Alltop.com

Given the current anxieties swirling around the recession, it’s no wonder that we’re a bit slow to trust our own financial decisions. But thanks to behavioural economics studies, we can learn how money affects our brain, and how to counter any potentially bad decisions with good ones.

As humans, we’re flawed decision makers. We are less than consistently rational and tend to be impulsive buyers. The financial mistakes we make are the result of our own inability to reognize the power of numbers. For example, when we see that minimum payment amount on our credit card bill, we’re re-assured and tempted to only pay the least amount possible, even though we know that it’s best to pay as close to the full amount as possible, to avoid more interest charges.

Make too many of these mistakes and you’ll end up anxious about deciding anything about your financial status. There are, however, things you can do to remedy this. For example, you know it’s best to save a certain perentage of your paycheck. So, instead of trying to convice yourself every month to put some of it away, set up an automatic deposit to a savings account. That way you only have to make the choice once.

Learn more about how money affects our brain and what you can do to regain the confidence to manage your finances here.

By Catherine Faas.

More news on psychology.