When I was in school, we were taught theories of personality and the ones I enjoyed most are the three components propounded by Sigmund Freud - Id, Ego and Superego. The Id consists of that part that drives human beings to want or crave something and won't stop until their needs are met. It is the primary component which is present from birth. The Ego is that part that tries to caution and remind the Id not to go by the unacceptable or inappropriate way which could be disastrous. Then the superego part is the one that stands in the middle of both and tries to bring a balance in a moral way. This personality helps to suppress the id's urge and desires that are unacceptable and fight to make sure the ego act upon the standards that are ideal rather than on realistic principles. These three components form our personality and define our decisions and behaviours.
For individuals trying to look out for ways to establish a strong financial foundation, the need to understand the determinants influencing financial stability is very important. Aside from external factors such as personal conditions and economic situations that can influence financial stability, internal psychological factors also contribute largely to it. I will be explaining more about how these components can impact the decisions of individuals when it comes to making decisions on the financial aspect of their lives.
The Id Versus Financial Stability
Just like I said above, the Id represents the impulsive part of an individual's personality. This is that stage where an individual desires something and can do or go to any length to achieve that without minding the harm it could bring later on. It operates on the pleasure principle, the desire and urge for immediate gratification, and when it comes to building a financially stable life, the Id comes to play the role of impulsive spending, taking on excessive risks and having a lack of financial long-term goals. When individuals are dominated by their id, they lose control and chase after immediate gratification, lack saving, spend on wants rather than needs, spend beyond their means and jump onto debt till they are unable to get out of it. In truth, this can ruin their decision on planning for a stable life and achieving long-term financial goals.
The Ego Versus Financial Stability
This operates on a reality principle and is conscious of what is going on around. The ego tries to strike a balance and achieve realistic decision-making. When it comes to financial stability, the ego makes sure individuals work on managing their resources, limiting their impulsive spending, making financial goals and helping them to make rational financial decisions. The ego makes sure that individuals prioritize their needs over their wants, create effective budgeting plans, plans for investment, and resist their urge in spending impulsively. The ego plays a crucial role in ensuring individuals strike a balance between their immediate gratification and long-term financial goals. In this kind of situation, individuals are able to weigh the costs and benefits of their actions before deciding whether to act on them or not.
For instance, an individual is able to decide thoroughly whether to go for that expensive vacation or invest the money on other important things knowing fully well the latter would yield more profits.
The Superego Versus Financial Stability
The superego deals with the sense of right and wrong. According to Google, the superego holds the internalized moral standards and ideals that we acquire from our parents and society. It serves as a regulator and enforces individuals' behaviours that are morally acceptable in society. When it comes to financial stability, the superego plays the role of helping them understand what financial habits are; like saving, budgeting, investing etc. It helps individuals live within their means and make decisions wisely. It helps to understand the risk behind choosing immediate gratification rather than the long-term's own especially when one is dominated by the personality. However, a tough superego might involve an excessively frugal life or being afraid to take calculated financial risks.
In conclusion, when individuals are able to understand the three components of personality and how they influence financial stability, they will be able to make informed decisions on their finances. Achieving financial stability requires integrating the id, ego and superego effectively.
