Professor Mira Fauth-Bühler, neuroscientist and professor of economic psychology and neuroeconomics at the Stuttgart University of Economics and Applied Sciences for Economics in Germany, supported N26, the 100% digital bank, to provide some useful tips for learning to make more informed financial decisions and have a healthy relationship with our finances.

And by the way, ” money mindfulness ” can help us: it is a new philosophy of approach to money management as well as a useful practice for being more responsible with expenses, savings, and investments.

When we talk about money, in fact, very often it can be difficult to stay focused if we are going through a stressful period, in other cases, however, some even refuse to check the remaining savings in the account to avoid becoming aware of an economic situation unsatisfactory. In this case, mindfulness, like meditation, acts as a support to deal with the feelings we can tolerate in the East and face difficulties in the best way. Financial advisor Kristi Nelson tells us, in a short sentence, how money mindfulness can help: “We can make friends with what we have ignored, free ourselves from the myths we have nurtured, and live more intensely the life we ​​want”.

But it is Mira Fauth-Bühler herself who provides us with some guidance on the topic: «We must constantly test ourselves to discover the health of our relationship with money by asking ourselves questions. A first step could be, for example, to ask ourselves: am I willing to wait a certain period before satisfying my needs, if in exchange the size of the reward increases, thus strengthening patience? The abstract concept of saving needs a concrete incentive that makes the wait valid. To increase the motivation to save, for example, it is good to identify concrete desires with a high reward value since it is this that triggers the strong impulses that guide our behavior.”

The relationship with money and in particular the ability to evaluate the long-term consequences when we satisfy immediate needs are governed by our control system, as well as genetic and environmental factors. «This system is one of the last regions of the brain to reach full development, so in children and young adults it is not yet mature and this has an impact on their relationship with money and towards achieving savings goals» explains the expert on how to train children to relate correctly to money and continues «An exercise for a good relationship with saving is certainly the definition of short-term intermediate objectives, with the prediction of intermittent and unexpected rewards that work better for our brain and which help younger savers to develop attention to more long-term savings objectives through a reward mechanism .”

Identify triggers

We all make or have made, impulse purchases that we later – in many cases – regret. According to Professor Fauth-Bühler, it is very likely that these happen when we are in a bad mood or stressed: «It is like turning off the region of our brain that deals with control and helps us achieve long-term goals, plan our finances, delay gratification and resist impulses and temptations. In this situation the reward system takes over, requiring instant gratification that will make us feel better.” And even lack of time would be the enemy of rational thought. Therefore, a first but crucial step towards more informed purchasing decisions is to become aware of one’s behavior patterns: “we start by identifying the triggers and situations that make us spend impulsively and then work to avoid them” explains Fauth-Bühler.

Fuel positive emotions

The behaviors suitable for responsible money management cannot be adopted suddenly and setting too realistic financial objectives can even be counterproductive since “trying to control too many impulses at the same time increases the risk of failure, leading to a possible impulsive purchase which could repent later” explains Fauth-Bühler. Instead, the professor recommends breaking down your savings goals into smaller, very specific goals.

Set a budget

We are so conditioned to associate money and credit cards with a pleasant outcome that, as the expert explains, they have themselves become desirable rewards for us – turning money and credit cards into what psychologists call a “secondary reinforcer.”. The credit card turns into a conditioned stimulus that we are so used to associating with a pleasant purchase, that the card itself induces us to want to buy something. In practice, this means that dopamine waves – dopamine is the brain’s “reward” molecule that makes us feel happy – are no longer caused only by achieving the desired stimulus, but also by receiving money or simply having a credit card. credit without spending limits. This is why setting monthly spending limits can help us achieve savings goals.

Train the control system

Fauth-Bühler points out: “The more tangible and concrete the incentive, the easier it becomes for us to allow our ‘control system’ to take over and delay gratification.” The professor therefore compares self-control to a muscle: we can train and strengthen it over time, even if sometimes genetics may not work in our favor. Experience and training lead us to listen more to our control system, which is not fully developed until we are over twenty and which are subsequently also influenced by the environmental factors that surround us, such as the composition of our social circle or the discipline we were taught during our growing up years because they influence the strength of our “control system” and related decisions. 

Do not overdo it

Set only a few goals at a time or realistic goals. After all, the amount of self-control our brains can exert is limited. Trying to control too many impulses at once increases the risk of failure, leading to a possible explosive purchase that you may regret later.

It fuels the reward system

Help your brain pursue those less exciting long-term goals by rewarding yourself for achieving intermediate goals in the short term. Intermittent, unexpected rewards – like saving bonuses from your bank – work better for our brains. This way we satisfy our reward system while keeping long-term savings goals at the center.