Does this mean that anyone who can't save doesn't have a brain?
Not at all, everyone can save but how much one person saves compared to the next always has a different starting point.
As a financial 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 anyone starts the process of saving money regularly there are several changes that begin to occur in their brain both neurological and psychological. 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.
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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”
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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.
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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.
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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. When I coach clients, I refer to this process as ‘Training the brain’
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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'
Final thoughts
Are you using your brain to it's fullest potential?
So as you can see, 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.
To explore how I can help you retrain your brain and enjoy a brighter future book a Free Exploration call today or if you still don't think coaching is for you just yet consider grabbing a copy of my book How I Fixed My Broken Budget - 7 Key Principles ToSuccessful Budgeting.
The key to a brighter future just needs you to take one step at a time.
Disclaimer:
The information presented in this article is intended for general educational purposes only and does not constitute financial advice. While every effort has been made to ensure accuracy, ReachUp and its authors make no representation or warranty regarding the completeness, reliability, or suitability of the information for your personal circumstances.
Loans, mortgages, and financial regulations in New Zealand are subject to change, and the content here may not reflect the most current legal or market developments. You are encouraged to seek advice from a qualified, authorised financial adviser, mortgage broker, or lender who can assess your specific financial situation, goals, and risk tolerance before making any decisions.
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