When it comes to spending and saving, can you use mind over matter to ensure success?
As wacky as it sounds, a new University of Chicago study suggests that if you want to make a better financial decision, think it through in a non-native language. Why? It forces your brain to slow down, which leads to more analytical thinking. Using the part of your brain that makes fast, intuitive decisions could lead to impulsive action, often deadly when it comes to investing and spending wisely.
Understanding how the brain's behavioral tendencies operate gives you an objective perspective, leading to better decision-making, according to the study. Even if you don't speak another language, the key is to slow down and focus on why you want to make a particular decision, considering it from every angle.
In investing, that translates into sticking with your long-term financial plan instead of getting caught up in the euphoria of the latest hot stock.
When spending money, it's beneficial to pause before opening your wallet. Retailers know how to entice shoppers into buying on impulse, so removing yourself from the situation by not shopping as often or analyzing why you really need something will help curb sudden urges to buy. Knowing that you're hard-wired to want what others have will help you resist overspending in an effort to "keep up with the Joneses."
Keys to tricking yourself into saving more include naming your accounts with goals, such as "retirement" or "vacation." When you feel the urge to spend rather than save, visualize your ideal retirement lifestyle or dream vacation to remind yourself of your longer-term goals.
Do you have any tricks for keeping yourself on the financial straight and narrow?
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