{"id":12236,"date":"2018-05-25T05:49:46","date_gmt":"2018-05-25T05:49:46","guid":{"rendered":"http:\/\/www.lifeandnews.com\/articles\/?p=12236"},"modified":"2018-05-26T05:52:47","modified_gmt":"2018-05-26T05:52:47","slug":"why-we-hate-making-financial-decisions-and-what-to-do-about-it","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/why-we-hate-making-financial-decisions-and-what-to-do-about-it\/","title":{"rendered":"Why we hate making financial decisions \u2013 and what to do about it"},"content":{"rendered":"

Aner Sela<\/a>, University of Florida<\/a><\/em><\/span><\/p>\n

The advice to use your head, not your heart, might not be helpful after all.<\/p>\n

We all make tough decisions, but choices relating to money send many of us running in the other direction. Unfortunately, ample evidence indicates that aversion toward financial decisions leads many of us to put off things like funding a 401(k)<\/a>, saving at a sufficient rate<\/a>, or just doing a better job managing our credit card debt<\/a>. All of these things can hurt our long-term financial health<\/a>.<\/p>\n

Economists and behavioral scientists have proposed several explanations for this phenomenon. For example, financial products are often quite complicated<\/a>, and we may feel we lack the necessary expertise<\/a>. We may be overwhelmed by too many choices<\/a> \u2013 such as when picking mutual funds to put in our 401(k) portfolio.<\/p>\n

But as valid as these reasons may be, my co-author Jane Jeongin Park<\/a> and I felt that there was more to the story. <\/p>\n

\n \"\"
\n A typical look when dealing with finances.<\/span>
\n Pormezz\/Shutterstock.com<\/span><\/span>
\n <\/figcaption><\/figure>\n

Money matters<\/h2>\n

Take me<\/a>, for example: I have an MBA with a concentration in finance<\/a> and a Ph.D. in business, yet I still hate dealing with financial decisions. Whenever I get a statement from my bank, my instinct is to shove it in my desk drawer. <\/p>\n

Clearly, knowledge regarding financial products or subjective perceptions of competence do not explain this type of behavior very well. What is going on here?<\/p>\n

Our research<\/a> suggests that the culprit might be our stereotypes about money matters. We discovered that people perceive financial decisions \u2013 more so than decisions in many other equally complex and important domains \u2013 as cold, unemotional and extremely analytical \u2013 in other words, as highly incompatible with feelings and emotions.<\/p>\n

This may not be surprising considering how media gurus routinely caution people<\/a> against allowing feelings to get in the way<\/a> of our personal finances, and how popular culture often portrays Wall Street<\/a> and other financial professionals as \u201ccold fish\u201d who are morally<\/a> and emotionally<\/a> apathetic.<\/p>\n

\n \"\"
\n Finance is cold and calculating.<\/span>
\n Matej Kastelic\/Shutterstock.com<\/span><\/span>
\n <\/figcaption><\/figure>\n

Emotional thinkers<\/h2>\n

Consistent with this notion, we conducted several studies to examine how people\u2019s perceptions of their own thinking style might influence their tendency to avoid financial decisions. <\/p>\n

In our initial study, we asked about 150 people to fill out an online survey, which involved several sets of questions. First, we asked about their tendency to rely on emotions in decision-making generally. We then tried to ascertain their tendency to avoid decisions in a range of domains, such as finance or health. We also asked specific questions reflecting engagement in everyday financial decisions like, \u201cDo you read your bank statements?\u201d or \u201cHave you ever tried to figure out how much you needed for retirement?\u201d Finally, we looked for evidence of financial literacy with questions like, \u201cDo stocks or bonds normally fluctuate more over time?\u201d<\/p>\n

We found that the more people perceived themselves as emotional thinkers, the higher their tendency to avoid or neglect their personal finances. For example, people who ranked high on emotional decision-making were less likely to have ever tried to figure out how much they needed to save for retirement, read financial statements, or know the fees and interest rates on their credit cards. <\/p>\n

Interestingly, this relationship did not extend to decisions in other areas, such as buying clothes or making health care decisions. It was also unrelated to respondents\u2019 financial literacy or feelings of competence.<\/p>\n

In four more separate studies, we led half of the participants to view themselves as emotional decision-makers and the others as more analytical. We did this by asking them to reflect on a prior decision in which they used either emotions or analytical thinking. In each study, we measured participants\u2019 propensity to avoid \u2013 or engage in \u2013 financial matters by asking them to choose between two types of tasks \u2013 one involving financial decisions and the other one not \u2013 or by offering them an opportunity to take advantage of a financial workshop. <\/p>\n

We found that when people were led to view themselves as emotional decision-makers, as opposed to analytical, they became more likely to avoid tasks in which they had to engage in financial decisions and instead preferred to work on other tasks that were equally difficult and time-consuming. <\/p>\n

They were also more likely to decline our offer to participate in an educational workshop on personal finance, which could potentially improve their financial well-being. <\/p>\n

In other words, our studies show that the more people perceive themselves as emotional beings, the more they feel alienated from money matters. This appears to be because they perceive the type of person they are \u2013 warm, emotional \u2013 as incompatible with how financial decisions are made \u2013 cold, unemotional. <\/p>\n

We found that these perceptions of incongruity \u2013 namely, that financial decisions are just \u201cnot me\u201d \u2013 account for a significant portion of the tendency to shun financial decisions regardless of people\u2019s actual knowledge about financial matters and their confidence in their ability to make sound financial decisions.<\/p>\n

\n \"\"
\n They saved wisely.<\/span>
\n Spotmatik Ltd\/Shutterstock.com<\/span><\/span>
\n <\/figcaption><\/figure>\n

A lifestyle hack<\/h2>\n

So is there a way to get around this problem? <\/p>\n

The good news is yes. We found that study participants were less likely to avoid financial decisions when those exact same choices were reframed as decisions about their lifestyle. <\/p>\n

For example, in our survey, when we asked participants to think about choosing annuities for their retirement portfolio as \u201ca decision about your life in retirement\u201d instead of \u201ca decision about financial investments for retirement,\u201d seeing themselves as emotional thinkers no longer resulted in decision avoidance. <\/p>\n

That\u2019s a hack you can use to tackle a money matter you\u2019ve been putting off. Try to picture the pleasant outcome you\u2019re creating down the line, not the icky decision facing you right now.<\/p>\n

These insights could also help employers, policymakers and financial product providers to present information in ways that make us more likely to engage \u2013 instead of run screaming. Advertising financial services as being about life outcomes, such as lifestyle goals in retirement, instead of as \u201cfinancial investments,\u201d may reduce people\u2019s tendency to shun these decisions. <\/p>\n

\"TheConsidering that the cost of doing so is ridiculously low, this may be worth a shot.<\/p>\n

Aner Sela<\/a>, Associate Professor of Marketing, University of Florida<\/a><\/em><\/span><\/p>\n

This article was originally published on The Conversation<\/a>. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Aner Sela, University of Florida The advice to use your head, not your heart, might not be helpful after all. We all make tough decisions, but choices relating to money send many of us running in the other direction. Unfortunately, ample evidence indicates that aversion toward financial decisions leads many of us to put off […]<\/p>\n","protected":false},"author":44,"featured_media":12237,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[277],"tags":[4547,692,462,4545,4544,4548,4549,4546],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/12236"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=12236"}],"version-history":[{"count":1,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/12236\/revisions"}],"predecessor-version":[{"id":12238,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/12236\/revisions\/12238"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/12237"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=12236"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=12236"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=12236"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}