Wish you were a better manager of your money? We make so many decisions every day. We can’t possibly make good choices all the time. When it comes to our hard earned dollars we want to make the best use of them possible, especially if we want to retire some day. Here are some helpful hints to being a better money manager.
I recently came across a Seinfeld video where he goes on a rant about cookies. Paraphrasing he says, “You never see them during the day. But sometime after 9 p.m. they begin to appear. They wait until you’re tired and weak. The cookies, all lined up in the boxes, look like a D-Day beach landing troop carrier ready to attack.” He’s talking about the temptation and weakness we have for consuming cookies or some sweet treat late at night…and observes that we never do this in the morning after breakfast!
What does being tired have to do with decisions about money?
Of course this made me think about choices involving money and a concept in psychology known as “ego depletion.” The theory is that we all have a limited pool of mental resources (…tell me about it!) When our mental energy is low decisions requiring self-control become more difficult. The result is lower willpower and increased likelihood of making a poor choice. How might this play out in our behavior with money? Think about the vast array of choices we have as consumers. We want to be satisfied and may feel a certain drive to make knowledgeable choices. We want value and a good price. All this takes effort. Complexity leads to depleting mental resources.
Be aware of the big ticket purchase!
Be particularly aware when making a big purchase. I recently bought a new suit. It took time and effort to decide on the best one. Then suddenly the salesperson is showing me shirts and ties to go with it and suddenly I’ve spent a few hundred dollars more than I intended when I walked in. Yes, this stuff even happens to me!
I’m so intrigued by the question; does our money go toward those things that matter to us most? Ego depletion suggests that it is easy for us to make impulsive decisions when we are tired, especially mentally fatigued. It appears that we are more likely to make impulsive decisions that aren’t necessarily in line with our true values.
Three things we can do about it
- One, avoid shopping when you are exhausted. We’re less discerning and more apt to make impulse purchases.
- Be aware of the effort that goes into a big purchase, like a suit, a car, etc. and the possibility of spending more than intended. The cost of those extras and added features adds up!
- When sitting down to track your expenses or make a financial decision be sure to do it at a time when you are rested and feeling fresh.
Bonus suggestion; being a better money manager requires mindfulness. Practicing mindfulness when money is involved is a skill. We need to notice how we’re feeling when making financial decisions. Ego depletion can explain how we become weak and less discerning precisely at the time we need to be more clear and awake. I suggest working on your finances before dark…before you’re tired and before the cookies come out of hiding!