Want to Be Smarter With Money? Trick Your Brain
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What is the main topic discussed in this episode?
Here's your Money Briefing for Friday, January 5th. I'm J.R. Whelan for The Wall Street Journal. Take a look at your list of goals for 2024. Spending less is probably near the top. But for many people, setting that goal is a lot easier than carrying it out. What's in the way? Our brain.
Fighting against any bad habits that we may have formed regarding money is going to require some brain training and guardrails to set up.
We'll talk to Wall Street Journal reporter Oyen Adedoyen about ways to trick our brain to help us spend more wisely. That's after the break.
How can rescheduling recurring bills help you avoid overdrafts and manage cash flow?
To be smarter with money, we may have to trick our brains. Wall Street Journal personal finance reporter Oyen Adedoyen joins me. So, Oyen, shouldn't our brain know right from wrong?
You'd think, right? It's actually harder than it sounds when it comes to money. Our brains are not wired to make the best decisions financially. In fact, a professor from the University of Penn's business school says people shouldn't look at their financial problems as a personal shortcoming. It's like asking one individual to stand up against a host of organizations whose sole mission is to get us to part with our money as quickly as possible.
But handling money becomes a habit. And doesn't it require someone to have the right attitude about money?
Yes, exactly. Fighting against any bad habits that we may have formed regarding money is going to require some brain training and guardrails to set up.
What simple digital habits add friction to stop impulse online purchases?
Most of us get a constant stream of bills each month. So how can we trick our brain to handle that better?
One researcher recommends seeing if you can reschedule the timing of your recurring bills. So that's like your phone bill, your electricity bill. See if you can call up the company that gives those bills out and get them to come out on the same exact day, ideally after a paycheck hits your account. That way you know when things are going to be leaving your account so that you can better manage when you can spend.
Which specific steps should you take to create ‘pain’ around spending on apps and websites?
It makes spending money and losing money more predictable. That way you can rework your spending around when you're going to be seeing those bills come out of your account so you don't end up maybe overcharging your credit card or incurring some kind of fee on your debit card.
We live in a digital era where it is so easy to spend money on just pretty much anything with a couple of clicks. How do you trick your brain to not take that step? I mean, I'm traveling around the Internet and I'm shown a necktie or I'm shown a dress shirt or cufflinks. I have to have them.
And it's so easy nowadays to just press a button and it's at your doorstep in the next day or so. We really have to train ourselves to have more friction when it comes to our spending, actually.
What is a Financial Health Day (money date) and how do you run one effectively?
And in some cases, make it, quote unquote, hurt more. This may look like clearing any saved credit card information off of any websites or apps because having to re-input your credit card number, expiration date, and security code It might actually give you a couple of minutes to think, do I need this new tie? Do I need this new hat? Or can I save that for later?
Just those couple of minutes to rethink your thought.
Yeah, that's how it works. It adds more friction and more pain to the spending. And some people might actually decide this isn't worth it.
Which personal-finance tasks should you prioritize during a money date?
So there are a lot of steps here, including taking all your information off the apps. But what if people don't have the time to do all this?
People should make the time. Financial therapists and behavioral scientists say that one of the reasons many people don't address their financial goals is because it makes them uncomfortable or they put it off until the last minute. Just like how you would take a sick day if you're not feeling well, you should take something called a financial health day or a money date. That can be anywhere from 15 minutes to a whole day where you just address some of the main money tasks that you have to attend to that week or that month.
Just take a whole day and it's done.
Take a whole day, make a to-do list, make it fun, get, you know, your favorite snacks, your favorite drinks and put on some music and just address these tasks.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:03–1:00
2
How can rescheduling recurring bills help you avoid overdrafts and manage cash flow?
1:00–1:50
3
What simple digital habits add friction to stop impulse online purchases?
1:50–2:21
4
Which specific steps should you take to create ‘pain’ around spending on apps and websites?
2:21–3:07
5
What is a Financial Health Day (money date) and how do you run one effectively?
3:07–3:40
6
Which personal-finance tasks should you prioritize during a money date?
3:40–5:18
7
Could guardrails and moderation improve enjoyment of spending without guilt?
5:18–6:13
Speakers
2 identifiedMore from WSJ Your Money Briefing
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