Mind-over-Money beats mindlessly handing-it over

April 24, 2017

While mindfulness may for some conjure visions of chanting nonsense while burning incense, the version of mindfulness gaining mainstream attention may help you manage dollars with sense.  Many companies like Deutsche Bank, Google and Yahoo have been incorporating the concept into their corporate practices to help their employees make better decisions. Business is getting serious about mindfulness, and maybe you should take a serious look at it too.

 

FiClub stands for Financial Insights – Community Learning – Upgrading Behavior. We believe improving your financial wellbeing takes a combination of each of these subjects. As far as Upgrading Behavior, you need to take a step back to see what personal behaviors are beneficial and which ones are a detriment. Mindfulness will help you build the discernment to identify what serves you and what hinders you.

 

 

Mindfulness - know your emotions in order to perform better:

 

“There is broad evidence that emotions are one key factor that influences human decision making. (Loewenstein, 2000; Adam et al. 2011a).  Emotions do not always impair decision making.  They can also have a positive influence and facilitate decision.  Recent research shows that, the ability of detecting or being aware of one’s emotions and the skills to down-regulate levels of high emotional arousal improves human decision making (cf. Fenton-O’Creevy et al., 2010)”

 

Quoted in an article written for the European Conference on Information Systems (ECIS) by Petar Jercic, Philipp J. Astor, Marc T.P. Adam, & Olle Hilborn:“ A Serious Game Using Physiological Interfaces for Emotion Regulation Training in the Context of Financial Decision Making.

 

It probably doesn’t come as a surprise to most of us that emotions do play a significant role in our decision-making process.  Familiar with the term “therapeutic shopping”?  If we all took the time to reflect on our past behaviors, we would find that the vast majority of financial decisions included our emotions in some way, shape or form. Marketing, advertising and sales are the sciences of playing the buyers’ emotions to influence behavior.

 

What did surprise me was the statement “Emotions do not always impair decision making.”  With regards to financial decisions, I was taught to weigh the pros and cons, to study the features and benefits, etc. in other words – try to be as logical as possible.  I felt that my emotions would cloud my judgement.  My readings thus far, show the contrary; emotions can be beneficial to our decision making process.  The key is to BE PRESENT or MINDFUL of our emotions when making decisions.

 

 A study conducted by xDelia was conducted over a 3 year period starting in 2009.  xDelia was commissioned by the EU to study the effects of mindfulness and emotions in the financial decision making process.

 

The great recession had just hit and the world economy was feeling its effect.  xDelia worked with professional investment traders to determine the effect of mindfulness, and how to harness mindfulness in making better trading decisions.  They developed several games which improved the player/trader’s ability to down-regulate levels of high emotional arousal.  Long story short, the player/traders were able to control their emotions in the ‘heat of the moment’ – not negating or removing them, but by being aware of their emotions, they made better trades.

 

While xDelia’s research focused on professional traders, I can’t help but think their results would have a benefit on regular individuals.

 

Author, broadcaster, and psychology lecturer Claudia Hammond wrote an article published by CNN.  She has written a book titled Mind over Money – The Psychology of Money and How to Use It Better

 

In the article, she gave an example on how stores entice us into buying more expensive goods. 

“Let’s say you want to buy a new laptop.  Whether in stores or online, you often see them displayed in threes – a cheap model, one costing a little bit more, and then a fancy expensive model.  Studies have shown that when an expensive model is displayed, twice as many people go for the mid-priced model.  I bet, if the consumer was more present with their motivations of buying the computer, they wouldn’t fall for this little trick as often.”

 

One could trade motivations for emotions in this statement.  If we understood what drives us to buy that computer, it stands to reason we would make a better decision.

 

My take on this statement is – Stores don’t believe we are conscious or present consumers.  If we were present / mindful of our emotions / motivations stores wouldn’t be able to pull the wool over our eyes.

 

Being mindful / present isn’t something that happens overnight.  Ask anyone who has really tried it.   It’s an on-going process.  The key is to stick with it, accept your slip-ups, reflect on the reasons why you slipped up, and move on - your effort can be well rewarded in the long run. One person who has attributed his success in business to directly to practicing meditation and mindfulness is rap producer and entrepreneur, Russell Simmons. It's hard to argue with a self-made net worth of over $350 million:

 

 

A good place to start the process of being mindful of your financial habits, would be to reflect on some questions. To be more mindful about money, ask yourself periodically :

 

·         What does my upbringing have to do with the way I think about money?

·         What does my upbringing have to do with the way I spend money?

·         How do I assign value to what I purchase?

·         Why is it so difficult to talk about money?

·         Would I be happier if I had more money?

·         Why do I give to some people and causes more easily than others?

·         How does money fit with the way I feel about myself and others?

 

You may think of other questions that may be more suitable to your own particular needs.  By asking yourself these questions and reflecting on the answers, you will become more mindful to the way you approach your relationship with money.

 

In an upcoming post, we’ll provide instructions on using Mint.com to download your past transactions. It will be a good experiment to compare your log of mindful spending with your actual transaction record.

 

 

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