4 Ways to Trick Your Brain Into Banishing Bad Money Habits

Carrie Sloan
Posted

4. Spend on Your Best Self

How It Works: To make your money behave the way you want it to, you need to first decide who you are and then make your budget obey that identity. Perplexed? Let us explain.

It can be hard to just “save” blindly or “not spend so much” when you don’t have a larger goal driving you. But if you’re someone who believes that providing for your children is important (like this mom, who says paying for her daughter’s college is her ultimate financial goal), you’ll be a lot more likely to make financial decisions align with your principles.

RELATED: The Life You Have vs. The Life You Want: Do You Spend on Your Imaginary Self?

Accomplishing this is a cinch: In the Money Center, we break down your budget into three essential categories based on the 50/20/30 rule—but you have free will when it comes to creating and naming the folders that describe your saving and spending. So if owning a house is important to you, designate a “dream home” savings folder. If being physically fit is your top priority, christen an exercise savings folder to reflect that goal.

Why It Works: “If we identify ourselves as responsible, and take pride in living up to the virtues associated with that identity, then we activate reward centers in the brain associated with goal achievement,” says Dr. Shefrin.

The other helpful factor: Humans have a desire to see themselves in a certain light, and we’ll reject anything that conflicts with that reality. It’s a phenomenon known as identity reinforcement theory. In other words, you can override bad money behavior by adopting good habits that reflect the person you really want to be.

  • Ibrar

    If you’ve been making excuses for your lack of financial resolve

    • John

      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

  • Ibrar

    If you have bad money habits that you’d like to improve—from getting zinged by bank fees

    • John

      Not convinced? Test out a few scientifically proven strategies to be a better financial version of yourself than you ever thought possible.

  • John

    “Only 25% 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.)

  • veritaseequitas

    Umm. A gene for being a poor money manager? I don’t think so. It’s like anything else, lack of impulse control, addiction, whatever gives you a momentary “high.”.
    This is just one more way “scientists” are giving people an out for self-indulgence.
    What a load of crap.
    “I can’t help it if I’m a food, drug, sex, gambling, alcohol, shopping, addict, it’s in my genes.
    Wake up people. You are a slave to whatever controls you.