Financial Decision Making

It turns out letting your lust for shiny, new shoes overtake the practical need to save money for a new car is not all your fault—it’s partly biological.

Before you get angry at your partner or yourself for getting into credit trouble, seeing things from an evolutionary psychology standpoint can help you understand your decisions even better.

More than 100,000 years ago, people bypassed the logical thinking prefrontal cortex. Instead, they followed their impulses when securing the resources they needed to survive.

Today, the resources have changed. Surprisingly, we may go about obtaining things in a similar way. Let’s say you splurge on a pair of heels or expensive restaurant more frequently than thinking about your long-term finances.

This means impulses are winning over the practical part of your brain. (Go ahead, treat yourself to those Jimmy Choos... Keeping in mind that too many of these indulgences will have you feeling anything but sexy when the credit card bills come.)

Making moment-by-moment decisions worked just fine in the Stone Age. Our ancestors didn’t have to set up a home and save for expenses (such as education, and simply, living a long life).

If you’re not convinced that we’re all guilty of making illogical financial decisions, let’s get into some anecdotes, and actual research.

An illogical money choice is not splurging on the more expensive air conditioner, even though you’d have smaller energy bills for years. Plus, economists find that non-financial factors come into our financial decision making all the time.

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