Television companies LOVE Super Bowl Month. That's when 4.5 million of you bought new big screen TV sets in 2011, which was up from 3.6 million in 2010. Now, here's the question: If you're impulsively buying a new TV this season, are you more likely to use credit or pay cash? And, which part of your brain do you think is in charge of this decision - your logical neocortex or your more emotional midbrain? And why could the latter be a huge problem? (Well, not for the credit card companies.)
Before I answer those questions, think about this: *"Would you rather have $15 in two weeks or $20 in four weeks?" According to fMRI brain imaging scans taken while the person is pondering, this question lights up your prefrontal cortex because it asks you to project into the future. But this next question: "Would you rather have $15 now or $20 in 2 days?" shows that the logical ignores that question and the primitive brain lights up. This is why we get into big trouble as consumers. If we want something and we want it NOW we will have it. Just CHARGE IT, right?
Of course we all know that consumer debt is a problem that creates strife and struggle. For you Cpa’s or Financial Advisors this piece around emotional decisions vs. logical is key when you’re advising your clients to save and invest in their future. Saving for the future is a prefrontal logical decision. Unfortunately, the emotional brain is all too often in charge. We all know of someone (cough, cough) who know they SHOULD be saving for their future or be adding money into their 401K. But the immediate reward of NOW wins out.
To help keep your logical brain in charge of major decisions, Dr. Krueger says to avoid making important money decisions when you're emotional or too tired, wait and sleep on big decisions and have a plan that you STICK to. There's an acronym from 12 Step Programs: HALT: which means to avoid getting too hungry, angry, longely or tired because these are vulnerable states of mind.
(*from The Secret Language of Money, David Krueger, M.D.)