‘The psychology really dictates all the finance’

For most of us money is a harsh reality – one we deal with more or less well. Can psychology help us in the seemingly never-ending task of trying to make ends meet? Chartered Psychologist Kim Stephenson is also qualified as a financial adviser, and he certainly thinks so. He has two books and a number of other projects to prove the point.

What are you trying to achieve in the books and website?
To get people to see how powerful and important psychology – and allied areas like evolutionary biology and neuroscience – are.

Specific money skills have been introduced into the school curriculum. This approach assumes that present knowledge will still be useful in 20 years time and it focuses on particular states of affairs and techniques. Nobody asks the obvious question, 'What is your goal?'. That's the psychological approach, asking about what the objective is and why you're doing things.  

If you answer the question of what you want to do, you might find money isn't the best tool to achieve it or as important as you think it is. You can then start looking at specifics – how important money is in achieving what you want; what you need to know and what you can ask experts to do on your behalf; where you need advice.

So I'm trying to help people understand that the important skills and knowledge in handling money are positive psychology approaches to purpose; goal setting and planning; cognitive insights into unconscious and conscious decision making; the neuroscience of habits (and things like CBT and Transactional Analysis 'life scripts'); how you change behaviour and form new habits. Financial skills come way down the list if they're on it at all.

The psychology really dictates all the finance. But it's a challenge – the financial world sees me as a tree-hugging dreamer and the psychological world appears to see me as a misguided economist.

How did you come to write the books?
Nobody else was talking about how the person was important, and I naively thought that people, when they realised this, would buy my first book, Taming the Pound, by the million. I'd be famous and the world would be a better, happier place. But no publisher wanted it. I was told it didn't fit into a bookshop category so they wouldn't know where to shelve it. I self-published, and that advice proved right – shops won't stock it because they can't put a label on it.

However, I got contacted by a US publisher who wanted to publish something practical that would be of value to college students in dealing with their finances, since their student debt problem is even worse than the UK, Books on how to invest go out of date but my book didn't take that approach.

Are there other areas in society where you feel psychology can contribute ?
There are so many. Career choices, in terms of being happy and doing something meaningful. In business, where it can inform decision making generally and help handle risk and uncertainty in particular. It can inform financial policy, as well as education in making it more useful in the real world. The problem as I see it is that in many areas discussion gets sidetracked into details rather than bigger questions – why is this being done at all, what is our objective and is it useful?

You deal with the media a lot
I do magazine and radio work. It's mainly BBC local radio, so I'm trying to spread the net with national stations and TV. I'm also trying to push into the direct financial areas. Financial media see themselves as experts on money, and claim that psychology is only useful to people who are 'weak' and 'broken' and who aren't smart enough to handle money.  Women's magazines tend to be interested in the relationship with money, the way that different people react, so they're a more receptive audience. Of course, there are no gender differences in financial ability but at the moment we still have this stereotypical response that the really clever people (and the men) do the 'hard' stuff like money (which is actually dead simple) and women bother about the 'soft' stuff like psychology (which is actually really complex).

I love doing articles and particularly broadcast media. I think it's the fact that journalists tend to ask basic questions, and I can put across basic ideas. Often the journalists know quite a lot, but they're acting for the public who don't, so they tend to ask 'why' a lot.

Tell me a bit about your background.
I was born in southeast London, into a close extended family. My parents died when I was quite young. I considered myself the 'man of the house', so I wanted to get a job and be self-supporting. Because I'd done double subject maths (plus economics and English) at A-level, I got a job in finance. Roll forward 14 years to 1992 and I was on good money, was quoted in the papers and I had all the qualifications you can get, but I realised I didn't like it. I enjoyed meeting clients, finding out what they wanted, what resources they had, and designing a plan for them to get it, but I was no good at selling.

I went to get some careers advice from an occupational psychologist firm. They suggested psychology as a possible career.  I figured it would require my growing a beard, developing a middle-European accent and asking people about their relationship with their mother. I did some research and found occupational psychology was about all the things I was interested in.

I did a full-time degree, then a master's. After that I did the standard things – lots of selection, psychometrics, a bit of training – before going freelance, mostly doing associate work in job selection, and was approached by a charity who wanted a 'talking head' for a roadshow they were doing on teenage finance. I realised that what I found simple about money other people found complicated.

The more I looked into it, the more I found that the core message of media and education was that money is really complicated. But it isn't. On the other hand, I'd learned the human brain is the most complex single thing in the known universe. So I thought, 'Why are you not told that you are the complex and important bit, the money is just a tool for you to use?'

What are your future plans?
I have four projects on the go.

One is working with young offenders, helping them to change their future prospects by teaching them life skills. The principles of life and psychological skills apply here just as well as they do with money. We may be extending the work to people coming out of prison, trying to help them develop skills to live independently, and potentially to people who exit any institutions such as former service personnel.

I'm promoting the new book, which I'm hoping is going to get me contracts to do something similar in the UK, as well as writing guides for other groups, such as those wanting to invest for retirement, those in debt, and so on. There are possible workshops in schools and colleges about the area. I want to build up some statistical evidence by running pilot programmes.

I've also designed a master's course in behavioural finance. This is about 95 per cent positive psychology, decision making, evolutionary biology and anthropology, goal setting, behaviour change, neuroscience and only about 5 per cent basic finance. It's aimed at those such as bankers, where the understanding of real-world decision making involving people and finance would be really useful. The challenge is marketing it!