Mind Over Money

In tough times, psyching yourself up to save is even more important. Here's how.

By Jean Chatzky from Reader's Digest | June 2008

Three — and most intriguing: Saving is, was, and always will be no fun. “Saving money,” explains Jason Zweig, author of Your Money and Your Brain, “doesn’t feel good.” Think about it this way: Choosing to save almost always means opting for delayed gratification instead of immediate gratification. “You can buy a pair of shoes today,” says Zweig, “or have a nice retirement 20 years from now.” You can go out to dinner now or put the money into an emergency fund in case the car’s transmission goes out — someday. You’re going to buy the shoes or head to the restaurant because the pleasure of getting something good today is much greater than the pleasure of getting something good years in the future — even if the reward in the future is bigger.

If it’s not shoes that make you go mushy inside, it may be technology, or rare books. But that’s not only an intensity you feel, it’s an intensity neuroeconomists can see. In recent years, this relatively new breed of experts in economics and neuroscience have started using MRIs to view the brain as it is making money choices. When something we want to buy comes into view, they see the pleasure center firing up as we get a feel-good dopamine rush. Similarly, getting a few dollars today is thrilling — more thrilling, in fact, than getting a slightly larger profit tomorrow. And if you have to wait a few weeks or months for that gain, it will have to be much bigger in order to arouse the same interest in your brain. Things way off in the future — like retirement — don’t jostle the pleasure center much at all.

Let’s say you’re 31 and you want to retire in 25 years. The key is to make the goal as concrete as you can, says Zweig. Pick your birthday circa 2033 as the day for your retirement goal. Then ask yourself, What do I want to do when I retire? Do I want a villa in Tuscany, a boat slip in Fort Myers, a condo in Waikiki, or a paid-off mortgage where I am right now? Of course, it’s different for everyone. But you’ve made retirement tangible: You have the date. You have the goal. Then you give it a name. It becomes “The Condo in Waikiki Fund.” You put a little Hawaiian music on your desktop, or cartoons of pineapples — whatever reminds you of your goal. Put your account statements in a manila folder and decorate it with Hawaiian beach scenes.

Sound corny? Sure, but what you’re doing, Zweig says, is building an emotional environment that you can save in. All these things work together to motivate you, and then when you see the pair of shoes, it will be easier for you to say to yourself, This is a choice between shoes and Hawaii. Suddenly, you can leave the shoes in the store.

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