quite loudly) that "it's not your fault that you're in debt. The credit card companies made it too easy for you to spend money!" and that "those evil banks enslave you with debt that you can never pay off." These advisers, T.V., and radio personalities are promoting the idea of Determinism in general, and Behaviorism in particular, in financial planning.

What's wrong with Determinism/Behaviorism in financial planning? Well, for one, it doesn't really help the individual. Behaviorism assumes that you are not responsible for your situation. In financial planning, it means that your financial problems are not your fault. 

But if you're not responsible for your financial situation, then who is? Well, the Behavioral approach says that other people or institutions are responsible for your credit card debt, or a brokerage firm is responsible for your massive losses in the start market, or your mooching 30 year old son or daughter is responsible for your inability to save money.

This reinforces a victim approach to financial planning that is becoming quite commonplace today. In whatever its form, the victim approach can never provide any real answers to your financial problems.

While there may be some things which are outside of your control (i.e. a flood), many times there are things you can do to guard against such unexpected disasters (i.e. flood insurance).

The only real solution to a victim approach to financial planning is to focus on what you can do to solve your financial problems in the here and now-to create a financial plan for your future, and to take responsibility for your existing financial problems.

You might also like

1. The Fallacy of Faith-Based Financial Planning
2. Financial Planning Begins Before You Are Rich

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This entry was posted on May 29th, 2010 by David C Lewis, RFC. Edits may have been made to keep this entry current. · No Comments · Current Events, Philosophy In Financial Planning, Psychology In Financial Planning, Retirement Planning