5 Minutes With Wall Street Money Luminary Kabir Sehgal

5 Minutes With Wall Street Money Luminary Kabir Sehgal

SehgalCOINEDKabirIn our new Money Luminary series, we're serving up fresh insight from a financial thought leader of the moment.

Today, we sit down with Kabir Sehgal, a New York Times best-selling author and Wall Street executive who looks at money through the lens of the social sciences. 

Got money on the mind?

Then you certainly aren't alone. And it's the reason why behavioral economics has grown in popularity in the last decade—it looks at the link between our brains and our bank accounts, which is insight that can help us make better financial decisions.

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It's also why Wall Street executive Kabir Sehgal devoted sections of his new book, "Coined: The Rich Life of Money and How Its History Has Shaped Us," to the psychology of money.

To show just how puzzling people's choices can be, we asked Sehgal to share some of his big-picture behavioral takeaways.

1. Money Is an Emotional Concept “We often assume that people act rationally,” Sehgal says. “But if you look at neuroeconomists’ research, you’ll see that we largely make financial decisions with our emotions.”

Case in point: On sunny days the market outperforms cloudy days by an annualized return of almost 25%, and other studies have shown that people tend to tip better under clear skies—all thanks to elevated moods.

Of course, you can't control the weather. But being aware of how invisible influences—like the day's forecast—can impact your money is eye-opening.

"Simply sussing out these cognitive biases can help you make better decisions about capital," Sehgal says.

Just looking at the personal-spending pie charts your credit card may provide could be enough to affect change. You literally see where you're overspending, and can make moves to change that.

2. Wallets Will Fall to the Wayside Forget the question of whether cash or credit is king. When it comes to consumer behavior, convenience takes the crown.

“The way I see it, there’s currently a dearth of credit cards [worldwide]—but a plethora of cell phones,” Sehgal says.

This desire for fast-and-easy payments means settling a bill via smartphone will become more commonplace over the next decade, Sehgal observes, due to emerging apps like Apple Pay and Square. In fact, McKinsey estimates that mobile payments could surge more than 100% in the next few years.

But don't assume that convenience equals more consumer cash flowing overall—it's still too early to know the full impact of mobile payments on spending behavior, Sehgal adds.

3. Visualization: Your Habit-Change Secret Weapon If you're looking to rewire your money mind, visualization is "one of the best ways to break a habit," Sehgal explains.

And we're not talking imagining yourself in retirement—it's even simpler than that.

Just looking at the personal-spending pie charts your bank or credit card may provide could be enough to affect change, says Sehgal, because they help you connect more tangibly to your spending patterns. You literally see where you're overspending, and can make moves to change that.

“What makes humans different is self-awareness," Sehgal says. "It's what helps us improve on our financial habits.”

RELATED: Secrets of a Psychologist: How to Train Your Brain to Make Smarter Money Moves

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