The neuroscience of decision-making says that choices are mentally draining. The insight has been life-changing when it comes to managing money.
After years of feeling like my finances controlled me, and not the other way around, I'm happy to report I have found the solution in the wisdom of a neuroscientist.
Perhaps the insight can help you, too.
I first met Moran Cerf, a neuroscientist and assistant professor of marketing at Northwestern University, over the summer. We chatted about the ways people make poor decisions, and how they could make smarter ones.
The conversation was so interesting, I wanted to meet again. So a few months later we convened on the second floor of a Whole Foods to delve yet again into the depths of decision-making. He brought up the topic of personal finance and how to create the perfect budget.
According to Cerf, decision-making is mentally draining. When we choose what to wear, what to eat for breakfast, what to listen to on our commute, what to eat for lunch, and so on, we sap ourselves of the ability to make bigger, more important decisions. It's better, he said, to make one high-level decision — he keeps to a principle of always ordering the second menu item on a list of specials, for example — and avoid small choices that won't really matter in the long run anyway.
When it comes to money, Cerf said the smartest way to budget is to find the timeline that works for you. People eat three meals day, pay bills once a month, go grocery shopping once a week, and pay college loans over a decade or more. Instead of juggling all these timelines, Cerf recommended creating a budget that standardizes them all to one timeline — say, a week or month.
I was listening to Cerf as a journalist, but as someone who's doubted nearly every purchase made for years — largely because I lacked a budget to tell me what I could afford — I was also listening for advice. Maybe this was the lifeline I'd been afraid to seek out on my own, since that meant confronting the problem.
When I got home later that day, I created a spreadsheet listing all my monthly expenses, including savings and investments, and the income I take home after taxes. Then I divided that income into weekly allowances, thinking that'd be the easiest middle ground between a monthly budget and a daily one. Cerf told me he's heard of people creating half-year budgets, and basing all their spending habits around that. But that felt unwieldy.
After each week, I colored the total spending in green or red depending on whether I'd come in under or over the budget. At the end of October, I tallied the four weeks. To my surprise, after a 31-day period that included an unexpected medical bill, a weekend camping trip, multiple long Lyft rides, and a handful of nights eating out, I was still under budget.
Suddenly, I realized I had nothing to feel guilty about. I also didn't need to try out a month-long budget or any other timescale, since I was lucky enough to find my sweet spot on the first go-around. I'm still leaving some room for doubt only because my current setup doesn't allow for major purchases. But since my bank lets me set "Goals," which automatically moves money from the main pot to a smaller one by a certain date, I can probably factor that into my regular savings.
I'm only in my second month of using Cerf's technique, but it's already erased years of self-doubt. By making the lone decision to set a weekly limit, I avoid making hundreds of smaller decisions that are fraught with worry. Learning the value of that trade-off has made all the difference.