emotions

3 Ways Your Body Sabotages Your Money

Emily Guy Birken — Thu, 07 Dec 2017 09:01:06 +0000

Humans share a common delusion when it comes to our actions: We like to believe that it's our brains running the show, and our bodies are just along for the ride. We trust our little gray cells to do the work of making sure we stick to the straight-and-narrow path while we are trying to reach our personal and financial goals.

The problem is that our bodies have an impressive ability to sabotage all the good intentions of our brains. Before you assume that your cerebellum is up to the task of resisting your body's sabotage, remember that the following things can crush even the strongest of good intentions into dust. (See also: 5 Mental Biases That Are Keeping You Poor)

Hunger saps your willpower

Those candy bar commercials are quite right when they point out that you're not you when you're hungry. While everyone has experienced the irritability associated with being a little "hangry," what you might not realize is that your low blood sugar is also depleting your ability to withstand temptation.

According to a 2007 self-control study by Matthew T. Gailliot and Roy F. Baumeister, your ability to exert self-discipline depends partially on your blood-glucose levels. This is the sort of thing that feels obvious when you go grocery shopping on an empty stomach, since you're feeling tempted by the very thing you lack. However, the relationship between self-discipline and blood-glucose levels is also behind your struggle to avoid other types of temptations. That's because, according to the researchers, "self-control requires a certain amount of glucose to operate unimpaired."

This is why it's much harder to avoid making impulse purchases when you're hungry. For instance, I recently forgot to grab a snack for myself right before taking my son to his weekly swim lesson. While I waited by the pool with my stomach rumbling, I found myself purchasing two new audiobooks from Audible on my phone, despite my commitment to refrain from spending more money on audiobooks. My willpower was destroyed by my hunger pangs.

That's why I try to always carry a piece of fruit or other complex carbohydrate with me while I'm out. (That, and you wouldn't like my kids when they are hangry.) Having a quick snack can often nip temptations in the bud before they have a chance to disrupt your good financial intentions.

Lack of sleep impairs your judgment

We've all known the fuzzy feeling in our heads after an all-nighter. Since the wooziness disappears once you've gotten some sleep, we all tend to ignore the effects of sleeplessness since they are relatively short lived. After all, no one goes for days on end without sleep.

Unfortunately, sleep deprivation has a much bigger effect on your cognitive abilities than you might realize. A 2000 study by A.M. Williamson and Anne-Marie Feyer found that going without sleep for 20 or more hours straight makes a person perform tasks as if they had a blood alcohol level of 0.1 percent, which is 0.02 percent over the legal limit for driving under the influence. The study was looking at how non-sleepers do while performing tasks requiring both speed and accuracy — such as the tasks necessary to drive a car.

Of course, most people are not going without sleep for 20 hours. However, even a built-up sleep deficit accumulated by regularly getting only four or five hours of sleep per night can affect your mental acuity. In a 2006 interview with The Harvard Business Review, Dr. Charles A. Czeisler, the Baldino Professor of Sleep Medicine at Harvard Medical School wrote, "[if you] average four hours of sleep a night for four or five days, [you] develop the same level of cognitive impairment as if [you'd] been awake for 24 hours."

So what does this mean for your financial goals? Nothing good, I'm afraid. Your ability to make rational financial decisions is also seriously impaired when your mental acuity is suffering from sleep deprivation. Your sleep-deprived brain is less able to fulfill the sorts of executive functions necessary to predict outcomes and perceive the consequences of actions — which means you are more likely to make poor financial decisions when you are exhausted.

Arousal can erode your moral compass

You might believe that your morality is an integral part of who you are, but behavioral economists have shown that our belief systems can be thwarted when our bodies want something. With a racy experiment, author and researcher Dan Ariely demonstrated in his book Predictably Irrational that our commitment to various strongly-held beliefs decreases when we are in a state of sexual arousal.

Ariely's experiment asked college-aged men how they felt about issues like fairness, gender equality, and safe sex. During the control "cold" state, these young men expressed commitment to moral, ethical, and responsible behavior. But after being exposed to sexual imagery, and entering into what scientists call a "hot" state, their beliefs were much more malleable.

This malleability of beliefs is not confined to sexual arousal. The hot-cold empathy gap is the name for this change in behavior due to any number of bodily needs. The empathy gap describes the way in which it is difficult for someone who is not currently experiencing something like hunger, pain, or sexual arousal to recognize how much these states can affect their decisions. For instance, in a separate study, respondents in a 2003 survey were much likelier to rate thirst rather than hunger as the most unpleasant aspect of being lost in the woods if the respondents had just finished a cardio workout and were therefore thirsty. If they had not yet started their workout, the respondents rated hunger as being more unpleasant.

This kind of empathy gap is the reason why we often wrongly predict that we will be able to resist temptation in the moment. When we are not currently faced with a temptation, we imagine ourselves as being the most rational and moral version of ourselves. But feeling hunger, pain, arousal, thirst, or other overwhelming bodily needs weakens our commitments to good behavior.

In terms of your finances, that means an overwhelming thirst (or other need) could prompt you to spend money you had no intention of spending.

Outwitting your body

The good news is that just because our bodies do have the ability to override our brains, we are still smarter than our impulses. The trick is to recognize that you are not always the best version of yourself, and plan ahead for those moments.

Carry snacks with you to make sure your blood-glucose level doesn't drop to finance-sabotaging depths. Make sure you get adequate sleep, and hide your credit cards when you know you'll have a few nights of sleeplessness. Assume that you're going to be the worst version of yourself when you're in pain, aroused, hungry, thirsty, or craving sugar. If you recognize that you'll have trouble avoiding temptation in those states, it's easier to structure activities so that you don't come into contact with temptations during those times at all.

The most disciplined and intelligent savers aren't necessarily better at exerting willpower. They just know that they won't always be perfect, and they plan ahead for when their bodies, rather than their brains, are behind the wheel.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Secret to Better Money Management May Be in Your Past

Sarah Winfrey — Mon, 20 Nov 2017 09:30:10 +0000

It's easy to feel out of control with your money. It happens to the best of us. But whatever the reason you're feeling this way, it's important that you regain your footing and, maybe even more importantly, that you regain your feeling of control. After all, if you don't think you can fix the problem, you probably won't even try.

Your first line of defense is financial education. It will help you understand what actions you need to take to get back on track. But there's another tool that could boost your motivation to carry out those actions. A recent study by scientists at Creighton University shows that harnessing nostalgia can help you get in touch with your feelings, which you can use to regain control over your finances.

The power of nostalgia

The Creighton team carried out an experiment. Dr. Brad Klontz, along with his fellow researchers, divided study volunteers into two groups. One half attended a standard financial literacy presentation where they learned about saving money. The other half was told to bring an item (or a picture of an item) that they considered nostalgic.

The latter group was led through exercises to help them come up with positive feelings and memories tied to their objects or photos. They were asked to name these emotions, identify the values that went along with these emotions, and understand how these same values formed the basis for their future savings goals.

Over the next few weeks, the "financial literacy" group saved 22 percent more than they had saved before. That, in and of itself, is a significant number. But the "nostalgia" group saved 67 percent more — three times more than the control group. It would seem nostalgia and the emotions that go along with it have a lot of power when it comes to how we handle our money! The researchers theorized that the powerful emotions associated with the nostalgic object provided a deep, positive incentive for saving. Participants were able to make direct connections between saving money and the things they value most in life.

Harnessing nostalgia for yourself

If you are feeling out of control with your money, here are some steps you can take to engage your emotions via nostalgia and get back on track.

1. Find an item that has nostalgic value to you

This can be anything, as long as it is important to you. It can be an item from childhood, something passed down from a family member, something you found, or maybe something you purchased on vacation. If you don't have an item that fits the bill, go through old photographs until you find one that is especially meaningful.

2. Think about how you got that item and why it's important to you

Remember the moment you found or received the item (or took the photograph). Think about the people you were with or the poignancy of the moment. To the best of your ability, take the time to actually relive the moments in your life that have made this object or photo so important to you.

3. Name the feelings that go along with that item and your memories of it

Giving your feelings names can help them feel more concrete, rather than abstract and ethereal. When they are concrete, they are more useful to you as you continue this exercise. It is perfectly fine to have multiple feelings about your object. For instance, something your grandfather passed down to you may make you feel excited, because he chose you for this item, but also loving because of the relationship you had with him.

4. Identify the values that underlie these feelings

Once you pinpoint your feelings, you can identify the values that provide their foundation. If something came from a grandparent, it may be tapping into your value of close family ties. Something that reminds you of childhood could be important to you because you value wonder and joy and you haven't felt those things in a long time. An item from a trip could be important because it reminds you that you value excitement and adventure.

5. Connect these values to a financial game plan

When our finances are out of control, most of us know what we need to do to get them in line again. However, it's hard to find the motivation to do that when we feel hopeless and helpless in the face of financial stress. Connecting our values to the actions we know we need to take can help us find the motivation to actually tackle them.

Think about those values you identified. If you value the safety and security of a stable home, that can motivate you to do what is necessary to provide financial safety and security in your own home. If you value adventure, it can motivate you to make the changes necessary to get your money under control now, so you can afford more adventures later. If you value joy, spend some time thinking about how you will feel when you are out of your financial hole.

It's never too late to take control of your money. When you harness the power of nostalgia and emotion, you may find yourself making and sticking with financial decisions that you have struggled with before. This, in turn, will help you make even stronger decisions until your money is completely under your control again.

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This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Times You Should Never Feel Guilty at Work

Paul Michael — Thu, 14 Jul 2016 09:00:18 +0000

Guilt is not a fun emotion. When we forget someone's birthday, or hurt someone's feelings, we have every right to feel a little guilty. Similarly, if we miss a deadline or make another mistake at work, guilt is an appropriate emotion. But sometimes, it's just not necessary. Here are eight times when you should banish those guilty feelings once and for all. (See also: 8 Awkward Money Moments Everyone Has at Work)

1. Taking Time Off When You Need It

One of the big complaints the HR department has about its company's employees is that they don't take the appropriate amount of time off. In other countries, people take time off regularly, and the company encourages it. They don't want people to be burned out, or hating their job.

In the U.S., however, it appears that people don't want to take any time off because they're afraid of being laid off, or seen as not essential. This is wrong on so many levels. We need time off to recharge, and you should not feel guilty about taking vacation time, personal days, paid leave, or sick time. In fact, when it comes to the latter, use your sick time. Do not come into work when you're ill. Sitting at home feeling awful is one thing, but adding guilt to that mix of nasty symptoms is even worse. The company has figured time off into your position, you should take it without ever feeling guilty.

2. Leaving Early If You Worked Late the Day Before

Salaried employees have certain benefits. For instance, in most salaried positions, if you come to work for just one hour, feel ill, and go home, that counts as a day's work. You do not have to use any sick time. Similarly, if you put in a 14-hour shift on a Monday, and you have all your work done by 3 p.m. the following day, you should not feel guilty about going home. You should of course check with your manager first, but any reasonable boss will be more than happy to let you go early, and for good reason. They have just gotten a whole lot of work out of you, and if they want to see that kind of dedication again, they should be willing to be flexible with your hours. Even if you leave early a week or two after you put in a big shift, don't feel guilty. You have more than worked those hours.

3. Competing With a Colleague for a Promotion

A position has opened up at work that you really want. Then you find out someone else, maybe even a friend or boss, is going for the same role. Should you feel guilty about competing for that title? Absolutely not. This is business, and this is also your career. Concentrate on yourself and your own best interests first, and go for that promotion with all the drive and vigor you can muster. To quote Col. Jessop from the movie A Few Good Men, "We went to the Academy together, we were commissioned together, we did our tours in Vietnam together. But I've been promoted up through the chain of command with greater speed and success than you have. Now if that's a source of tension or embarrassment for you, well, I don't give a s**t."

4. Telling Someone They Have a Bad Idea

Hurt feelings are legitimate in some aspects of life, but they have no place at work. Too often, people feel guilty about telling someone they have a bad idea, so they don't. They say it's fine, or they say nothing at all. This is not good for the business, or the person that had the idea. By saying "your idea sucks" you are not saying that the person who had the idea sucks. Not at all. This is no time to confuse the two issues. A great person can have an awful idea, and it is not only okay to say so… it's essential. (So long as it's done respectfully.) Otherwise, terrible ideas gain traction, and before you know it, you have to deal with the fallout of that bad decision. Stop a bad idea in its tracks, and never feel guilty about it.

5. Reporting Someone to HR

There are many reasons to report someone to HR. It could be sexual harassment, racism, bullying, favoritism, illegal activities, or anything else that directly violates HR policy. It doesn't matter if that person is your boss, a friend, someone with a family, or any other reason that could put your guilt chip into overload. The fact of the matter is, they are doing something wrong, and if all other attempts to stop them have failed, talking to HR is nothing to feel guilty about. Of course, you should try to reach out to them first, if possible, and avoid escalating it to something that can have far-reaching consequences. If that falls on deaf ears, going to HR should have no guilt attached.

6. Refusing to Be More Than Colleagues

Some people at work will take a liking to you. They may want to be a friend outside of work. They may want to be more than a friend, and start a personal relationship with you. In either case, you should not feel guilty about rejecting these advances or requests. You may just want to keep your work life separate from your home life. You may, in fact, not really like that person and thing things he or she is into (and let's be honest, that happens a lot). At work, being polite and making it work is the right thing to do, but you should never feel guilty about letting someone know that you want to keep things strictly professional.

7. Reprimanding Someone (Especially a Friend)

It's not easy telling someone off. If that person is a friend, it's even harder. But you must not feel guilty about the admonishment. If someone gets out of line, makes a costly mistake, or acts in a way that embarrasses both you and the company, you must crack the whip. How you do it is up to you. There is no reason to be overly harsh or sadistic, and inversely, being too "nice" will reduce the impact of the reprimand to something forgettable. Find the line, and walk it well. Guilt should play no part in the rebuke — it's part of working life and if that person cannot handle it, they're clearly in the wrong career.

8. Blowing the Whistle

If your company is doing something illegal, unethical, or otherwise not correct within the organization, you should not feel guilty about blowing the whistle. There is a reason whistleblowing laws exist, and you have the right to be protected and expose any wrongdoing without it coming back to bite you. Yes, your actions may result in some people losing their jobs, but those people were doing something wrong. You cannot afford to feel guilty about that, even if they are really cool people who are fun to be around. Illegal activities can hurt everyone in the company, including you, and if you have the knowledge and ability to stop them from happening, do it. No guilt allowed.

What other scenarios should you never feel guilty about at work? Share with us!

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Common Pieces of Emotional Baggage (and How to Ditch Them)

Beth Buczynski — Wed, 02 Jul 2014 17:00:05 +0000

I hate the weight of unnecessary stuff. That's why I fly with just a carry-on and never take a purse or jacket into concerts. But excess baggage isn't only physical. As we travel through life, we collect emotional baggage as well. And just like lugging a roller bag that's missing one wheel through the airport, emotional baggage can really slow us down. How many of these useless emotions are you hanging on to? Find out how to leave them behind for a lighter journey. (See also: 6 Ways to Manage Powerful Emotions)

1. Guilt

Everyone experiences guilt. Everyone. To err is human, and humans tend to err a lot. Feeling guilt when you've wronged someone, broken a rule, or acted inappropriately is natural. Carrying that guilt around for weeks, months, or years isn't. We hang onto our guilt because we want to punish ourselves, but that's never a strategy for making it right.

Ditch Guilt

Stop the retroactive self-judgement, and stop playing the "what if" and "should have" games. Practice positive affirmation by stating (out loud) good things you have done, personality traits you're proud of, and blessings you're grateful for. Forgive yourself, and if possible, seek forgiveness from those you've wronged.

2. Regret

It's so easy to get stuck in a rut of regret, imagining what life would be like if you did everything "right." The fact of the matter is, we can't predict the future, and we shouldn't punish ourselves for the past. A recent study in Germany found that participants who were able to let go of regret were more cheerful and reported higher levels of happiness later in life.

Ditch Regret

Stop treating yourself like the victim. We all make choices. Some are good, and some are bad. That's just life. Remind yourself of decisions you're proud of, like having kids, donating to charity, or saying no to that slice of cake. Look for the lesson. If you learn something from a mistake, there is no reason to regret it. (See also: 21 Decisions You'll Never Regret Making)

3. Shame

If you've ever been taken advantage of or forced to live a lie, you may feel intense shame. "There are many circumstances where we have our truth kept locked in, and unintentionally we create shame around our truths. If you feel unable to speak your truth, then you feel shame. It's nature's law."

Ditch Shame

The way to break this cycle of negative emotion is to stop internalizing it. If you can, tell someone you trust about the shame, and the events that sparked it. If you're not ready to speak the words aloud, write them in a journal. Also realize that you have the right to experience the other emotions — anger or sadness — that come along with shame. Allowing yourself to acknowledge what happened, and your own innocence, is the first step.

4. Your Inner Critic

We tend to judge ourselves quite harshly. We take a far more critical view of our bodies, careers, and decisions than the rest of the world does, although we imagine it's just the opposite. That little voice inside can be our friend, but when the voice is too loud and too critical, it's a foe. Excessive self-criticism tends to backfire, because it leads us to focus on our so-called failures instead of the "small ways that we could have improved," psychologist Tamar E. Chansky, PhD, author of Freeing Yourself From Anxiety, told Health.com.

Ditch Your Inner Critic

Realize that no one cares about you — and that's a good thing. Visualize a drawer in your head. Label it "expectations" or "critiques." Whenever you start judging yourself for how things should be or should have been, mentally place the thoughts in this box. They're no good to you anyway. Silence the voice by reminding yourself of small achievements, and stating your goals out loud.

5. Anger

When someone wrongs us, or we observe injustice, anger is the natural reaction. Hanging on to this anger is unnatural, and over time can cause depression, eating disorders, heart disease, and prevent recovery from addiction. Understanding the cause and channeling the anger into something positive are the best ways to avoid this fate.

Ditch Anger

First, allow yourself to feel it fully without shame. Allow yourself to rant or cry or journal about it, but only for a set amount of time. When the time's up, remind yourself that the only person affected by your anger is you: Simply having the anger doesn't hurt the person who caused it in any way. If you can do so calmly, explain your anger to the person who sparked it. If they ask for forgiveness, give it. If they don't, realize it's now their problem and not yours. It can also be helpful to take responsibility for your role in the situation. Instead of blaming others, ask yourself "What could I have done better?" You might be surprised how empowered you feel.

6. Past Relationships

Romantic or not, we've all been involved in a toxic relationship. The time we spent with these people impacts us deeply. Maybe it was abusive. Maybe it was unrequited love. Maybe we were abandoned or cheated on. Allowing these past relationships to affect our current lives is a recipe for disaster. (See also: 6 Time-Tested Ways to Make Relationships Work)

Ditch Past Relationships

Write a letter to the person. Say all the things you wish you'd said when they were around. Send it if you feel like it. Put it in a drawer if you don't. Try to find the lesson in the experience. If you learned something, it was not pointless. "Although you might like to avoid the inner work necessary to achieve a healthier relationship, you have to appreciate that with insight you grow to make fewer mistakes," explains soulmate expert Ariadne Green.

7. Stress and Worry

Between work, family, and friends, there is no shortage of stress in our lives. We've conditioned ourselves to believe that stress equals productivity, but carrying around too much of it is really a shortcut to total burnout.

Ditch Stress

Remind yourself that stress achieves nothing. It doesn't get you closer to your goal, or prevent bad things from happening. Use a deep breathing technique, like ujayii, to soothe yourself and seep into the present moment. "Imagine your life 10 years from now. Then look 20 years into the future, and then 30. Realize that many of the things you're worrying about don't really matter in the grand scheme of things."

8. Fear

We're not just talking about a fear of spiders or tornados. We're talking about that paralyzing fear that grips us when contemplating the unknown, potential failure, or people and situations that intimidate us. When allowed to fester, this fear will trap you inside your own head, and prevent you from enjoying life and loved ones.

Ditch Fear

It's counterintuitive (and uncomfortable) but the best way to achieve freedom from fear is to face the things that make you feel it. "Exposure is hands down the most successful way to deal with phobias, anxiety disorders, and everyday fears of any sort," Stanford neuroscientist Philippe Goldin told Lifehacker. Don't be afraid to start small, slowly ratcheting up exposure until you're doing what you previously thought was impossible.

Have you dropped some emotional baggage? What was it, and how did you ditch it?

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This article is from Beth Buczynski of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Brain Hacks for Better Investment Decisions

Emily Guy Birken — Mon, 26 Aug 2013 10:24:31 +0000

When it comes to investing, we all know what we should do: invest money early in our careers, so compound interest can do its magic; buy low and sell high; and avoid anything that sounds too good to be true. (See also: 4 Quick Ways to Decide if a Company Is Worth Your Investment)

Unfortunately, just because we know what we should be doing doesn't mean we're any good at doing it. Our own cognitive biases and behavioral quirks get in the way of making the best investment decisions, which can really cost us in the long run. We may strive to be completely rational investors, but we tend to act more like emotion-driven gamblers.

However, it doesn't have to be this way. Just because your brain tends to default to emotional decisions doesn't mean you're stuck with them. You can trick yourself into making better investment choices — without having to fight your nature. Here are four brain hacks you can implement today to improve your investing.

1. Imagine Yourself With Wrinkles and Liver Spots

The very biggest investment mistake that most people make is failing to invest at all. Even when your employer makes it relatively easy to invest in a 401(k), it's even easier to do nothing — or only invest the bare minimum. That's because your future self feels like a stranger to you, so it's difficult for you to care about him/her. (See also: 6 Valid Reasons Not to Contribute to Your 401(k))

I recall a coworker who once told me with a straight face that she didn't bother saving for retirement because she wanted to enjoy her money now. This woman simply didn't care about the cat food-eating retiree that she would become because that future self didn't feel real to her.

This is a phenomenon called hyperbolic discounting.

Human beings tend to place much more importance on things that happen now, and discount anything that might happen in the future. It's why it's so difficult to bypass that chocolate donut in the morning meeting, even though you're trying to slim down for a wedding or reunion next month. Your immediate gratification seems to be so much more important than your future trouble fitting into your dress.

When it comes to retirement, many people feel like my former co-worker. They may feel like they really need the money now. Why bother putting it aside for some future self — who feels like a stranger?

Meet Your Future Self

The solution, according Hal Hershfield of New York University's Stern School of Business, is to get acquainted with your future self.

Specifically, Hershfield found that participants who looked at age-progressed pictures of themselves increased their saving behavior. Suddenly, seeing a be-jowled, wrinkled, and white-haired version of themselves made it clear to reluctant investors that they actually would reach retirement age — and boy would that extra savings come in handy.

Basically, when you see a representation of what you will look like in 40 years, it makes your future self's financial concerns much more immediate.

You can create an age-progressed picture of yourself for free at www.ageme.com.

2. Automate

Wise Bread readers already know that they need to automate their savings and investing. It's the best way to pay yourself first, because relying on willpower is simply not going to cut it. Willpower is like a muscle, and it can be used up — even with unrelated issues. Anyone who has ever gone on a shopping spree to celebrate losing a few pounds, or who has gone face-first into a bag of cookies after successfully avoiding spending temptations, has felt the weakness of willpower.

But even if you automate your savings and investing, you can do more automation in order to periodically increase the amount you put aside. For instance, if you know you can count on a 3% raise each year, it can be easy to let that money simply add to your lifestyle creep. A month prior to when your raise will kick in, let your rational side take the temptation to spend your extra cash out of the equation. Arrange for your 401(k) or other investment contribution to go up by 1% to 2% before you've even seen the check with the additional money it. That will allow you to ignore the emotional temptation to spend now. (See also: Lifestyle Inflation: The Ultimate Financial Trap)

3. Set Short-Term Goals

I have a dirty little secret. Despite the fact that I am the daughter of a financial planner and a personal finance writer, I have often put money aside for my son's college education ahead of saving for my retirement.

I certainly know better — but saving for my little one's education is a goal I can easily wrap my head around, and one that has a specific end-date and dollar goal. Putting money away for college feels like I'm doing something tangible that is working towards an achievable goal. Putting money away for retirement feels much more amorphous.

My problem is a common one, even among diligent savers. It's difficult to really comprehend the huge investment goal that is planning for retirement, but a more tangible goal like saving for college or a vacation is much easier to grasp. This is related to hyperbolic discounting, since we are able to give up our need for instant gratification if we can feel like we're making progress on a short-term goal. (See also: Managing Your Short-Term Money)

In order to keep yourself from letting those short-term goals get in the way of your long-term ones, behavioral economist George Loewenstein recommends that investors "set short-term goals designed to accomplish long-term goals." This strategy will allow you to take care of your future needs, while still giving you the short-term gratification you need to stay the course.

For me, since retirement is such a huge and undefined goal, I need to set immediate goals for my money within the big goal of retirement. For instance, my current short-term retirement goal is to max out my IRA contribution every year. Once I am able to do that, I will add a new goal of maxing out my Self-Employed 401(k), which has a much higher contribution limit. These goals are actionable, tangible, and allow me to feel a sense of accomplishment, whereas just planning to "save more for retirement" is none of those things.

4. Hide Your Statements From Yourself

It truly hurts to lose money. I can tell you the exact amount of money I have spent on various unused purchases that ended up being nothing more than clutter — because it hurts so much to think about the money I wasted.

This universal phenomenon is called loss aversion, and it's the reason why you're still using that treadmill in your basement as a place to hang laundry, and the reason why you might have sold a bunch of faltering stocks in the economic recession only to see them rebound. In the first instance, you hate the thought of taking a loss on selling off the treadmill, even though the money you can get through a sale is more than you have currently. And in the second, you can't stand the thought of losing any more money when things are not going well.

Unfortunately, loss aversion is so hard-wired into our brains that it is very difficult for investors to think rationally while in the midst of a loss. Fear makes investors sell low in order to protect as much of their initial stake as possible. And often, those same investors will not feel confident enough to reinvest until the market has returned to a high point, meaning they have sold low and bought high.

Since you cannot override your emotional reaction to a volatile market, the best solution is to selectively bury your head in the sand. While it is absolutely critical that you keep an eye on your investments and readjust your assets and your strategy as necessary, it is also a complete mistake to react to every movement of the market. So commit to only looking at your investments at pre-determined times.

For me, I find that reviewing my investments quarterly can help me to overcome the panic I might feel at market losses and stay the course for the long term. (This also prevents me from feeling like I can guess what the market is going to do and jumping on "hot" new stocks.) Forcing myself to ignore the short-term ups and downs of my investments will allow me to better understand how they are doing over time.

Your Brain Is Costing You Money

We now know that there is no such thing as a completely rational investor. We are all slaves to our emotional/irrational brains, which will lead us into a much poorer future than we really want. The most rational investors are the ones who have found ways to circumvent their own irrationalities.

Brain hacks like these can help your to protect yourself from your own worst impulses.

What are your favorite investment brain hacks?

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Emotions Can Hurt a Home Buyer

Emily Guy Birken — Thu, 08 Aug 2013 10:24:37 +0000

Three years ago, when my husband and I first moved to our current home in Lafayette, Indiana, we got a pretty rude wake-up call about how emotions can make the process of buying a home even more costly. (See also: Your Finances: 4 Emotional Decisions to Avoid)

At the time that we moved, we were in contract on a house that we had really fallen in love with. I also happened to be seven months pregnant at the time, and we were anxious to close on the house and get settled before the baby arrived. Unfortunately, the detached garage was years overdue for a new roof, and the roof on the house itself was also in need of replacement.

Since we were already in contract at that point, the sellers' agent decided to start playing hardball. Knowing we loved the house and that we had an immovable time constraint, she advised the sellers to refuse to fix the garage roof at all and to only pay for re-shingling the house roof, despite the fact that it was past due for a full replacement. We were in the unenviable position of having to decide if we wanted the house badly enough to accept their terms.

Thankfully, even though we had already started envisioning ourselves living in that house, we felt so uncomfortable with the agent's tactics and the state of the roofs that we were able to do a real cost-benefit analysis and decide the house wasn't worth it.

For many home buyers, however, logic can sometimes take a backseat when making such a big decision. Not only can your emotions get the best of you, but agents and sellers can play on those emotions to lead you into a costly mistake. Here are some of the common emotional mistakes new home buyers can make, and how to avoid them.

1. Falling in Love at First Sight

Often, this particular emotional speed bump is only described as problematic if you're looking at houses outside of your price range. And while that certainly can be an issue (particularly if you're looking for a mixed-use property where you can start your ghostbusting business), even falling in love with a home you can easily afford can still be an issue.

Anytime you let yourself get carried away with visions of living happily in a particular home, you leave yourself vulnerable to making a big mistake. That's because you're more likely to fall into the confirmation bias — a cognitive bias wherein you look for information that reaffirms your belief in the soundness of your choice and discount any information that suggests otherwise. You are so enamored of the granite counter tops and spacious sun room that you ignore the fact that your new home is in a lousy school district or has mold in the basement.

Confirmation bias was part of our problem with the home we were in contract on. We knew that there were several downsides to the house — not including the roof issue — that we had basically ignored. On reflection, we realized that a homeowner who does not take good care of a basic home structure might also neglect other aspects of home maintenance that hadn't been revealed by the inspection — a fact that we simply disregarded when we were still in love with the house. (See also: How We Brainwash Ourselves Into Brand Loyalty)

Our situation made it abundantly clear that every home buyer needs to be willing to walk away from a sale, no matter how gorgeous the hardwood floors are. Allowing your love for a house to overcome your logic could really hurt your finances.

2. Not Seeing Past the "Trappings" of the House

When you first walk through the front door of a house for sale, it can be easy to be seduced by all the positives that the seller and agent are playing up. This is something like going on a first date with a house. The house is all dressed up and ready to impress — and it would be ridiculous to propose marriage (that is, make an offer) right on the spot.

Seeing past all the positive attributes can be even harder considering the fact that many sellers and agents are savvy enough to manipulate the atmosphere to make the house feel like your home: having the lingering scent of chocolate-chip cookies in the air (and a plateful waiting for you in the kitchen), removing family pictures and other personalized touches that might make it more difficult for you to imagine yourself in the house, and playing soothing and welcoming music. (See also: 6 Cheap Ways to Stage Your Home in a Buyer's Market)

But as much as the home staging can show off the house in its best light, it's a mistake to overlook all the possible downsides of the home. Having a house be a good home is about a lot more than cookies, closet space, and well-appointed kitchens. Don't forget to think about what work the house needs, how livable the house would be for your family, and whether the neighborhood truly meets your needs.

3. Looking for Perfection

While some buyers can fall for the vaulted ceilings in a house whose neighborhood is like a demilitarized zone, other buyers can fall into the opposite trap — wanting their home to fulfill any and every expectation they have ever had for an abode.

These types of home buyers are what Barry Schwartz, author of The Paradox of Choice, describes as "maximizers." Maximizers are absolutely certain that there is a perfect house out there for them, and they will not be satisfied until they find the house that meets all of their requirements.

Not only will looking for perfection in this way make your home buying experience prolonged and frustrating, but it also opens you up to overspending. Once you do find a house that fits your criteria, you will feel justified in spending any amount of money in order to make it yours.

But there is no such thing as a perfect house, and even once you've found "perfection," you'll find aspects of the house you don't like, and you'll resent the amount of money you've spent.

A better way to view the home buying process is to be satisfied with a house that meets about five criteria that you deem to be most important. Not only will that open up your options, but it won't set you up for disappointment.

4. Overestimating Your Ability to Perform Home Improvements

My husband and I are old house aficionados. We both grew up watching "This Old House" on weekends and have become the sort of tourists who drive around old neighborhoods to check out the architecture.

Because of that, we tend to fall for old houses when we're in the market to buy. The problem, of course, is that our price ranges run to the "fixer-upper" end of the old house spectrum. Thankfully, my husband is an engineer and actually knows how to fix many things. (I excel at supervising him.) If it were up to me, however, I would not be able to afford even the inexpensive old houses we're drawn to, since I simply do not have the handy-woman skills (or inclination) to handle repairs and improvements. (See also: DIY Home Improvement: 10 Free Options for Training and Advice)

After years of watching Bob Vila and Norm Abram, not to mention all those successful property flippers on TV, many of us may feel more confident in our abilities to handle home repairs and maintenance than we should. This is actually a symptom of the cognitive bias known as the overconfidence effect. Basically, we overestimate our ability to handle tasks.

Anyone who has ever gotten hip-deep in a home improvement project before realizing it's beyond their abilities (like me, for example) can tell you that having to call in professionals at that point makes your project far more expensive than it would have been had you simply called in the pros from the beginning.

Basically, if you are tempted by a house that will require you to strap on the tool belt as of day one, stop and think about whether you already own a tool belt. If you have to buy one for the occasion (or locate and dust off the one your father-in-law gave you several years ago), then you should probably step away from the home purchase. Know your limitations.

Avoiding Emotional Decisions

While emotions should certainly be a part of your home-buying decision process, it should not be what is driving your purchase. You will have to live with your decision for years, and you'll be much better off without indulging your emotional side and ignoring the rational reasons why a particular house might end up being more headache than dream home.

Did emotions influence your home — or any other — purchase?

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

3 Steps To Managing Workplace Conflict With Emotional Intelligence

Scott Allen — Thu, 28 Apr 2011 21:01:57 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/3-steps-to-managing-wo...

No matter how great a corporate culture you create, no matter how good a role model you are, it’s inevitable that situations will arise that require you to mitigate emotional stress within the ranks. Personal conflicts, outside pressures, and job-related stress will eventually become a factor to be dealt with in any workplace setting. How well leaders handle those situations depends on their emotional intelligence.

Managers often make one of two common mistakes when dealing with an emotional situation.

The manager attempts to invalidate or downplay an emotional conflict and becomes a player in the emotional drama himself.
The manager simply ignores the job-affecting emotions, hoping they will resolve themselves.

When the manager or group leader tries to downplay or dismiss a worker’s emotions, he inevitably creates a bigger problem. Not only does this raise the emotional stakes, but it now creates a situation wherein negative emotions are directed at the manager. Though this is very common and, arguably, a natural form of response from busy managers with plenty on their plates, it’s incumbent upon leaders to avoid leaving an employee feeling slighted in this way.

Likewise, ignoring the problem often creates a snowball effect, where resentment and negative emotions continue to grow, making the situation worse as well as causing additional problems as time progresses. It's always better to address emotionally wrought problems earlier rather than later.

There is a three-step formula, however, which comes naturally to some emotionally intelligent leaders. It is one that can easily be employed by any manager to take the edge off an emotional situation. Carefully note, this formula does not attempt to “solve” the problem itself, but is geared toward addressing and neutralizing the emotions so that the problem can then be approached in a more objective and effective manner.

Step One: Acknowledge

More than anything, people want how they are feeling to be acknowledged. It may seem overly simple at first, but a statement such as, “I want you to know, I understand you are feeling very stressed right now,” can go miles toward lowering the emotional stakes of a situation. Everyone wants to feel understood, and acknowledgment is not difficult or compromising to do. Further, it doesn’t concede agreement with the emotional state, only empathy.

Step Two: Positively Substitute

There is great power in a positive outlook and almost any negative situation can be framed in a positive light. A manager with emotional wisdom may say something like, “I know you are under a lot of stress, and I know a great deal of it is because you are a great employee and want to do the very best job you can.” What the manager has done in this example is to mitigate a negative emotion with the positive emotion of personal pride in a job well done. This doesn’t alleviate the first emotion, but it breathes a positive perspective into the conversation.

Step Three: Suggest, Re-acknowledge and Appreciate

Not all situations are within the control of the manager. An increased workload that has come down from above may not be able to be removed, for example. What the manager can do is suggest ways he or she might be able to help, re-acknowledge the emotions involved and offer appreciation for the employee. “I cannot promise anything, but I will try to see if there is any way to lighten your load. I understand you are feeling stressed and I want you to know I really appreciate your efforts.” By saying this, we have reassured the employee without making binding promises and reinforced a sense of empathy and appreciation.

This article is from Scott Allen of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: