8 April 2024

How your brain helps you save money

Now that’s sounds like a click-bait title if ever I have seen one but don’t disconnect from reading just yet. As a money coach if there is one thing I have come to understand about money, it’s this: It is not about the numbers but how you do money that counts When you start the process of saving money there are several changes that begin to occur in your brain both neurological and psychological. It’s why I love my role as a money coach, it is really satisfying seeing how clients who have never been able to save money are saving money within four weeks. What is even more fascinating is how their thinking and creativity changes so rapidly too.   It’s like they have just given their brain a massive jump start. There are several things that change, and I won’t go into them all here but below I have listed the five top benefits I believe occur, both mentally and monetary.   Increased sense of achievement   Dopamine is a chemical that gets released and commonly associated with reward and pleasure. Saving money regularly and seeing your savings grow is a practical activity which can quickly help you feel good about money, particularly if you haven’t been saving previously. This feeling of achievement releases dopamine and that feel good feeling triggers the subconscious encouragement to keep going. Establishing for yourself the right amount to start saving regularly is important. If you set yourself a savings level too high for your current situation the opposite occurs. The moment you can’t put aside the money, your brain associates this with failure and releases cortisol which contributes to a feeling of disappointment. That’s why you will often hear people say “Just start small with a few dollars a week” Here’s a link to a calculator you can use if you want to work out your achievable minimum savings capacity.   Establishment of good habits   Every time you add to your savings you are reinforcing a loop in your brain. While it might feel hard at the beginning and need a lot of focus, over time this looping effect is triggering activity in the basal ganglia, the area in your brain that is involved in the development of motor skills and habit formation. Just like anything you do that is new, start working out at the gym, learning to drive, it gets easier over time the more frequently you repeat it.   Stress and anxiety levels reduce   Remember that hormone I mentioned earlier, cortisol. Research suggests that saving regularly and having a savings buffer reduces the level of cortisol that gets released. The lowering of cortisol and the increase in dopamine and endorphins from saving makes an excellent combination for improving your cognitive abilities and decision making. Making better decisions with your finances and becoming less reactive to financial pressures because of now having a savings buffer then reduces the feelings of stress and anxiety. Like I mentioned earlier, it’s not about how much money you have but how you do money that makes the difference.   The impossible becomes possible   If you don’t have savings or aren’t contributing to building regular savings, then chances are you don’t have too much expectation or direction for the future. Life is possibly more about existence, getting from one pay-check to the next. Saving money regularly starts to provide direction and opportunities. There is no point saving for the sake of saving but until you get the process into momentum it is impossible to see a brighter future. That idea of owning a home, taking a family vacation or whatever it might look like for you just can’t be seen as reality. Saving causes you to become more mindful of what the future could look like. As you start thinking differently your prefrontal cortex kicks into action which is the part of the brain that works on planning and execution, helps with your decision making process and also starts to make positive changes towards impulsive decisions. For anyone who considers themselves impulsive when it comes to finances, saving money regularly I believe is the key to overcoming this not determination or will power. These days when I coach clients, I refer to this process as ‘Training the brain’   Knowledge becomes action   We live in a world of information overload. You can google how to be better with money or any other topic you desire and instantly become drowned in opinion and information. It is only when that knowledge is put into action that change occurs however like I mentioned earlier, you are going to flood you brain with cortisol becoming increasingly disillusioned and demotivated if that knowledge isn’t applicable for your situation and fails. However, if you start saving and allow yourself to go through the process of change, you can avoid that risk as you become more knowledgeable about money, finances, budgeting, investing and planning and increase your financial literacy through learning as you save. Again, your brain actively involved, this time your hippocampus. This is the area responsible for learning and memory and as you retain what you are learning without being impulsive or reactive to your financial situation, you become more discerning about what might be the right action for you to take. I term this as 'Making smarter money decisions'   Are you using your brain to it's fullest potential? So as you can see, anyone with a brain can save money and do it consistently, and saving money is a foundation stone in the process of rewiring the brain to influence not how much you earn but how you do money.   How you do money is the key.   If you have read this far, don’t stop here, you read this far because you’re interested in a brighter future financially.   If you want to explore how I can help you retrain your brain and enjoy a brighter future I am just a phone call away or perhaps start with grabbing a copy of my book.   The key to a brighter future just needs you to take one step at a time.

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