Does it feel like you're getting further and further behind on your bills -- and you keep making mistakes that just dig you deeper into the hole, financially? Well, quit kicking yourself over it because it may not be all your fault. Not having enough money literally messes with your mind.
This is according to Harvard researcher Sendhil Mullainathan, co-author with Eldar Shafir, of the book, Scarcity. What he found is that whenever we feel like we don't have enough of something (money, time, affection) our brains become hyper-focused on that one thing. And then we lose sight of everything else in our lives.
“To put it crudely,” Mullainathan says, “poverty — no matter who you are — can make you dumber.” Which can lead to more impulsive behavior, poor financial decisions, even poor performance in school. It's not that your inherently lazy or stupid. It's that worrying about money high-jacks your brain.
Here's a few examples:
1. You keep showing up late (or not at all) for things that could ultimately help you earn more money. Unemployed people in job assistance programs often show up late or not at all. Why? Because they're struggling to find a ride to class and arrange free or cheap childcare. If they make it, they're tired and burned out from the struggle.
The same problems can keep you from showing up at work on time. And then you get fired, or demoted. And you slip further into poverty.
2. You go deeper into debt. If you don't have a reliable income you may end up taking out payday loans -- which come with super high interest rates. Or you rack up credit card debt and end up rolling over fees and interest. Everything you paid for ends up costing you twice as much.
“This type of high-risk borrowing seems ridiculous,” Mullainathan says, but his research shows that it's not that we don't understand how money works. “It comes from putting out fires.” You can't make good choices when your only options are terrible and you're totally focused on getting by day-to-day.
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3. You spend too much on fees and penalties. Your car registration is due, but you're worried you don't have the money to renew it. Or you can't find the time to renew it. So it expires and you end up paying a hefty fine. Quick raise of hands, how many of us owe library fees? Yup. It's hard to get books back to the library on time when you're running from work to the daycare to school and back again.
4. Your kids have expensive medical issues. You don't have money for dentist visits, and when you finally do, the kids have so many cavities you go into debt paying for the fillings. Or you hesitate bringing them to a doctor when they're sick and they get worse -- and then you end up with hospital bills.
Beyond that, they also miss too much school and fall behind. Or their development is slowed. Is it because you just don't care enough? Or is it that you're struggling just to keep a roof over their heads?
5. You keep gaining weight. Scarcity isn't just about money -- it can be about other aspects of your life. For example, you keep trying diets, but you always end up gaining the weight back, and then some. "Sticking to a diet requires coping with the challenge of having less to eat than you feel accustomed to — a tight calorie budget or calorie scarcity," Mullainathan writes in Scarcity.
6. You keep missing deadlines and you keep wasting time. If you're worried about your long to-do list that worry ends up taking up too much of your mental bandwidth, and then you have a harder time focusing on actually doing the things on your to-do list. You end up peeking at Facebook 300 times just to relieve the pressure. And that wastes precious time. And you fall farther behind. And that makes you feel even more worried.
We all make these mistakes of distraction when we feel like we don't have enough of something. The big difference is, when you have plenty of money you have more wiggle room. And the costs of your mistakes don't hurt as much.
Have you found yourself making similar mistakes?
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