"If Only I Had A Brain!"... Money Psychology - 1

The Wizard of Oz is a timeless classic that has captured the hearts of generations since its release in 1939. More than just a film or musical, it holds a much deeper significance, serving as a metaphor for life itself. The movie follows the journey of Dorothy, a young girl from Kansas who is transported to the magical land of Oz, where she embarks on an adventure with a group of companions, each seeking something they believe will complete them. Along the way, they face challenges, confront their fears, and ultimately discover that the answers to their deepest desires lie within themselves.

 One of the main characters, the Scarecrow, famously complains, “If I only had a brain...” He believes he isn't smart because he doesn't possess a piece of paper stating that he is.  However, during the journey to Oz, he devises solutions to problems and eventually realises he had a brain all along; he just wasn’t aware of it.

 

Neurofinance

An emerging discipline in psychology is neurofinance, the study of how our brains process financial decisions and how emotions, biases, and mental shortcuts influence our money management. It combines neuroscience, psychology, and finance to explain why people often make irrational financial choices, such as overspending or avoiding investments.

Neurofinance explores why individuals often find it challenging to save money or resist the urge to purchase unnecessary items. By analysing these brain patterns, neurofinance seeks to offer insights for making more informed and rational financial decisions.

 

By leveraging insights from neurofinance, individuals can design systems that align with their brain’s wiring—automating positive habits, minimizing emotional traps, and staying alert to external manipulations. It’s less about sheer willpower and more about creating environments where smart choices feel instinctive.

 

Two sides

 

Psychologists state that the brain has two parts that are usually not equally used—the left side and the right side.

 

The left side of the brain, often associated with logic, analysis, and structured thinking, plays a vital role in financial decision-making by processing numbers, facts, and patterns. When making financial choices, the left hemisphere supports rational thinking, budgeting, planning, and risk assessment. It enables us to calculate interest rates, compare investment options, and develop strategic financial plans based on objective data. This logical approach is essential for tasks such as creating a monthly budget, analysing stock market trends, and setting long-term savings goals. Individuals who primarily rely on left-brain processing tend to make financial decisions in a structured and disciplined manner, minimising impulsive behaviour and focusing on long-term financial stability.

 

Conversely, the right side of the brain is more intuitive, emotional, and creative, influencing financial choices through feelings, social dynamics, and gut instincts. This hemisphere governs our emotional responses to money, such as the thrill of spending, the anxiety of loss, or the desire to give generously. Right-brain thinking can enhance financial decision-making by fostering innovation, altruism, and vision-driven investments, such as starting a business or supporting a cause. However, it can also lead to impulsive spending, emotional investing, or financial choices driven by fear or excitement instead of logic. Individuals who rely heavily on right-brain processing may find themselves making fast financial decisions based on emotional shifts rather than thorough analysis.

 

Balancing the two

 

The most effective financial decision-making arises from a balance between both hemispheres, employing logic to assess financial risks and rewards while integrating intuition and values to develop a holistic financial strategy.

 

To effectively balance both hemispheres of the brain in your financial decision-making, here’s how you can apply logic, intuition, and values in practice:

 

1. Start with Data and Analysis (Left Brain):

Start by gathering and analysing objective data to assess your financial situation. This includes setting up a budget, tracking income and expenses, and evaluating any debts or investments. Tools like spreadsheets, budgeting apps, or financial calculators can assist you in breaking down your finances logically. When making significant financial decisions—such as purchasing a house, investing, or taking out a loan—perform thorough research to evaluate risks and rewards. For instance, calculate the potential return on investment (ROI) or compare mortgage rates to ensure you are making an informed, rational decision based on solid data.

 

2. Incorporate Intuition and Emotion (Right Brain):

After gathering and analysing the numbers, take time to reflect on how the financial decision feels. Does it align with your long-term goals, or does it evoke anxiety or excitement? Trust your instincts regarding decisions like investments, especially when they carry emotional or ethical significance. For instance, if an investment in a company excites you because it aligns with your values or mission, this emotional connection can provide deeper fulfilment, even if the financial data is relatively neutral. Taking time to listen to your gut feelings can help prevent hasty decisions driven by fear or greed.

 

3. Align Decisions with Personal Values (Right Brain):

Integrate your personal values into your financial strategy. This step involves asking questions such as: "Does this purchase or investment align with my values? Am I living in a way that reflects my priorities?" For example, if sustainability or charity is important to you, you might choose to invest in socially responsible funds or allocate money towards charitable donations. This ensures that your financial decisions reflect your beliefs and contribute to a fulfilling, purpose-driven life. Incorporating values helps prevent feelings of regret or disconnection when managing finances.

 

4. Set Clear Financial Goals (Both Hemispheres):

Use the logical strengths of your left brain to set clear, measurable financial goals, such as saving for retirement, purchasing a home, or eliminating debt. Then, engage your right brain to connect these goals with your deeper desires and overall life vision. Visualise your future, ensuring that your goals encompass financial outcomes, emotional fulfilment, and alignment with your personal values. For example, while the left brain focuses on the number of years until retirement and the monthly savings needed, the right brain allows you to see the bigger picture, including the joys of traveling freely or creating a legacy for your family.

 

5. Make Time for Prayer, Reflection and Re-evaluation (Right Brain):

Periodically reflect on your financial choices. Ask yourself whether you are still on the path that feels right for you, both emotionally and logically. Your right brain encourages introspection, helping you understand how your financial strategy aligns with your values and life goals. The left brain ensures that your decisions are sound and strategically aligned with your financial position. This balance of introspection and data analysis can guide you through financial challenges confidently, ensuring that your choices evolve with logical understanding and personal satisfaction.

 

6. Practice Emotional Regulation During Financial Stress (Both Hemispheres):

Financial decisions can become emotional, particularly during times of uncertainty or significant change. Manage your emotions (right brain) by stepping back when you feel overwhelmed, then apply logic (left brain) to analyse the situation calmly. For example, during a market downturn or economic crisis, resist the urge to panic (right brain) and instead evaluate whether your financial strategy remains applicable (left brain). This approach helps you avoid impulsive decisions that could negatively affect your financial well-being.

 

Bible

 

The Bible verse illustrates the balance between using both logic (reasoning) and intuition (faith and values) in decision-making.

"Trust in the Lord with all your heart and do not rely on your own understanding; in all your ways acknowledge Him, and He will make your paths straight." (Proverbs 3:5,6 NIV

 

This emphasises the importance of trusting in God, which involves faith, values, and intuition, while also recognising that our understanding through logical reasoning is limited. It encourages us to submit all our decisions to God, integrating both our mental processes and spiritual guidance. By doing so, we can make decisions that are wise and aligned with God's will, effectively combining both the practical (left brain) and spiritual (right brain) aspects of decision-making.

Next time: How the Christian faith interacts with the brain's hemispheres, engaging both the left brain (logic, structure) and the right brain (creativity, intuition), fostering a balanced approach to spirituality and decision-making. Faith, as experienced through both hemispheres, allows for a holistic relationship with God that integrates rational understanding and emotional connection.