11/4/2013 11:15 PM ET|
Trick your brain into banishing bad money habits
If you struggle with saving and spending, try these scientifically proven strategies to help change your ways.
If you've been making excuses for your lack of financial resolve, science may have your back: Believe it or not, researchers have identified a gene that could determine whether you're good or bad with money.
Specifically, the discovery has to do with self-control -- or how some people are better able to resist temptation to make sound financial decisions.
According to a new report from Chase Blueprint, "Born to Spend? How Nature and Nurture Impact Spending and Borrowing Habits," (.pdf file) a specific section of the human brain lights up when we face a choice, such as, say, spending on something that we know we shouldn't.
"Only 25 percent of us are born with the 'good' variant of that gene," says report author Dr. Hersh Shefrin, a professor in the finance department at the Santa Clara University Leavey School of Business. "Some people are simply better than others at self-control, and neuroscientific studies have shed light on why this is the case." (Note: These annoying people are also more immune to office birthday cake and mid-afternoon candy binges.)
But before you run off to get your gray matter tested, you should know that research also shows that, in this arena, nurture trumps nature -- every time. In other words, there are proven ways that you can trick your brain into being smarter about money.
Not convinced? Test out a few scientifically proven strategies to be a better financial version of yourself than you ever thought possible.
No. 1: Adopt a new mantra
How It Works: For this exercise, you'll be using the help of a fancy scientific term known as a "heuristic," which is essentially a rule of thumb that you live by to make decision-making easier. You probably already have many money heuristics that you abide by every day -- whether you're conscious of them or not.
Some examples: "I only buy used cars," "always take your tax return to the bank" and "I deserve to shop online after a hard day at work." As you can see, some heuristics are better for your finances than others.
Why It Works: If you're conscious about adopting helpful heuristics, they can be powerful enough beliefs to override bad money behavior. Case in point: "Banking raises, if it becomes a habit, helps us avoid being tempted to spend the money, when we'd rather save it," says Dr. Shefrin.
If you have bad money habits that you'd like to improve -- from getting zinged by bank fees to overspending on gifts -- come up with a specific heuristic to help you combat each one. Psychologists have found that we tend to feel poorly about ourselves for breaking the rule, even if we created it. Weird, but helpful.
No. 2: Make saving a no-brainer
How It Works: In an experiment called Save More Tomorrow, employees were asked to save more for retirement by signing up for a 401(k), then voluntarily increasing contributions by a set amount every few months. The results? Over the course of 28 months, the average participant's savings rate jumped from 3.5 percent to 11.6 percent.
Why It Works: By having the money come directly out of their paychecks, before it hit their bank accounts, the participants never missed the money. Essentially, they bypassed the portion of their brains that loves temptation and activated the slow-thinking region that promotes self-control.
While they could opt out of upping their contributions at any time (so they didn't feel trapped), what happened instead was a phenomenon called "status quo bias." In layman's terms, it's a tendency to keep doing what we've always done. In this case, it benefited the people in the experiment because they continued to participate in the plan.
You, too, can apply this bit of trickery to any savings goal. Simply pick a start date, set calendar alerts for set times when you want to up your contributions, and then sit back and watch your balance grow. Certain banks and brokerages will even automate the process for you by letting you program a percentage amount by which you can increase your contributions over time.
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Here's an additional thing that works for me:
I calculated how much money I bring home per hour. Divided my take-home pay (after all taxes etc. have been taken out) by the number of hours that paycheck represented.
Then when I'm considering buying something that is not essential (not rent / mortgage, utilities, basic groceries, etc.) I divide it's price by my per hour rate.
That tells me how many hours I have to work to pay for that item.
Then I consider how hard I have to work and how well I like my job (or not) vs. how many hours I'd have to work to pay for that item.
It makes me less impulsive when I consider how hard I have to work to pay for something.
If you intend to charge the item, don't forget to bump up its cost by your credit card interest rate (unless you know you can pay off the whole credit card balance at the end of the month).
Another good idea
GET RID OF YOUR CREDIT CARDS,
You'll spend MUCH, MUCH less if you don't have them
We need a good example on budgeting ....And it's not the Government
I do not need any credit help. My condo is paid for.
I get tired of working hard and having all the lowlifes chisel me out of my money.
My father has always had nasty credit, but he knows how to make a lot of money anyhow.
Why are three Senators offices and One House of Representatives offices following me on Twitter?
Do you think Christie let Cory get in there as a McKissick candidate?
Do you think Snyder and Kevin Orr precipitated Duggan's win tonight?
O'Malley has the cheapest insurance for the mandate.
I think I rediscovered Bruno Bettleheim, or a torque of him. I want some recognition.
Bloomberg was your Javitts Republican.
Guess which political candidate has "noticeable" features and actions that mark him as a recent member of the British Aristocracy, and many people have this, but not so prominently. Pappy Bush is one (hint).
It's time I tell the world about the fishing industry and fish on Friday. From the near conclusive study of New Bedford Massachusetts USA and the Russian Eskimos of Alaska USA. It is proof positive that the Canon law changed by Pope Pius to not need to eat fish on Friday, turned New Bedford into a Ghost Town with the propensity for Alzheimer's disease. It also destroyed the Greek economy. But as a reference point, for the fish diet, Eskimos actually out-live the even the tribes of the South Japanese Seas. Why they don't? Actually like New Bedford and Whale hunting, is Eskimos have no blubber to chew, that reduces tooth decay and loss of teeth. This actually creates the problem of mastication and poor digestion, altering their dietary absorption bringing on an early death for the lost Russian tribes. Also fish is known as brain food, as on Friday, that lowers the brain damage induced by toxicology. Helping the working class, endure the evening on Friday without drunkenness, domestic disputes, child rearing, and emergency situations as found in the likes of vehicular homicide.
I am really surprised a man like the new Pope Francis, known as infallible didn't recognize this (like Bishop Menendez and Mother Theresa did in New Bedford MA. USA. To reconcile Pope Pius in a Mass) that he should have on All Saints Day, re-inducted Fish on Friday. Someone remind him of this, for the Greeks, for the Portuguese, for the Eskimos, as found in the wisdom of the poor, as unto Hades: "If you give a man a fish, he has fish for a day. If you teach a man to fish, he has fish for a lifetime."
Little note: The wealthy New Yorkers? that live in Connecticut, used to go to Switzerland for sheep's blood implants or as like transfusions and this wear the dear tick starts in Ct. USA, not from a goat spirochete (who ever heard of goats in Connecticut anyways? geez), but from a sheep spirochete as found in human from the heath spas of Switzerland. ****ing ****s!
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