In part 2 of this special #Sparechange series, we look at a major focus of Iona’s upcoming book – the psychological factors that stop us making smart decisions about our spending and saving. Today, we’re looking at inertia, the need for certainty and other brain blocks to financial savviness
Today’s challenge: Which mental barriers stop you from being good with money? Tweet me @ionayoungmoney using the hastag #Sparechange or leave a comment below…
Iona Bain
It’s easy to go into autopilot when it comes to day-to-day financial decisions. We’re very good at buying to please ourselves today, not so great at thinking about what will be in our best interests tomorrow. Many of us struggle to save, we ignore mounting debts, we put off taking out those products that might help us out further down the line.
But we shouldn’t beat ourselves up too much – many of these problems arise from common, maybe even universal responses to difficult subjects or complex problems. Here are just a few outlined in Spare Change:
- Inertia is defined by the Oxford English Dictionary as ‘a tendency to do nothing or to remain unchanged’. For some, inertia seeps into every corner of life, but, for many, it is contained within a few ‘blind spots’. So you might make active plans for your social life and holidays, but never really sort out your bank account or energy bills.
- Money Matters end up on the back burner because we crave certainty. Taking a decision which has an unpredictable outcome – often the case with money – is taking a leap into the unknown.
- We don’t think we know enough to make the right decision – even though we have no intention of getting more information to help us out! Doing nothing means we feel less responsible for what may follow. It’s better than beating ourselves up when we haven’t got it quite right.
- We would rather avoid all the emotional baggage that comes with making a good or bad call.
- We think we’re too busy to sit down and come up with a plan.
What may feel natural and normal, however, may amount to doing deeply silly things with out money without even realising that we’re sabotaging ourselves (or should I say our future selves). But the good news is that knowing about these unhelpful mental responses to our money is the first step towards correcting.
Our brains are extraordinarily agile in forming new neural pathways that lay the groundwork for new habits and ways of thinking. But they take time and practice. Repeated actions – such as setting aside time to do a financial audit, switch our bills or even just come up with a simple budget – will strengthen those neural pathways and make the habit easy, perhaps automatic, given a few months.
So think about the following areas and ask yourself – have YOU put these areas to the back of your mind?
Savings
Investments
Pensions
Borrowing (and specifically, your credit rating!)
Switching your bank account
If so, you might be doing yourself a great disservice. To find out how to get to grips with these issues, look out for Spare Change – you can pre-order your copy here ahead of its publication date on February 11th.
