I love terms like 'behavioural finance'. They add academic and professional cred to spending enormous amounts to time pondering simple questions like 'why do people waste money when they should be doing something constructive with it?'.
It's pretty simple really. What people do with their money is dictated largely by the next crisis or the next temptation (tick the appropriate box) that they're facing. Retirement savings are always trumped by buying a yacht, which is in turn trumped by school fees, which in turn are trumped by feeding yourself or buying beer, which are in turn trumped by allocating your scarce resources to wherever your spouse directs.
All these things have one thing in common - in ascending order of importance, they're motivated by indulgence, obligation, necessity or fear. I left out the other big motivator, lust, as its links to spending are often controversial and best left untouched.
This goes many metres towards explaining why, in financial services, it's much easier to flog loans, credit cards, ATMs and cheque accounts than investments and pension plans. When the tussle is between instant gratification and deferred pleasure, I know where I'd place my winning bet 90% of the time.
It's why, in part, people love buying their own home. They have the instant gratification of owning it, living in it and showing it off to their friends, while they get the feel-good vibe of investing their money wisely, or at least spending it on tangible evidence of once having money.
So behavioural finance appears to me to only have the opportunity to kick in when rationality or a serious excess of discretionary spend allows you both instant gratification and deferred pleasure. I'm obviously too low in the Maslow Triangle to derive these dual benefits. Like most others, my finances rest low in the Bermuda Triangle, where misbehavioural finance rules.