Perfectionism is both a driver and a symptom of behavioral finance. Understanding this relationship is essential for breaking the cycle.
How Perfectionism Feeds Behavioral Finance
- Perfectionist standards are unachievable, guaranteeing chronic disappointment
- Harsh self-criticism when falling short of perfect standards directly drives behavioral finance
- Procrastination (a perfectionism avoidance strategy) creates shame and increases behavioral finance
- The gap between standards and reality is a constant source of behavioral finance
Types of Perfectionism in Behavioral Finance
Self-oriented perfectionism: Unrealistically high personal standards Other-oriented perfectionism: Unrealistically high standards for others Socially prescribed perfectionism: Belief that others demand perfection from you
The last type has the strongest link to behavioral finance.
Moving from Perfectionism to Excellence
Excellence — doing your best with available resources — is compatible with behavioral finance management. Perfectionism — doing it perfectly or not at all — is not.
CBT and ACT are particularly effective for the perfectionism-behavioral finance cycle.