Your Brain on Money
By Stephanie Matthews
There are certain things that contribute to financial well-being—paying off debt and having cash accessible in case of an emergency, in addition to squirreling money away for future needs, like home and car purchases, big vacations, and retirement. It sounds simple enough, but most of us haven’t figured this out yet.
Some of you may be thinking, “I just can’t do this. I’m bad with money.” I want you all to know that is not true, - YOU aren’t bad with money, the HUMAN BRAIN is bad with money. Our brains can KNOW what’s good for us, theoretically—like saving for retirement and having cash in an emergency fund. BUT that doesn’t prevent the brain from wanting to spend it all.
There’s a part of our brain called the basal ganglia that plays a very important role in survival. Think caveman. Food there. Basal ganglia says, “Good. Eat it! Self care!”
But, as our environment and surroundings have left us less prone to flesh-eating lions or the possibility of going without food for weeks at a time, our basal ganglia hasn’t seemed to notice or care.
Instead, everything is a reward needed right now. Let’s take a look at how the basal ganglia reacts in our world today:
You stumble across a 60% off sale at your favorite store. Your basal ganglia wants to:
Walk right past
Do a cost-benefit analysis of the purchase
Check your bank account to see if you have the funds
Buy EVERYTHING – NOW!
You wake up with a headache, and on your way to work, you pass by your favorite coffee shop. Your basal ganglia wants to:
You already had coffee at home this morning – pass!
Just keep drinking from your water bottle
Drink the stale coffee at the office
Half-caf, non-fat, extra whip, hot latte with a double shot. Treat ya self!
We often justify a lot of spending as “self care.” Cars, homes, and many other luxuries. What we are really doing is spending on these things that we often don’t need or even really want in lieu of saving for our future. That’s not true self-care.
Our brains are not our friends when it comes to finances, that isn’t what they were built for. So, blame it on your brain! The good news is – we have a way to get around the brain and set ourselves up for success, whether you consider yourself a spender or a saver.
Saying “I am terrible with money” is a defeatist attitude that says, “Why bother trying to make good financial decisions? I might as well do whatever, because it won’t matter anyway.’ This is where humility comes in. Changing one habit could be the difference between retiring and working an extra 5 years. It could mean finally taking that big trip, or starting to save for a home or car down payment.
The goal isn’t to eliminate ALL spending on non-needs that bring you joy, like coffee, manicures, fishing trips, or dinners out. But, if we can keep these expenses reasonable and use our savings as, well, savings – then we get the best of both worlds! The good news is that we can get around our pesky basal ganglia and put practices in place to take care of ourselves now and in the future.
The key is: automating our savings. if you have money going from your paycheck directly to your retirement account and your savings account, then you never have to think about saving – you're doing it automatically. That money never reaches your checking account, and it’s much harder to spend money that you don’t see!