None consciously choose between being proactive or reactive with money. But this choice, has profound effects on your financial behaviours and even mental health.
Because the only way to get the life you want is to make it happen through your daily financial decisions proactively.
Being proactive means taking control of your finances, defining where your money will go, adjusting your financial plans as needed, and ensuring your future free cash flow is allocated according to your priorities.
Proactivity fosters a sense of control and reduce anxiety about the future. A proactive approach means you are less likely to be caught off guard by unforeseen financial difficulties.
This sense of control over your financial life helps create a positive, growth-oriented mindset. Instead of feeling constantly on the back foot, you feel empowered to take charge of your life.
Conversely, reactive money management refers to a style where your finances go where society makes you go. And our consumerism society is designed to make you spend, leaving you insufficient money for the goals that truly matter to you.
Reactive individuals often find themselves adjusting to financial surprises and realising their finances went in the wrong direction.
Reactive money management leads to higher stress levels as it allows external forces to dictate where your money goes.
Ultimately, reactive individuals end up feeling they’re not in control of their own lives, without knowing how to fix this problem.
Consistently being proactive or reactive when managing money impacts the brain's structure and function over time. When we form habits, our brains create neural pathways that strengthen with each repetition of the behaviour.
In proactive individuals, this can result in strengthening areas of the brain associated with planning, decision-making, and impulse control.
Conversely, reactive individuals might reinforce pathways associated with stress responses and impulsive decision-making.