Every day our brain has to make thousands of decisions, from the mundane, like:
- “How far do I have to reach my hand to get that cup of coffee?”
- “Do I have to blow on the coffee because it might be hot?”
To the more important, like:
- “Should I click ‘buy’ on this 50% off lifetime subscription?”
- “Would I really use an exercise bike?”
In a 2011 book by psychologist Daniel Kahneman called “Thinking, Fast and Slow” he talks about two systems of thought that help us make these many decisions – the “fast brain” which is automatic, instinctive and emotional, and the “slow brain” which is slower, more deliberative and more logical.
Marketers want to appeal to that “fast brain”. They want to pressure us to make a quick decision so we don’t have time to weigh the pros and cons.
When we have more time we can use our “slow brain” to make a more thoughtful choice. We can think about things like how it will impact our overall budget, if there are any associated costs (cars need maintenance, expensive clothes need dry cleaning), and if this is something that we really even want.
Our fast brain is also responsible for our “automatic” decisions – that cup of coffee we buy every day without thinking about it, the bakery we stop at every time we pass by, or the unused subscription we never cancel because we don’t even think about it.
Using your “slow brain” to make better spending decisions
If you are being pressured into making a buying decision, take time to slow down — especially when making major purchasing decisions. If you are being told you have to buy it NOW — walk away. Chances are that same deal will still be there tomorrow, or you can get it from somewhere else.
When it comes to routine spending – put your “slow brain” to work and take some time to think about your daily and weekly routine. Are there things you buy only out of habit and not because you really love them? Or maybe they fit into your lifestyle at one point, but now really don’t give you value for the money you are spending. Asking these questions can help us prioritize our money on the things that are really important to us.
Using your “fast brain” to improve your finances
One of the things our fast brain does is use past decisions as a shortcut for making new decisions. You buy Brand X one time, and from then on your fast brain will default to that so you don’t have to make the decision again.
You can take advantage of this to improve your finances by making the good decision once and then letting your fast brain keep you on autopilot.
For example, you can make the decision once to make a monthly, automatic transfer to savings, and then you can let that become part of your routine. Now you don’t have to make that decision every month, wondering “Should I do the savings transfer this month, or should I skip it?” By not giving your slow brain a chance to engage and talk you out of it, we stay away from temptation, and we can harnesses the power of our natural default to past decisions to help us do the right thing.
You can also do this with other automatic payments such as:
- 401(k) or 403(b) contributions
- setting credit cards to pay the full balance every month
- contributions to an investment account or IRA
- contributions to an HSA (Health Savings Account)
- utility or other bills
- charitable contributions
Anytime that we can make the right decision the easy one it helps us stay on track. This can apply to finances, health, and many other areas of our life.
Want even more help with spending decisions, and improving your finances? I talk about all this and more in my coaching sessions. My rates are affordable, and we will start with a free 30 minute intro call where you can decide if coaching is right for you. Schedule a call today!
