Determinants of personal financial decisions

Decision-making in personal finance is influenced by numerous interconnected factors. This article examines both internal and external factors affecting financial decisions and provides a typology of these influences. Internal factors depend on an individual’s preferences and characteristics, including financial literacy, financial goals, income and expenditure levels, risk tolerance, behavioral traits, and personal life experience. External factors encompass conditions beyond an individual’s control, such as the national economic climate, taxation policies, financial inclusion, social aspects, and the accessibility of financial information. Understanding these factors enables more effective financial decision-making and the development of personalized financial strategies, which is particularly relevant in today’s environment.