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  • AutorenbildFriedhelm Boschert

Mindful Finance – no stress with money anymore!

What do you feel when thinking of your financial matters or your #money? Concern? #Happiness? Stress? Anxiety? Appetite for more? Feeling guilty? Or do you feel nothing at all? And does your financial advisor know about - above all, what drives himself unconsciously? Money and thinking in money is a highly emotional issue," the Future Institute states in their current trend study "Money-Brain: Tomorrow's cultural technology of paying”(March 2017, in German language only, sorry). Highly emotional - how true it is!

But what do you do?

Preferably suppressing (bad!). Listening to "neutral" experts (worse!). Or, without hesitating, investing in overvalued assets or playing at a gambling casino (quite bad!) and supposedly calming oneself in this way. But all of this is neither rational nor healthy. And no doubt, you don't feel balanced, either. What's more, how often high importance is attached to money in your mind every day, which even makes you ruminating during sleepless nights. Is this normal for you? If no, it is high time to approach the topic about money and financial issues from the perspective of mindfulness. To open your eyes on MINDFUL FINANCE. And in this way, to restructure your quite personal relationship to money at last. This applies even more to those, who deal with money for professional reasons: bankers, financial consultants, financial dealers. In particular from this point of view, things have to change. But let's start - as we always do, when addressing to MINDFUL SOLUTIONS– quite individually with you, with your brain.

What happens in the brain, when money is involved?

"The answer delivered by neuroeconomics that analyses financial decisions and their impact on brain activity, is not very flattering," the psychologist Hanna Drimalla from Berlin writes in "das". Oh, why? Well, this means nothing less than, our rational brain, the cortex isn't much involved finally, but the "island region" and the fear centre even more. "Loss of money or precious things activates the so-called island region," the neurology professor Elgerfrom Bonn explains in the just mentioned article, "This is extremely unpleasant. This structure is also activated, when we feel pain." And we try to avoid this of course and bear losses or produce expected losses for fear of losses. Currently, this can be observed, when people invest their money in totally overvalued asset classes like stock markets or overpriced real estate for fear of loss of money value. Rather irrational, isn't it? But that's not all.

"Except of Amygdala, the reason has got a second enemy, deep in the basal forebraine: the nucleus accumbens. This core region belongs to the human reward system. When we obtain or only expect money, sex or chocolate, this region is active and triggers feelings of happiness," the psychologist Hanna Drimalla says. And this appetite for happiness is actually able to eliminate any sense of rationality. Which might result in fatal financial decisions. "The very quick profit activates the reward system and reduces decision-making capacity and rationality," the neurologist Elger says. Oh dear, this doesn't sound good ... and it still continues.

Along with biases and mental overload

Not only since Daniel Kahnemannhas received the Nobel Prize, we know that perception errors or biases may result in wrong decisions. So we are often far off the mark when assessing probabilities: after reaching the head ten times, when tossing a coin, we think that there must be finally a tail ... wrong! Or: At the stock exchange, so many investors cannot fail at all at the same time - we think and then we also jump onto the bandwagon (too late) ... wrong!

And we also know that sometimes our rational frontal cortex simply "shuts down" - when we have too much stress for a too long period of time above all. Whereas financial problems often might be serious causes for stress. The same goes for complex things overloading us with a multitude of information (see my blog "Your overloaded Brain"). Which is today the case - bankers, listen carefully! - for financial decisions in a VUCA world more than ever. And then brain stem and emotional brain take over control. Have you ever wondered, why you are rather aggressive in a stress situation? That you rather take brute decisions? It's clear, your emotional brain and your brain stem dominate and are hardly controlled by the frontal cortex anymore. And this is exactly, how you take your financial decisions: in a brute and emotional way ... if you are not, yes, if you are not mindful.

MINDFUL FINANCE starts with you

Yes, but I already deal so carefully with my financial issues! This is, what you will immediately think, when reading this. I shall then be mindful as well? Exactly, right! But you shall not be mindful with your money, rather with yourself, when dealing with money and your financial issues. Money, itself, is "powerless and faceless", as Verena Muntschig from the Future Institute correctly states in the study mentioned above. It's you, it's your brain, your intuition, your imagination that makes money to become an object of desire or a problem and stress factor or an instrument to improve the world or to generate security. Nobody else. Only you. Therefore MINDFUL FINANCE starts with you (hello, wake up …even you, dear bankers, investment advisers and money dealers, this applies to you as well! Not only to your clients!). And only in a second stage, we will ask, what will have to be changed within the institutions, and in the financial system itself.

Simply give it a try!

Let's come back to the questions asked at the beginning. How are you, when thinking of your money and your financial issues? What do you feel? What do you think? Which emotions arise? Don't be satisfied with fluffy and quick answers. Listening into yourself in a mindful way, this first means to perceive yourself without assessing, without judging at once. Sitting quietly, in an open and attentive position and listening. Into yourself. Listen to what is happening in you, when thinking of account statements, of your savings book, of your retirement savings provisions. How you feel, when receiving money, spending it, when investing it? Do not conceal the truth, do not suppress anything - allow everything to appear and perceive all that without judging. Even your fears. In this way, you start to collect the first precious information for dealing with your financial issues - something that your financial adviser cannot offer you.

Solomon Halpern, a brilliant expert in #financialissues and #mindfulness from Boulder/Colorado, got to the heart of this in a short and precise American style, when writing in the article Mindful Finance Jump Starter: "Mindfulness allows our personal experiences, narratives, and emotions to become valuable tools rather than distractions to our financial planning". Stage one, thus, making aware own emotional and physical experiences with respect to financial issues. You will be surprised, what's there - in you. After a targeted mindfulness training, one of my clients could hardly believe it: "I’m not an apprehensive person for sure. And I've got well sufficient cash. But I'm realizing only now, how much I've put myself under pressure all the time. And how often I'm thinking about during a day. And always worrying around money. Why actually?" This was the entry.

With mindfulness back to the driver's seat.

Regular mindfulness practice will change perception and thinking, even your brain. The readers of my blog just know this (see amongst others the blog post "How to keep sticking to New Year‘s Resolutions" which is the most often read article with more than 2,000 visits). You can better deal with complex issues - because you train how to change the focus of your perception and so enhance the interaction of different #brain areas. You cannot only better manage your emotions (not suppress!), but view these with a certain little distance as well - because you train how to recognize, accept and differentiate emotions at an early stage. You are no longer driven by your #emotions. And this is crucial with respect to your financial decisions, no matter if they are about earning, spending or investing money.

MINDFUL FINANCE for Investment Managers

So important that the American #CFA Institute, which offers trainings to become a "Chartered Financial Analyst", added a mindfulness module to the CFA programme. And on the website of the global CFA Institute, you find the "Meditation Guide for Investment Professionals" just delivering the reason, why mindfulness is so material for investment managers: "It can help reduce stress, improve mental focus and creativity, promote ethical behavior, and overcome behavioral biases." I think, these are sufficient reasons for all persons active in the financial sector - bankers, financial advisors, money/stock/bond-dealers, banking associations - to think about MINDFUL FINANCE. As a lever for stepping into a new financial industry. But more about this in the next blog.

Until then, I wish you mindful days and no stress with your money.

Kind regards

Friedhelm Boschert

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