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Why you should carry cash

file0001679856317If our dopamine is supposed to help us make good decisions, why do we continue to make bad decisions, like getting into debt, thinking irrationally, and pursuing the short term benefit, rather than seeing the long-term outcome?  Because dopamine isn’t the only thing working inside our heads.

Hey, ya like losing? Right. Me either. That’s called loss aversion. (Lehrer 76). It’s why game shows like Deal or No Deal are so popular and provide so much variety. Give a person a calculator on that show and it becomes someone doing 5th grade math, but give them the chance to win hundreds of thousands of dollars and you’ve got a Nielson ratings winner. Why won’t you take the Banker’s deal when the math is clearly in your favor? Because you don’t want to risk losing what you MAY have. If not losing the chance at having something, just think how powerful not losing something you actually have can be.

The desire to avoid anything that smacks  of loss shapes our behavior and leads us to do foolish things,” (Lehrer 77).

Averting loss is an innate flaw in all of us – it’s also known as negativity bias (Lehrer 81) meaning that essentially, as Anthony Robbins is quite fond of saying, “we will do more to avoid pain than to gain pleasure.”

This negativity bias is also responsible for much of the personal debt that American’s have run up. When we spend cash, the purchase involves the actual loss of something – money, moola, smaolies, pictures of dead Presidents, small pieces of legal tender, Benjamins, you get the point. When that happens a little part of your brain known as the insula, which is associated with negative feelings, lets you know that you now have less money (Lehrer 86). However, when we use a credit card, brain-imaging experiments suggest that the activity of the insula is quieted so that spending money doesn’t feel bad – therefore, spend baby spend (Lehrer 86).

“We tend to overvalute immediate gains,” at the cost of future expenses, says Lehrer (87). The subprime mortgage disaster and even heading the fridge for a nightly binge may all be a result of this flawed process. When our self-control breaks down, we opt for rewards we cannot afford (Lehrer 90). Life is short and we want our rewards now, not later (Lehrer 91). That’s why some savvy financial planners make set you up on spending plans that deduct money that’s to be saved or invested BEFORE it hits your bank account.

Another challenge to the decision-making process is panic. Panic causes perceptual narrowing, which means our thought process narrows. When we’re threatened, or in a panic state, our view of the world literally shrinks (Lehrer 98-99). But all hope is not lost. Lehrer offers to excellent examples of how people in panic situations were able to save themselves and the lives of others – citing a case of a wilderness firefighter who developed a new way to save others who are overcome by a forest fire, and Captain Al Haynes, who saved over a hundred lives on United Airlines flight 232, which crashed in Sioux City, Iowa in 1989.

In an emergency, survival often depends on being able to beat back or control our emotions, which keeps our head clear to make good decisions (Lehrer 99). Both sides work together – our automatic instincts, sometimes referred to as “fight or flight,” or thinking with the reptilian or frog brain, buy us some time by focussing on the immediate variables or threat, its giving us time to think rationally about the next step (Lehrer 99).

So how do we regulate emotions? Simple. We think about them. Our brain’s prefrontal cortex allows us to contemplate our own mind in a process known as metacognition (Lehrer 106). We have the ability to think about WHY we are feeling a certain way. When our emotions tell us that we want (or worse, rationalize why we need) something, we can consciously step back and decide what’s really going on – is loss aversion or negativity bias at work? Are we overestimating some immediate gain at the expense of a future benefit? The ability to regulate this process allows us to make better decisions. 

  • Distractions can also be a critical tool in making better decisions. In studies, kids who have been offered a treat immediately, but were also told that more treats were available later in they could refuse the immediate offer, did better at controlling their impulses when they distracted themselves from the treat in front of them (Lehrer 112). This works for adults too.
  • When you see the thing you really want, walk away and tell yourself you’ll come back later for it. Don’t give yourself the time to think about it – do the opposite. Give yourself the time to NOT think about it. Distracting yourself allows the rational part of your brain to process the short and long term rewards or consequences associated with spending the money (or binging out at the fridge).
  • Teenagers have a very difficult time overriding their emotional brain due to their limited brain development.  Drugs, risky sex, alcohol – what some friends of mine simply called “senior year,” are the result of the teenage emotional brain running at full throttle (Lehrer 114) while the other parts of their brains (the ones with rational thought) are still forming. Teenagers tend to respond better to short term rewards or consequences rather than long term – they just have a hard time seeing that far into the future.

Want the best of both worlds? Make your teenagers buy things with cash only – delay the credit card as long as possible.

Lehrer, Jonah. How We Decide. Boston: Houghton Mifflin Harcourt, 2009. Print.

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