CAPE TOWN - Uncertainty contributes to people making bad money decisions. Find out what else can trigger bad money decisions.
Eight out of ten American adults feel anxious about the state of affairs of their personal finance.
If individuals are stressed when it comes to making money decisions, they should seek professional advice.
Northwestern Mutual working with neuroscience research firm, ThinkAlike Laboratories, measured the electrical activity of people's brains as they evaluate financial situations. The findings include that when people think about financial decisions, it impacts their brain functions.
In addition to this, neural activity associated with "stressful information processing" was 20% higher among people who made their own money decisions compared to someone who received financial advice.
"When participants had even minor assistance, it relieved their brains of a significant degree of attentional demand.A skilled financial advisor presumably has a similar effect on their clients", says head of ThinkAlike, Sam Barnett.
How Stress Affects the Brain
A group of researchers conducted tracked responses from young adults (18-34 years old) and older adults (65-85) in 2013. All participants were given positive and negative feedback concerning the questions.
The researchers then found that stressed-out participants performed better when the questions were guided by positive feedback.
"Under stress people might be more likely to pay attention to positive feedback and disregard negative feedback", says University of Southern California professor of gerontology and psychology, Mara Mather.
The last thing you want to do is to seek advice while you’re stressed out and make risky or wrong decisions with your money.
"After all, we know that poor financial decisions will only lead to future stress - and a vicious financial cycle", concludes Mather.
- BUSINESS REPORT ONLINE