TDL Study: Improving Financial Decision-Making
Decisions about money can be difficult – they are often abstract, require us to imagine our future selves and can be typically driven by emotions. Whether they are about what brand of cereal to buy, how much to save for retirement, or what our next car should be, we are constantly bombarded with hard money choices. It’s easy to get caught up in the details of these decisions and allow them to stress us out. Unfortunately, this stress makes us more irrational. The problem is, Americans are finding it more difficult than ever to focus on our long-term goals. This is why we embarked on a study to find ways to help improve financial decisions under stress.
The Decision Lab teamed up with Capital One to uncover simple ways to reduce the effects of stress on our financial decisions. In particular, we focused on how thinking about the big picture can affect financial decisions under stress. Typically, stress causes people to get stuck in details and ignore long-term impacts. So, we wanted to see whether a quick mental exercise could reverse this effect and make people better with money. To do this, we ran a study with 1,011 nationally-representative Americans.
We found that ‘bigger-picture’, abstract, thinking styles led to healthier financial behaviors. Abstract thinking means focusing on the broader situation rather than the details. In particular, thinking about why we might do something instead of how we might do it causes us to be more rational. Taking that perspective lets us feel more in control of our finances, budget better, save more—and ultimately achieve more of our financial dreams.
About the Authors
Dan Pilat
Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.
Dr. Sekoul Krastev
Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.
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