Unit #1 Flashcards by muffin mufmuf

What is the difference between Interior and Exterior?

Exterior: Focuses on managing money (e.g., financial planning, investments)
Examples:

Taxes
Cash flow
Retirement Planning

Interior: Addresses beliefs, emotions, and psychological relationship with money
Examples:

Goals
Emotions
Beliefs

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What are the Intgrated Planning Services? Ho do they fit in with Interior and Exterior? What is the model actually called?

Klontz-Kahler Model: illustrates how financial planning, financial coaching, and financial therapy services fit into the interior and exterior aspects of the past, present, and future

Exterior column (Traditional financial planning):

Past: Accounting.
Present: Portfolio management, financial advice.
Future: Retirement and estate planning.

Interior column (financial coaching and therapy):

Fiancial Coaching focuses on future goals but may address present and past issues.
Finacial Therapy primarily explores past events and emotions but also considers present and future impacts.

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How do Fiancial Planners limit themsleves form becoming effective? What is the lesson?

by not understanding their own money landscape (by avoiding painful past money-related memories)
lack of compassion
may not hear/understand what client is trying to say

Lesson: important to uncover money issues, erroneous beliefs, and resulting behavioural adaptations

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Lessons: Let clients take the “” and “”; know when to refer to “” “”

lead, LISTEN
somone else (professional therapist)

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what is the #1 factor for estimating finacial well-being? Opposed to what popular belief?

Finacial Behaviour, opposed to income

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Which are considered interior finance?

Stated goals
Authentic Goals
Beliefs
Possibilities

2,3,4

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Which of teh practices would be classified as Fin. Coaching?
1. identifying and changing limiting beliefs
2. change destructive behaviour patterns
3. Providing advice and information
4. Working to resolve chronic compliants

1 and 3

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Which behaviours are classified under therapy?
1. identifying and changing limiting beliefs
2. change destructive behaviour patterns
3. Providing advice and information
4. Working to resolve chronic compliants

2 and 4

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Social status and action orientation are examples of

Psyh. factors

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Age, gender, immigration status are exmaples of

social factors

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The “____________” consists of the client’s beliefs, feelings, stories, and unconscious thoughts around money.
a. interior future
b. exterior future
c. interior present
d. interior past
exterior past

d. interior past

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Financial coaching involves a “_________________”, focused on achieving goals.
a. future orientation
b. therapeutic approach
c. present orientation
d. holistic approach
past orientation

a. future orientation

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In the FCAC study, the overall financial well being score was comprised of three components. They are:
a. financial behaviors, economic factors, and social factors
b. knowledge of the economy, financial markets, and banking practices
c. ability to save, using credit responsibility, and financial knowledge and experience
d. financial knowledge, financial experience, financial behaviours
e. meeting commitments, feeling financially comfortable, and resilience for the future

e. meeting commitments, feeling financially comfortable, and resilience for the future

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Money management, understanding of financial products and, how to manage risk are examples of:

knowledge and experience factors

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At the lower end of financial well-being (Struggling Somewhat and Struggling a Lot groups) which psychological factors played the largest roles in differentiating the groups.
a. time preference and emotional stability
b. impulsivity and self-control
c. attitudes and time orientation
d. social status and action orientation
e. locus of control and financial confidence

e. locus of control and financial confidence

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The relationship between income and financial well-being is strongest for Canadian households with:
I. Very low income
II. Average income
III. Very high income
IV. Very high net worth
a.III and IV only
b.I, II, III and IV
c.II only
d.I, II, and III only
e.I and III only

e. I and III only

Define Fiancial Planning, Coaching, and Therapy

Financial Planning: Traditional exterior-focused advice across six areas—estate planning, retirement planning, cash flow management, risk management, tax planning, and investments.

Financial Therapy: Involves diagnosing and treating emotional/behavioral disorders and providing psychotherapy (individual, group, couple, or family).

Financial Coaching: An advisory model focusing on the interior aspects of financial health, helping clients gain skills, explore beliefs, and achieve financial and life goals.

Define Fiancial Well-being

Financial well-being: is the extent to which you can comfortably meet all of your current financial
commitments and needs while also having the financial resilience to continue doing so in the future

FAC Study: Five key components of financial well-being

Financial Behaviors:
○ Examples: Saving, borrowing.
Social Factors:
○ Examples: Age, employment status.
Psychological Factors:
○ Examples: Confidence, attitudes towards money.
Economic Factors:
○ Examples: Income.
Financial Knowledge and Experience:
○ Examples: Experience with financial products.

What are the four Fiancial Well-being Groups and define why they’re in that group and what they struggle/benefit most with?

The Financially Secure Group

can do the things they want and enjoy life
income was the variable most strongly related to financial well-being.
Knowledge of money management (i.e., knowing how to plan spending against income, choose the right savings
products, and choose the right consumer loans and credit cards)

The Somewhat Secure group

“Quite good””
can do the things they want and enjoy life (30%) or are neutral
on the topic (30%)
* the number of dependent children living at home was strongly related to financial well-being.
- Those who had fewer (or no) dependent children at home tended to have higher financial well-being than those with more.

The Struggling Somewhat group

either good nor bad”
revealed that not borrowing for daily expenses was the variable most
strongly associated with higher financial well-being
having post-secondary education was strongly related to financial well-being for Canadians in
this group

The Struggling a Lot group

“Quite bad” or “Very bad”
have less than 1 month’s income in savings (or don’t know how
much they have)
do not feel their finances allow them to do the things they want
and enjoy life
Canadians who had a higher score for locus of control tended to have higher financial well-being.
Locus of control refers to the extent to which people believe they have control over the outcomes of events in
their lives, as opposed to external forces beyond their control having more influence.

At the lower end of financial well-being, locus of control and financial confidence played larger roles. (to well-being)

if they lack these things then they don’t have good well-being

At the upper end of financial well-being, life stage played a larger role. (they were older, ~65)

*Financial well-being has a stronger relation to “_” than to economic factors

*Canadians who “_” _”
have higher levels of financial
well-being than those with similar incomes who don’t

*“” “” and attitudes toward spending,
saving and borrowing are important

behaviours

actively save

Financial confidence

Does Financial Education work? Why doesn’t it?

Research shows that financial education rarely works

Why?

Financial education effects fade over time – People forget or don’t apply what they learn.
Knowing doesn’t mean doing – Learning finance doesn’t guarantee better financial decisions.
Other factors matter more – Income, habits, and environment impact financial well-being more than knowledge.
Minimal real impact – A Canadian study found only 4% of financial well-being is linked to education.

what is “just-in-time” financial education?

is it more effective

What if you were to learn about how mortgages work right before you go looking for a mortgage?

You are much more likely to retain and be able touse that information to make a well-informed decision.

YES

Financial education consistently leads to long-term improvements in financial behavior and well-being. **True or false? **

False

Financial education has a minimal impact on improving financial behaviors. True or False

True

1) Which of the following best explains why financial behaviors, like saving and using credit responsibly, are more predictive of financial well-being than income? A) High income always guarantees financial stability. B) Good financial habits, like saving and budgeting, have a stronger impact on financial well-being than just earning more money. C) People with higher incomes never face financial difficulties. D) Financial well-being is determined solely by how much money a person makes.

Correct answer: B) Good financial habits, like saving and budgeting, have a stronger impact on financial well-being than just earning more money.

2) Why do financial confidence and attitudes play an important role in financial well-being? A) People who feel confident about their finances are more likely to take positive financial actions. B) Confidence has no effect on financial decisions or well-being. C) Only financial education determines financial well-being. D) Attitudes toward money have no impact on spending or saving habits.

Correct answer: A) People who feel confident about their finances are more likely to take positive financial actions.

What is the Components of Integrated Financial Planning?

**Components of Integrated Financial Planning**: Combines **exterior** (**mechanics of money**) and **interior** (**emotional relationship with money**) aspects. * Aims to create and maintain a healthy relationship with money across past, present, and future dimensions.

Components of Integrated Financial Planning: What is the right and left column?

* **Exterior Finance (Right Column)**: ○ **Past**: Historical data (e.g., tax returns). ○ **Present**: Current financial status (e.g., balance sheets, cash flow, insurance, investments). ○ **Future**: Projections and planning (e.g., retirement, estate planning, goals). § Traditionally managed by **financial planning professionals**. * **Interior Finance (Left Column)**: ○ **Past**: Clients’ beliefs, feelings, stories, and unconscious thoughts about money. ○ **Present**: Authenticity, clarity, and awareness to create abundance beyond wealth. ○ **Future**: Dreams, possibilities, and authentic goals. § Explored in **financial coaching and financial therapy**.

○ Financial planners must examine their "_" "_" "_" "_" "_" to enhance empathy and effectiveness. Understanding "_" financial experiences is critical for clients to move forward.

own money history and beliefs past

Differences Between Coaching and Therapy

○ Therapy uses the medical model, focusing on assessing, diagnosing, and treating mental disorders. ○ Coaching focuses on skill-building, encouragement, and guiding clients to address limiting beliefs and optimize behavior.