Did you know your brain may be to blame for preventing you from reaching your financial goals? It’s true. Several recent studies conducted by Prudential suggest that we should train our brains to think differently about money because our brains are tricking us every day. Here’s how:
- What would happen if you asked a stranger to donate to your retirement fund? They’d probably laugh at you. But, research suggests when we think about our older selves in retirement, we see ourselves as strangers and have a hard time saving for something we can’t easily envision. For example, when we think about ourselves now, our medial prefrontal cortex reacts strongly, yet when we think about a stranger, the same area has a lesser reaction. Oddly enough, this section of our brain has the same insignificant reaction when we think about ourselves in the future. To make saving easier, we need to find ways to connect with the person we want to become so it doesn’t feel like we’re giving money to a person we don’t know.
- Have you ever lost a $20 bill? It hurt, didn’t it? Did you know that our brains recognize physical pain and losing money in the same way? Furthermore, the same area of our brain that reacts when you lose money is responsible for reactions related to saving money. It’s almost as if we feel like we’re losing money when we save. Ouch. That hurts. But consider this – what if we woke up one day and checked our bank account to find we had a lot more money than we originally saved? How would this make you feel? Personally, I’d be doing a happy dance! This means we need to start focusing harder on the gratifying feelings that savings can lead to instead of the pain we feel when saving today.
- You work extremely hard. So, why are you behind in reaching your financial goals? The area of your brain that helps you make responsible decisions, your dorsolateral prefrontal cortex, is focused on overriding the parts of your brain that encourage you to make impulsive decisions. Because your responsible side gets tired from all the decisions it makes every day, the impulsive side often overrides it. This leads to procrastination. Big surprise, huh? You’re tired! The last thing you want to do after coming home from a long day is to calculate your retirement gap or figure out the best way to invest your money. So, what can you do to prevent procrastination? Get an accountability partner!
One of the most important ways to help bridge the gap between where you are today and where you want to be is to find someone who can understand your goals, help simplify the decisions you need to make by offering you easy solutions, and keep you on track when life gets in the way. I’d love to help you get from here to there. Feel free to reach out to me if you’re ready to get focused.
*Originally published in the October issue of Hills & Castles magazine.