Financial Resource Center

Money Management

September Financial Fitness Challenge--Sleep On It

by Susan Tiffany, CCUFC / September 6th, 2011

You might expect that sleeplessness would be one symptom of financial stress. If you're worried about paying bills or losing your house, you might well have trouble sleeping nights. Now researchers are finding that fatigue itself can lead to money trouble, when it contributes to making bad choices in the first place. And it's more than just a case of being physically tired. Our complicated modern lives present us with so many decisions all day, every day that we experience something called "decision fatigue." As John Tierney reported recently in the New York Times Magazine, "Decision fatigue helps explain why ordinarily sensible people get angry at colleagues and families, splurge on clothes, buy junk food at the supermarket, and can't resist the dealer's offer to rustproof their new car." Willpower is not constant for any individual; it strengthens as you use it more, and it also can fatigue with overuse. Small wonder that it can wear out, when you think about how many choices—from what clothes to wear for the day, what TV show to watch, to the right phrase for a greeting—we make all day long.

Plumb tuckered out

Scarlett O'Hara might have been on to something when she routinely declared she would "think about it tomorrow." At the end of the day, when your deciding muscles are tired, you're more likely to make a bad choice. And here's a surprise—it's because fatigue makes us more optimistic that we settle upon the choice that minimizes risk. Researchers at Duke University in Singapore and in Durham, N.C., observing participants with functional MRI, report that "Sleep-deprived individuals in the study tended to make choices that emphasized monetary gain, and were less likely to make choices that reduced loss."
Postpone making decisions when you know you're depleted.
One of the researchers provides the example of a casino atmosphere to illustrate the findings. "Late-night gamblers are fighting more than just the unfavorable odds of gambling machines; they are fighting a sleep-deprived brain's tendency gains while discounting the impact of losses," says Vinod Venkatraman, lead study author and grad student in psychology and neuroscience at Duke. Is it a coincidence that TV shopping channels introduce their best "value" of the day beginning at midnight? Maybe not.

Outsmart that tired picker

Knowing these things, you can try to keep decision fatigue from tripping you up. Here are a few ideas:
  • Make a choice once and then automate it. That can include using automatic 401(k) contributions, and credit union services like direct deposit of your paycheck, automated transfers from checking to savings, and online bill payment to stay ahead of bills and late fees. Don't wear yourself out making the same decisions over and over.
  • Have a routine. Similarly, reduce even small but daily decisions to routines, like what route you'll drive to work and what you'll have for breakfast or take to work for lunch. These choices may seem to have nothing to do with your finances; the point is, all the cumulative daily decisions we make deplete our ability to make good decisions of any kind.
    Willpower strengthens as you use it more, and it can fatigue with overuse.
    Habits and routines can be your ally. A very wise teacher once told me, "A bad habit is easy to make, but hard to live with; a good habit is hard to make, but easy to live with." Don't worry that you'll never have another spontaneous moment. Think of a calendar that reminds you when meetings and appointments occur—without that framework, you couldn't identify "free time" for that spur-of-the-moment lunch with a friend.
  • Postpone making decisions when you know you're depleted. Know when to say no—for now. It's a rare decision that you can't postpone.
  • Gather your research and put it aside for a few days when you have a big financial decision to make. Go back tomorrow or the next day—in the morning—and see if the picture is clearer. Imagine, for example, how you might trick out a new car if you're making choices at a dealership in the late afternoon after looking at multiple options for hours. If you've ever bought a lot more car than you planned to, maybe now you know why.

Financial Fitness Challenge

The people at your credit union are serious about helping you achieve and maintain financial health. They bring you this website and other tools to help you make the most of your financial resources. The Financial Fitness Challenge continues to look at ways you can make better financial habits no matter what condition the economy is in. Each month we randomly select five winners to receive $50 Visa gift cards; we choose each month's winners only from that month's entries, so enter often. Remember to register for the Financial Fitness Challenge. ST
Susan Tiffany, CCUFC
Facebook Post