The Power of Financial Behaviour:
A Better Measure of Success
Table of Contents
Table of Contents
What gets measured, gets managed.
Educator & Author
Why must we assess our
Financial behaviour?
Traditionally, income has been considered the primary determinant of a person's financial security. While income is an essential indicator of financial success, developments in household finance research have revealed its limitations.
For one, the metric does not take into account how we spend our money—if we are making financially sound decisions that support our goals and provide financial security against life’s uncertainties. If we wish to measure a person’s overall financial well-being, we must look beyond basic metrics such as adequacy of income, and look to capture the complete picture.
Today, advancements in the fields of behavioural finance and neurofinance prove that what we choose to do with our income is a subjective outcome of our core traits and characteristics. Our financial decisions are influenced less by logic and rationale and more by our personalities and learned behaviours.
These discoveries have paved the way for the development of a more comprehensive way to determine a person’s financial success—financial behaviour.
Assessing an individual's ‘financial behaviour’ gives a holistic picture of their financial situation and overall well-being.
Essentially, financial health encompasses three major aspects:
The ability of individuals and households to
Meet their ongoing financial needs (expenses) and commitments (liabilities)
Withstand and bounce back from financial shocks
Fulfil their future financial requirements by exploring avenues to build and sustain wealth
Just as physical fitness and mental stability are vital markers of health and wellness, financial health too is a distinct measure of a person’s well-being.
What is
Financial Behaviour Score?
Our financial behaviour is a complex concept influenced by various factors ranging from our behaviour and psychology to our financial choices and habits. To make this easier to understand and evaluate, 1 Finance's team of quantitative analysts and behavioural finance experts has developed an advanced scoring mechanism—the Financial Behaviour Score.
The Financial Behaviour Score is a concise metric that reflects the alignment between an individual’s current financial choices and their ideal financial behaviour. This metric takes into account factors such as personality, life stage, generation, life constraints, and macroeconomic conditions. By evaluating the proximity between a person's current and ideal financial behaviour, the Financial Behaviour Score empowers individuals to make informed decisions for a more secure and fulfilling financial journey, while overcoming behavioural biases.
The score is a numerical representation of a person’s financial well-being
offering an in-depth assessment of how closely their existing financial choices align with
the ideal behaviour they should exhibit as dictated by their personal situation and the macro-economic environment.
What is a Healthy
Financial Behaviour Score?
The Financial Behaviour Score is calculated out of 100. There are three different ranges or sub-scores that one can fall under-
How is your
Financial Behaviour Score Determined?
The Financial Behaviour Score is determined by evaluating a person's financial performance against the three most critical areas of personal finance -
Ability to effectively meet current needs and future obligations
Under this aspect, we check for the most significant data points that enable us to evaluate an individual’s ability to manage their expenses and liabilities in the most financially sound manner. Following are some of the key metrics assessed:
Ability to tap into wealth-building opportunities
Under this aspect, we evaluate each individual’s asset allocation against the ideal exposure to assets such as equity, debt, real estate, etc. recommended for them. After months of quantitative research and analysing tons of data points, we determined a set of hyper-personalised benchmarks based on various factors such as lifestage, generation, personality type (MoneySign®), current macroeconomic environment, etc
Ability to cope with financial setbacks
Under this aspect, we check for the most significant data points that enable us to evaluate an individual’s ability to plan for emergency situations in the most financially sound manner. Following are some of the key metrics assessed:
How do we use your
Financial Behaviour Score?
Financial Behaviour Score is the 3rd offering on the 1 Finance ecosystem - and the third step in your financial well-being journey.
After knowing yourself (with the help of MoneySign®) and your finances (with the help of 1 View), the Financial Behaviour Score helps determine how well your finances align with your personal situation.
The goal of the Financial Behaviour Score is to offer deep, quantifiable insights into your financial behaviour. We use it to guide your decision-making process, prioritising impactful short-term steps towards financial well-being, and to generate a tailored financial wellness plan to keep you on track. If you envision financial freedom as your destination, financial well-being has to be your journey. Our goal is to help you navigate this journey with informed and confident decisions, every step of the way.