By TWD Australia

April 4, 2018 | News

This is your brain on money

It’s no secret that money affects our lives on a large and small scale. Everything from choosing when and how we’ll retire, to the decisions of daily life, such as whether to whip out the credit card for a new pair of slacks.

In many ways, our relationship with the almighty dollar can also be seen as a reflection of how we perceive ourselves. Our “financial personality”. We’ve all known people who begin to ‘make it’, then move into a cycle of financial self sabotage. Perhaps because they subconsciously feel undeserving of wealth, or are unprepared for how to handle the responsibilities that come with that change in fortune.

Our behaviour around money comes down to how humans are wired. The limbic system (the oldest ‘lizard’ part of our central nervous system) evolved to react to decisions with primary, binary choices: fight or flight. It also plays a vital role in our mood and reward sensitivity (like eating, procreating – and earning $$$). This means our ‘stupidest brain’ often takes charge in attempt to alter our emotions.

When we’re dealing with an unfamiliar situation, where the stakes are high, the brain responds by releasing hormones related to stress, panic and anxiety. The trick is in knowing what is actually a ‘big’ decision.

Sure, it’s easy to imagine that a financial decision today could result in becoming the pauper in rags down the track. But realistically, spending every moment agonising over each financial decision in detail is theft of our own happiness in the moment.

Seeking advice or assistance is one great way to relieve the burden of stepping into the unknown. Research suggests that when we ask for advice from peers and professionals, the result is not only a feeling of calm but also more confidence in taking the next steps.

Financial planning and advice also helps us to compartmentalise a seemingly infinite list of choices into more manageable and straightforward processes. While an advisor cannot take all of the stress out of financial decision making, it’s a way to get the critical parts of our financial lives on the right track. Because as they say: ‘You can’t put a price on piece of mind’.

Words by TWD Australia.