Financially Inclined August 23, 2024 Transcript

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Yanely Espinal: What’s up everybody, I’m Yanely Espinal, and welcome to Financially Inclined from Marketplace. We’re sharing money lessons for living life your own way. This episode is all about how money can mess with our brains, and how our brains can mess with our money. Because money can make us feel scared and stressed out sometimes. And it can be really hard to talk about it. But it’s important to know the ways that our brains can play tricks on us when we’re making financial choices. 

Lindsay Bryan-Podvin is here to help us out with all of this. She’s a financial therapist, and an author of the book called “The Financial Anxiety Solution.” Her work is all about helping people understand how money and mental health are connected. You can find her on social media @mindmoneybalance, or on her website, mindmoneybalance.com. All right, let’s jump into it. 

Yanely Espinal: As a financial therapist, I know you work with a lot of different people. And I want to know like, of the different things that they come in and that they’re dealing with and they share with you, how many would you say deal with like the psychological effects of money? Like how your brain can play tricks on you when it comes to spending your money.

Lindsay Bryan-Podvin: I mean, in my work, I’d say it’s 80% plus, and the research backs me up. When we say how your brain messes with you when it comes to your money, what we’re talking about is that most of us make decisions based on how we feel rather than the facts of the matter. And this is true in and out of our personal finances. For example, most of us know we shouldn’t be, like, scrolling on our phone before bed, because it’s bad, the blue light messes with our sleep. But uh, raise this hand. [laughter] 

Yanely Espinal: So guilty!

Lindsay Bryan-Podvin: Most of us still do it before bed, because we’re like, “Ah, it kind of feels good. It’s my little habit. Yeah, yeah, I know, it’s not good for me, but I’m gonna do it anyway.” And when it comes to money, psychology plays a huge role in what we do, and the research says that about 80% of our decisions that we make are based on how we feel – not on our spreadsheet, not on our budgeting app, not on our, you know, very cute SMART goals that we’ve laid out. Our brain takes over and hijacks with a bunch of different ways, and tricks us a little bit to do things that might not be the wisest long term, but feel really good in the moment. 

Yanely Espinal: Yeah, that makes a lot of sense, like feelings. And I think one of the big feelings, at least that’s common is fear. So like FOMO, right? #FOMO, fear of missing out. How much do you think FOMO plays a role in a lot of the irrational decisions that people tend to make?

Lindsay Bryan-Podvin: So when we’re thinking about FOMO, the psychology term we’d use is “social norms.” And social norms are basically feeling peer pressure or feeling like you have to do something because other people around you are doing that thing. So this can look like going shopping. I don’t know about you, Yanely, but when I go shopping by myself, I’m much better about, like, sticking to my list. But if I bring a couple of my girlfriends, all of a sudden I’m buying a ballgown, even though I have absolutely no reason to be purchasing the ballgown, because my friends are like, “Oh, you look so cute in it!” You know, whatever, “You look great, you should buy it!” And that is an example of how those social norms kind of pressure us into spending money that (a) we didn’t plan to, or spending money outside of the ways that we really want to be spending our money.

Yanely Espinal: Yeah, that’s a good example. I definitely can relate to that one, because when I was in college, I had a lot of friends who I had to mindfully stop going shopping with because they would convince me to buy stuff that I had no business buying. And so, I think that’s a good one. What other examples do you feel like are really common for FOMO?

Lindsay Bryan-Podvin: Yeah, when it comes to FOMO, it’s also – this sounds irritating, but it’s so true – it’s the brands, it’s what brand is trending right now, how can you stay on top of it. And as we know, with social media, when it comes to Tiktok, every time I’m on Tiktok, I’m being served a new Tiktok shop link to stay on top of the latest trend, whether it’s a water bottle, or a pair of sneakers, or a cute outfit, it doesn’t matter. There’s always something new. And it’s not just the look of the thing, it’s also the brand of the thing, and branding is often what we pay for. When we look at something like the brand of water that you drink, they’re basically all the same. In the U.S. we have the same standards for what is inside of that water bottle. But look at Liquid Death, right, their water they can charge a little bit more for it, even though it’s the exact same thing inside of that can, because they have really leaned into the branding that feels edgy and fun and exciting. So we’re more likely when we’re even just like, you know, at the bodega being like, “Oh, I want the Liquid Death instead of that weird off brand bottle.” 

Yanely Espinal: Yes, that viral, the virality factor. Yeah, but it’s hot right now.

Lindsay Bryan-Podvin: Yes. And it’s hard to stay on top of, right? Like that FOMO is so real, not just the brands, but also with social media wanting to go to the trending restaurant. You know how like when a Tiktok blows up some certain restaurant and people are waiting, like, five hours in line for a sandwich or something like that. We do that, too. And we might be spending a lot more on that viral sandwich than we would from, you know, a random sandwich down the corner.

Yanely Espinal: I’ve seen that so much! Like Miami Slices is like a pizza shop here in Miami. People line up around our block. And I’m just like, I’m sorry, I come from New York City where pizza is actually good. This Miami pizza is not…

Lindsay Bryan-Podvin: Ooo fighting words! 

Yanely Espinal: This Miami pizza is not cutting it. [laughter] Now, I know one of the big things too is that when you see it, you want it, like in that moment, right? And like that’s that instant gratification piece. Like, where does that come in, and how much does that affect us like on our day-to-day? 

Lindsay Bryan-Podvin: Yeah, that instant gratification, what we would use in psychology is called “present bias,” which is this feeling of this thing in this very moment is more important than anything in any other moment. So if we think about outside of money, this is staying up late before an exam, before a big paper is due, before a test, because you just need to get to that next level in your video game, even though you know you’re going to be tired the next day and probably won’t perform that well, because it feels so good in the moment. So present bias also shows up with that instant gratification when it comes to our money. And it’s so hard. This happens to all of us, you know, these, these little behavioral economics hiccups happen to the best of us, and they’ll continue to happen, but it’s just about being a little bit more aware. So the way that I see this show up are with things like the Buy Now-Pay Later. I know y’all did an episode on that! 

Yanely Espinal: Yep!

Lindsay Bryan-Podvin: Doing things like putting things on credit cards, especially as teens hit that, like, 18-year-old mark. As soon as they turn 18, that’s when you’re gonna start getting those flyers in the mail about getting a credit card with 0% interest for a few months, it’d be so enticing to just start swiping. Or even maybe you did get a little bit of a financial treat, maybe your auntie gave you 50 bucks on your birthday. And you know you want to save up some money for a car or something like that in the future, but it feels so good to have that money in the moment. And you’re like, “Whatever, I’m gonna go get a new eyeshadow palette,” right?

Yanely Espinal: That’s there’s something about it like, I don’t want to have to wait, right? That’s the thing. It’s like the waiting is annoying. It’s like I don’t want that. I rather just get it right now. And I see that a lot. But at the same time, there’ll be some people who like are the totally other way, like on the flip side: they want to, like, hold on to all their money and they don’t want to spend. Like is, do you feel like that’s common too, where you have some people, maybe some personality types that just go the total other way, and they really want to cling on to money and not spend? 

Lindsay Bryan-Podvin: Absolutely, the term we would use for this is called “loss aversion.” And basically what research shows is that it’s more painful to lose something than it is to gain something. They’ve literally put people in brain scanners, and those different parts of our brain that are associated with feeling physical pain light up when we lose things, whether we lose money, whether we lose a parking space, it doesn’t matter – losing doesn’t feel good. And so when it comes to money and saving, even though on paper, yes, we do want to be saving up for our future selves, sometimes we are so fearful of the pain of spending or buying or investing that we keep it underneath a literal mattress. And you and I both know that that makes sense if, depending on, like, how you were raised, but also, it is not insured, it is not protected. It isn’t the best place for your money to go. So we can see this all the time. 

Yanely Espinal: Yeah, I definitely relate to that. I feel like it’s a little bit like, “I don’t want to let it go, cuz I don’t know if I’m gonna get it back!” 

Lindsay Bryan-Podvin: Yeah, yeah. And what we see, you know, as we do more and more research on financial psychology and on how people engage with their money and use their money, what we see is that people who come from backgrounds where they grew up where money was tight in their household, it makes perfect sense that they’re going to want to hold on tightly to that money because of exactly what you just mentioned: “I don’t know when I’m going to have more money. I don’t know when I’m going to get paid. I don’t know if my auntie is going to give me money on my next birthday. So I want to hold on to it, because it does feel really safe.”

Yanely Espinal: Yeah, that makes a lot of sense. All right, well, I know that you kind of already broke these down and went in detail with them, but let’s say that somebody wanted a quick bite sized like 60-second explainer for these three that you brought up. I feel like for the first one, it’s like hashtag FOMO, the second one is giving like hashtag dopamine, and then the last one is like hashtag like fear. 

Lindsay Bryan-Podvin: Yeah. And you hit the nail on the head that it is dopamine and also with these other things, it’s other chemicals too. We love hashtag dopamine and dopa-menus and all of that. But the other feelings here are serotonin and oxytocin, which you may be going, “What the heck is that?” But I will tell you, my favorite way to think about this when it comes to money is I use a pool analogy. So it’s a hot summer day, you want to go swimming. Dopamine is the kid who is doing cannonballs in the deep end. It’s that rush of excitement that feels so good, and so, when it comes to money, that is that like present bias, that FOMO, that spending, and it feels so good. The endorphins is when somebody is practicing for swim, and they are doing laps. That is that feeling of accomplishment, and it feels really good. Sometimes that can happen with loss aversion: we worked really hard to save that money, so we don’t want to spend it. Then at night when the sun goes down, and we’re hanging out in the hot tub, and it feels really good, and we’re chill: that’s serotonin. That’s that happy chemical. And sometimes that’s FOMO, too. We want to be happy, we want to feel good. And then hanging out in the hot tub with your friends: that’s oxytocin. That is that feeling of being connected and together. And that can happen with present bias and social norms and FOMO, too.

Yanely Espinal: I love that analogy. That’s so great. Okay, so I got one last one, because let’s be real, a lot of this is vocabulary words that some of us just have never really heard. What is, like, your definition for “behavioral economics”?

Lindsay Bryan-Podvin: When I think about behavioral economics, it’s the way that we engage with money based on our feelings or based on our behaviors, but not based on the money facts.

Yanely Espinal: The money facts! Ooo I like that one! I like that one. It’s like informing your decision or like feeling through what you want to do with this decision is very different. 

Lindsay Bryan-Podvin: Exactly.

Yanely Espinal: Now, you talked about “present bias,” which has the word bias in it. And I know a lot of these are examples of different biases that we deal with in our minds. So what would you say like the definition for “cognitive bias” would be? 

Lindsay Bryan-Podvin: Yeah, so if we take “bias” first, basically, it’s our tendency to do something. So I might be biased when I go to the bodega to always get mac and cheese, and you might be biased when you go to the bodega to get a slushie or something like that. It’s our desire, and it is our preference. So when we talk about “present bias,” we are talking about having a bias toward thinking about what’s happening in the moment. And when we talk about cognitive bias, “cognitive” is just thinking or just our brain, so it’s basically the bias or the tendency that our brains have for different things in our lives.

Yanely Espinal: And then specifically as it relates to money? 

Lindsay Bryan-Podvin: Yes, yeah. So when we’re talking about “financial cognitive bias,” that’s when the money and the brain and our preferences all come together. 

Yanely Espinal: And then just for anybody who’s like, “Wait, Lindsey, is a financial therapist? Like, what does that mean?” What’s financial therapy, and what is being a financial therapist mean? 

Lindsay Bryan-Podvin: Great question. So financial therapy is a relatively new area of therapy that kind of popped up within the last 10 years. It starts out kind of like a bad joke: it was literally a financial planner and a psychologist walked into a conference. And they really realized that they were each doing things in their work where they wanted a little bit of help from somebody on the opposite side of the aisle. So financial therapy is a discipline that helps people understand the way that they think, the way they feel, and the way that they behave with money to help them make wiser financial decisions, and feel good in their bodies and in their emotions when they’re making those decisions. And for me, as a financial therapist, my background is as a social worker, so I was a licensed therapist first, and then I got training for financial therapy. So that is where I kind of hang out in the work that I do. So my work is less of how to make a budget, and much more what’s getting in the way of you making a budget? Why is it hard for you to stick to a budget? How are you going to talk to your boyfriend or girlfriend or partner about a budget in the future? That’s my job. And that’s what I like to do.

Yanley Espinal: Thank you so much, Lindsay. This is great. 

Lindsay Bryan-Podvin: Yeah, this is so fun. I feel like I was back in Psych 101! [laughter]

Yanely Espinal: Okay, I know that was a lot of info. Lindsay broke down some of the stuff that goes on in our brains when we choose to spend or not spend our money. Remember: dopamine, oxytocin, serotonin, all of these chemicals are bopping around in our brains. And they can influence us when we make choices. And understanding how those brain processes work against us can help us fight back and make better decisions with our money. All right, I know you got this, and I’ll catch you next time. 

Financially Inclined is brought to you by Marketplace from American Public Media, in collaboration with Next Gen Personal Finance. I’m your host, Yanely Espinal. Our Senior Producer is Zoë Saunders. Our Video Editor is Francesca Manto, and our Graphics Artist is Mallory Brangan. Our producer is Hannah Harris Green. And our intern is Marika Proctor. The podcast was edited by Courtney Bergsieker. Gary O’Keefe is our Sound engineer. Bridget Bodnar is the Director of Podcasts. Caitlin Esch is Supervising Producer. Francesca Levy is the Executive Director. Neal Scarbrough is the VP & General Manager of Marketplace. Our theme music is by Wonderly. Catch you next time!

Financially Inclined is funded in part by the Sy Syms Foundation, partnering with organizations and people working for a better and more just future since 1985. And special thanks to the Ranzetta Family Charitable Fund and Next Gen Personal Finance for continuing to support Marketplace in its work to make younger audiences smarter about the economy.