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Whatever floats your boat: extrinsic vs intrinsic motivation


Motivation triggers action in numerous areas: educational achievement, career choice and financial behaviours to name but three. This post sets out to improve your understanding of two important forces: extrinsic and intrinsic motivation. My aim here is to explain what these are, deepen your understanding through examples and invite you to reflect upon how they apply to your own financial behaviour.


Given the desire of many coaches to drive clients to action, understanding motivation is central to building a relationship with clients which opens the door to change. The distinction between these concepts is relatively simple, with activity driven by intrinsic motivation carrying its own rewards whereas actions or choices powered by external motivation look for rewards or recognition outside the individual. An example might be a student of English who studies hard mainly out of a love for literature and one who is going for a top grade. They are not mutually exclusive, of course, but the intrinsically motivated student might still be reading great novels in a generations time.


In personal finance, extrinsically motivated purchases might be driven by a need for status. The idea being that a certain style shapes image, providing validation as a member of a group or class. Given the resources devoted to advertising and marketing, extrinsic motivation shapes and strengthens our consumer culture. Instant gratification is made more accessible through financial products such as loans and credit and innovations like hire purchase or monthly repayments.


What about intrinsically motivated consumption? Here the drive might be to buy goods or services which are long lasting and hard wearing, purchased using current income or savings. This is likely to lead to more thoughtful spending and very possibly less spending. The resulting monthly surplus could be used to build up contingency savings. Once this has been achieved the surplus might support increased equity investments.


Of course, most spending decisions are a mix of extrinsic and intrinsic motivation – even a designer bag can carry groceries. But the dichotomy is useful as it opens space where we can pause and take a breath before deciding to purchase. We might reflect upon which emotions are driving our financial behaviour and ask the question: how does this purchase serve me?


The debit or credit card might still be swiped, and the purchase made, but there is an increased chance it will be from a place of conscious awareness and choice.


I invite you to flex your intrinsic motivation muscle.


George Callaghan


Money Coach


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