FLASHBACK: Thousands of years ago. You live in a cave, kill your own food, carve your own pictures into cave walls, and communicate very effectively through a series of grunts (clearly, I have no actual sense of what this period of time was like).
We know our bodies evolve based on our circumstances. THIS IS STILL TRUE. Example: Wisdom teeth. Remember back in the cave when we had to tear flesh apart with our teeth. No forks. No knives. Teeth. “Oh” you say, “THAT’S why we have wisdom teeth!” Now, wisdom teeth are a hassle. They crowd our smaller jawlines, mess up the rest of teeth, can get impacted, and cost money to get removed. Well, guess what? Humanity has gotten the memo! I, personally, only had 2 wisdom teeth, and my husband only has 1 that’s never grown in (I know. We’re advanced specimens). Some predict wisdom teeth will disappear altogether within just a few generations!
What does this have to do with spending money?
Oh yeah… I was talking about money.
Well, let’s go back to that meat we’re eating in the caves with all of our wisdom teeth.
“Mmm. That was a delicious wild turkey leg, but I’m stuffed. Could you just pop the rest in a Tupperware in the fridge and I’ll bring it to the office tomorrow for lunch?”
Nope. No Tupperware. No fridge. (And, no office, but that’s a separate post.)
You had to eat it. RIGHT NOW. We didn’t really think long-term because we could, you know, get eaten by a tiger tomorrow. We were wired to be immediate consumers. Literally.
Now, our bodies ARE evolving, but evolution is slow and we still have a lot of those scarcity impulse reactions to spend money NOW!
How do we use our evolution to help with money?
Let me suggest 2 awesome tools we have:
1. The Prefrontal Cortex
In five million years, the Prefrontal Cortex of the brain has increased in size six-fold! (This is also the explanation behind why our foreheads are higher than early humans, if you were wondering.)
So what does this awesome evolving part of the brain do? Short answer: A LOT!
Longer answer: The Prefrontal Cortex is involved in short term and long term memory, decision making, error detection, reward-guided learning, and decision making involving risk and reward. Basically, the Prefrontal Cortex is what is involved when we start thinking BEYOND the “Here’s food. Must eat. Here’s money. Must spend.”
When we actually start balancing the risks and rewards for spending the money, we’re using our Prefrontal Cortex. When we learn from our previous mistakes, we’re using our Prefrontal Cortex. Use it!
The incorrect opposite of “Emotional decision” is “Rational decision.” THIS IS WRONG. Emotions can be rational, too. Deliberate vs. Emotional is a better pairing.
I think we understand the benefit of deliberate decision-making. You use that Prefrontal Cortex of yours and you make what you have determined to be the best choice after weighing the options.
When are emotional decisions rational?
Back to those cave days: You’re walking through the grass and you hear a rustle of grass (maybe even some rattling). What do you do? Stand there calmly and think: “I should probably wait to see what this thing is that is coming towards me in the grass. There might be a benefit to that.” NOPE. Your emotions take over. Fear settles in and immediately your body is capable of running faster than you could do if you weren’t experiencing fear. You jump, you run, and you question the situation later. Emotions are a super power! If you had waited to assess the situation to make a deliberate decision, you’d be dead! I mean, seriously, how cool is that? Our bodies become greater than we could force them to become all because of our emotional responses!
We do need to keep our emotions in check, but we also need to use them. Your choices shouldn’t be based on numbers alone. Life doesn’t work so nicely. Sometimes you plan to use your upcoming money to help max out a Roth IRA and then you rear-end the car in front of you (*ahem* I don’t want to talk about it). In these moments, financial planning helps you include your emotions. Will you still cry uncontrollably for an hour because you’ve thwarted your plans and ruined your day? Maybe (I don’t want to talk about it). But if you have your finances in order, money won’t be part of those emotional responses.
You want to get your finances in order as soon as possible so that money doesn’t have to play into an emotional moment in your life. A family member dies? Of course you want to be there. You buy plane tickets. No-brainer. This is a rational emotional response. You should spend that money.
For some reason, we feel that we can’t ever make a monetary decision based on emotion. Sure, “retail therapy” may not be the best way to solve your problems, but that doesn’t mean you shouldn’t spend money based on emotional reactions.
We humans have the Prefrontal Cortex and Emotions to help us out. In all financial choices (whether deliberate or emotional), we should ask ourselves “Is this a rational, intentional way to use my money?”