You may not realize it but among the most vital and complex relationships that you will ever have in your life is with your money. In fact, experts in the science of behavioral finance maintain that your emotions – including anxiety, regret, frustration, and inertia – play a critical role in every financial decision from spending to retirement planning. And in today’s uncertain environment, emotion-charged responses to money matters have been off the charts.
Stacey Tisdale, president and CEO of Mind Money Media, who has explored how gender, race, culture, class, and age impact financial well-being and wealth-building abilities, has written for BLACK ENTERPRISE about how “emergencies can completely derail financial security. A job loss, illness, even a flat tire can throw budgets into turmoil and lead to debt, sap our retirement savings, and create financial circumstances that can take years to recover from.”
As individuals contend with a heightened sense of urgency tied to the COVID-19 pandemic, Tisdale’s assertions have even greater meaning – especially for African Americans, who tend to have a weaker financial position than that of white Americans. According to a series of Pew Research Center surveys, the current environment reveals the overall precarious state of African American finances. For instance, 73% of African Americans said they did not have emergency funds to cover three months of expenses versus 47% of whites.
Instead of fretting about money matters, Tisdale wrote that “we need to take a realistic look at why it’s so hard for our brains to grasp what it means to save.” As such, she refers to what leading financial behavior expert Ted Klontz calls the “reptilian brain” – the part that continually seeks out danger. Since it causes individuals to embrace anxiety and become dismissive of positive future developments, the brain becomes “hardwired” against saving.
So how do you protect your finances against such responses?
Tisdale agrees with experts like Klontz who maintains that you should engage in setting up automatic savings withdrawals through employers or financial institutions to suppress “the decision-making aspect” of your brain.
Moreover, she wrote that it’s important to “stay clear on your most important financial goals and determine how much they cost. Knowing the numbers will give your brain the power to pause before you spend in ways that inhibit your ability to save for what really matters or jeopardizes your financial security through lack of emergency savings.”
Tisdale also stresses in her writings that if we don’t take intentional action then we will continue to “let society make us forget that the most essential parts of us have nothing to do with monetary value. We can fail to see the powerful teacher that money really is, and the ways in which the silent pointers it gives voice to tell us the disconnect between what we’re doing and what we value.”
For example, she recommends that you remove money from the equation when it comes to reviewing how you feel about living beyond your means and taking on unsecured debt; being financially prepared for the future or emergencies; and leaving a financial legacy for your family.
She wrote in BLACK ENTERPRISE that you should pick one area of your financial life where your decisions represent a conflict with your true nature. So, engage in research to devise a plan that allows you to take small steps that will bring your finances into alignment with your values. Ensure accountability by sharing it with a friend.
By taking such action, you will become more adept at managing your most important relationship.