Mediating Effects of Decisional Balance in the Transtheoretical Model of Change for Customers who Mismanage their Money

Abstract

This research introduces a Transtheoretical model of change for customer financial behaviour that focuses on approach-avoidance money management strategies. Approach strategies include processes for increasing savings while avoidance strategies involve processes for reducing spending. The mediating effects of decisional balance on the relationships between predictor variables (stages of change) and the outcome variables (strategies of change) are examined. The empirical study analyses consumers who mismanage their money and find themselves coping with this issue in early stages of change like precontemplation and contemplation. Regression analysis was used in order to examine the relationship between those early stages of change and approach-avoidance strategies and to test the mediating effects of decisional balance. Results indicate progression of approach-avoidance strategies by stages of change. Decisional balance between pros and cons to change seams to mediate the relationship between the characteristics of precontemplation and contemplation stages and approach-avoidance strategies. The outcomes of the study provided valuable information on how each predictor variable is connected to the adoption of approach-avoidance money management strategies of change. Previous studies have mainly delineated the relationships between stages of change and the other two constructs while mediating paths serve to clarify the psychological process that generates behaviour change. By understanding the mechanisms of behaviour change, professionals who are marketing financial services can develop effective financial education strategies that take into account the role of decisional balance while changing money management behaviour. Decisional balance can be used to measure the progress of customers in the behaviour change process.