Mind Over Money

Tips to developing a smarter money mindset from The Decision Lab

A healthy mindset about money can have a positive impact on our financial lives, according to a new study by Capital One and The Decision Lab. The Mind Over Money study sheds light on how stress can impact financial decision making, but even a quick change in perspective can help us feel more in control of our finances, save more and budget better.

The study showed that stress dominates the financial mindspace of Americans: 77% of respondents  reporting that they feel anxious about their financial situation and 58% reporting that finances control their lives. The study found that, under the effects of stress, people are worse at saving and budgeting, feel less in control, are more impulsive in how they spend their paycheck and are less likely to agree that success comes to those who work hard. Interestingly, this effect was present even when controlling for income and credit scores, meaning that it is likely a mindset effect, not an effect of financial circumstance.

In order to see how the effects of stress can be alleviated, the study then asked participants to perform a quick mindset shifting exercise. It found that thinking about long-term goals for even a few seconds can reverse these effects, causing people to become better at saving and budgeting and more confident about being able to deal with their finances. Thus, ‘bigger-picture’, abstract thinking styles can lead to healthier financial behaviors. The Decision Lab shared these tips to help people focus on the big picture  and stay motivated in achieving their goals. 

Practice These Tips to Develop a Smarter Money Mindset 


1. Make important decisions under low stress

Next time you have to make a financial decision—like considering a move or booking a vacation—you could try to schedule the decision at a time when you’re naturally more relaxed and have the cognitive bandwidth to consider the long term impact of your decisions. You can’t choose to be less stressed right now, but you can choose to put off your decision until a moment when you’re less stressed.

2. Focus on values over features

One of the more interesting findings of our research is that thinking more abstractly makes us better with money. Unfortunately, in our daily lives, we can often get bogged down in details. For example, we get lost comparing products to each other and lose track of how the products compare to our core values and goals. Next time, you find yourself absorbed in comparing a whole aisle full of different coffee makers or TVs, you can ask yourself: “How will this purchase affect my long-term goals? Is it consistent with what I want in life?”

3. Use goal-directed accounts

To help focus on your long-term goals, one simple way to do this is to set up goal-directed banking accounts. For example, you can name an account after a big life goal such as “buying a house,” and then use this account for your savings pool.

4. Don’t punish yourself for the past—be kind to yourself when reviewing purchases

Stress can push us to make decisions based on whatever feels most satisfying at the moment. In some cases, these decisions can lead to regret, which can lead to further feelings of stress, and so on, creating a vicious circle. Next time you are thinking about past purchases, and there is one you are not happy about, you can try to accept it, acknowledge that it was a mistake, and formulate a plan to avoid it next time. However, try not to stress too much about it—because the stress itself can make you less likely to do better.

5. Use the good times to shift your habits to support your mindset change

Research shows that stress causes us to engage in more habitual behaviors instead of deliberate ones. However, since stress can’t always be avoided, forging good habits when times are better can protect us when things get tough. Examine your habits critically when you are in a relaxed state. In particular, think about what positive changes to your habits are most likely to carry over to your actions when you encounter stress again.

6. Focus on what you can control instead of what you can’t

While you cannot immediately change your financial situation, you can change the way you think about it to improve the decisions you make about your finances. The next time you are faced with a financial decision, try not to get caught up thinking about what you wish you had—instead, you can try to focus on what is within your control and what you can change.

7. Go from problem to solution oriented

When you’re under a lot of financial stress, it is easy to get caught up in the problem and all its details. Our research has demonstrated that part of feeling in control (which predicts financial anxiety) is knowing how to overcome the problem—and this has to do with identifying clear solutions. The next time you’re faced with a difficult financial situation, try to spend your bandwidth coming up with strategies to overcome it. This may not only help you take action faster, but it could help you feel more in control of the situation (which in turn could reduce your financial stress!). 

8. Keep your goals in front of you 

To overcome present bias, you can try keeping your goals salient so that whenever you are confronted with a decision, you will be forced to consider how it will affect your financial goals. For example, you can write your goals out on a piece of paper and stick it by your bedside or your door or you can put it as a screensaver on your phone—these small reminders will ensure that your goals are always top of mind, especially when making financial decisions. 

9. Share your goals with people who might have similar goals

Research has demonstrated that people are more likely to follow through on their goals when the goals are shared publicly with others. Under financial stress, making your goals more social, especially with others who might share them, can help to make them more real. By surrounding yourself with people who know and share your goals, you are creating a virtuous circle that will make your goals easier to achieve.

10. Do something kind for someone

Shifting your focus from yourself to other people can go a long way in changing your mindset, reducing stress and making you feel good about yourself while helping others. The next time you feel yourself getting overwhelmed by a financial decision, you can try to shift gears and see what you can do to help out a friend, family member or stranger. Most people have their own challenges—seeing that reality can be a powerful reminder that you are not alone. Now that you’ve shifted your focus, you can go back to your problem with a different perspective.

Study Methodology

The Mind over Money Study was conducted by The Decision Lab on 1,011 nationally representative US adults over the age of 18. The study took place between March 10 and March 11, 2019, using Amazon’s Mechanical Turk® platform. Participants were randomly assigned to one of three conditions: thinking concretely (“Ways to Save”), thinking abstractly (“Reasons to Save”) and a control group. All participants then completed a series of tasks and questions designed to assess financial behaviors, attitudes and stress.