The Case for Financial Procrastination

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In our first TIME Moneyland post, we explore an issue we’ll return to a lot: the effect of framing and state of mind on financial choice. Framing is one of the aces in the deck of cards that make up behavioral economics; and state of mind powerfully influences how we frame our financial decisions. It’s ironic that people generally consider many factors when making financial decisions but rarely give enough weight to their own state of mind and body. There’s plenty of evidence to suggest that how we’re feeling — literally, how we physically feel at a given moment — can affect our decisions about all sorts of issues, including those that have nothing to with those feelings. In a straightforward example, if we’re cold we’re more likely to spend more on a heating system. In a more nuanced hypothetical, someone feeling anxious may be likelier to save more for retirement or to be more risk-averse with their retirement funds than they would otherwise.

It’s tricky stuff when trying to live life and make choices, but it’s important. And we were reminded of it recently by some interesting new research, which might not seem immediately relevant but does in fact lead to some important practical wisdom.

We’ll begin, of course, with melting polar caps!

Seriously, that’s where we’re starting. Whatever your politics, it’s fair to say that global climate change may (at least potentially) be the most consequential issue of our time. We might therefore expect people’s thoughts on the issue to be the product of sober reflection. That’s certainly true of some folks, but even they’re likely to be influenced by non-conscious forces that shouldn’t matter. Two recent papers, by Jane Risen and Clayton Critcher in the Journal of Personality and Social Psychology, and Ye Li, Eric Johnson, and Lisa Zaval in Psychological Science, report that people believe more in the reality of global warming and consider it a more serious environmental threat on hot days than they do on cooler days. This effect held even when participants were inside a laboratory, filling out their questionnaires in a room with the thermostat set either to 81 or 73 degrees. Those in the warm room expressed greater belief in reality of global warming. The effect was quite strong, comparable in magnitude to the effect of political attitudes: conservatives in a warm room expressed the same concern about the problem as liberals in a cold room.

How can humans be so shallow, our beliefs subject to the influence of something as irrelevant as room temperature? To understand anything — an abstract proposition, a sentence of text or a possible future state of the world — we have to mentally “try it on” or simulate it. Even when we read a sentence like “the road ran through the valley” the motor regions of the brain associated with running become ever so slightly active. Likewise, to get a handle on something like global warming, we try to mentally simulate a warmer environment in the future. That simulation is easier — and more compelling — if we are already physically warm ourselves. Risen and Critcher show the generality of such influences on judgment by demonstrating that thirsty participants believe droughts and desertification are a worse threat to the future than do unthirsty folks.

You can see where we’re going with this, right? Spending, saving, investing, borrowing and insuring decisions can be affected not just by our conscious and subconscious thoughts about consequences, but by our states of mind and body as we are pondering future actions.

This is the beginning of an argument we’ll elaborate in future columns. But by itself it is one of the most useful pieces of advice on financial decision-making that we’ve heard in a combined six decades (yikes!) of experience in psychology and personal finance. Gary likes to call it “Wait and C,” the “C” standing for “consult.” This tenet is simple and doable: When you think you’re ready to make a serious financial decision — an expensive purchase, a stock or bond investment, choosing an insurance policy or deductible — get in the habit of postponing your choice for just a bit. Maybe a day, maybe an hour. Maybe change locations, too.

By waiting, you give your subconscious mood or worldview a chance to change, to manifest a different state of mind. Maybe you’ll be a little less hot or anxious or giddy or needy, and maybe that change will alter your appraisal of the decisions at hand. In an ideal world, you’ll also have time to consult with someone you trust, to run the idea up their flag pole just to get someone else’s take, someone with a different state of mind and body than you. In so doing, you’ll end up with multiple viewpoints on the same decision (two of yours, one of theirs) between which you can triangulate. Maybe you’ll reach the same conclusion you had before, but maybe you’ll decide differently.

Either way, by recognizing the effects that non-conscious states of mind and body can have on conscious thinking, you’ll give yourself a fighting chance of controlling their power.

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