How a Personal Finance Failure Can Be a Good Thing

Just about everybody experiences money problems. Unless you’re born into the upper crust, odds are you or your family will go through some sort of personal finance catastrophe at some point. Actually, in all likelihood, you’ll probably go through many trying financial times over the course of your life. Financial issues can harm family relationships and impact your health. And even if you’ve done everything you should have to prepare for an economic downturn or medical catastrophe, you can still end up seeing your savings and safety net vaporized with a single mistake.

Money and personal finance issues are more or less a fixture in our lives. We’re always striving to keep our heads above water, to pay the rent or mortgage, and if we’re lucky, try to save for a new toy or vacation. When times do get really tough, however, there isn’t much to say that’s positive about the experience. You simply have to try and weather the storm the best you can and hope you’re not too much in the red when things calm down.

Surprisingly enough, researchers are now starting to say that those times of intense stress and struggle related to money might actually be a good thing — at least one way. Money problems may make us mentally sharper.

Personal Finance Issues & Psychology

Though our personal finance problems may feel like they’re sending us into a mental tailspin, a new study says we’re actually more psychologically nimble when we’re experiencing strife related to money. The study was published in the Scandinavian Journal of Psychology, and found that while having financial issues on your mind can bog you down, it doesn’t necessarily affect every mental task you do. It all has to do with “working memory,” according to the researchers.

“Recent research has shown that poverty directly impeded cognitive functions because the poor could be easily distracted by monetary concerns. We argue that this effect may be limited to functions relying on working memory. For functions that rely on proceduralized processes however, monetary concerns elicited by reminding of financial demands would be conducive rather than harmful,” the study’s abstract reads. “Our results supported this hypothesis by showing that participants with lower income reached the learning criterion of the information-integration categorization task faster than their more affluent counterparts after reminding of financial demands.”

Essentially, the research team came to the conclusion that worries about money don’t hamstring all of our mental processes, though it may feel like it, and that people with more financial trouble in their lives can perform better in certain cognition tests.

The British Psychological Society’s take on the study lays out an example:

A trucker is likely to rely much more on the relatively automatic and instinctive processes that make up safe, effective driving. This is not to make a facile argument such as “financial stress is good for the poor,” but rather to make the point that even if such stress does impede some parts of poorer people’s lives, in other capacities they will be able to operate strongly in spite of, or even in small part due to, this stress.

Getting Your Money Problems in Order

While the results of this particular study may be surprising and a little bit encouraging, you’re still going to be much better off — mentally speaking — if you can get and keep your finances in order. That’s no easy feat, of course, and many people spend their entire lives trying to wrangle their finances and money problems into submission. But, as we all know, things can happen that can derail even the most carefully constructed plans.

Though there are money lessons to be learned seemingly everywhere — from TV shows to movies, and everywhere in between — sticking to sound advice from the experts is your best bet. What they’ll tell you is to slowly and methodically build up savings accounts for emergencies, and then to start saving for retirement and investing. Yes, it’s easier said than done, but if you don’t have some sort of plan, you’ll find yourself in a hole in your later years.

The best thing you can do to prepare for a financial emergency is to plan for one while you can. Recessions are going to happen, and stock markets are going to dip. But if you plan ahead, you’ll be able to save yourself a lot of mental grief.

This article originally appeared on The Cheat Sheet.

Image: Geber86

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