Executive function, or the lack thereof, can make or break your financial success.
Most people understand the basic idea of not spending more than you make to keep finances under control. However, many other factors, such as physical, mental, and emotional health, influence money views and decisions. An essential factor we often don’t notice or take for granted, crucial to any activity we engage in, is executive function.
What is Executive Function?
It is a combination of cognitive skills, such as attentional flexibility, working memory, and inhibitory control, needed in everyday life. These skills allow us to plan, monitor, and execute our goals. It enables the ability to initiate tasks, stay focused, filter distractions, use time efficiently, recognize when to ask for help, adapt, and persevere when objectives get challenging.
A component that can jeopardize the achievement of financial goals is self-regulation.
What is Self Regulation?
It is when the components of executive functioning come together to determine behavior. Simply put, it’s being able to stop and alter our behaviors to meet standards, ideals, or goals, including thoughts, emotions, and actions.
There are usually two components to self-regulation: behavioral and emotional.
- Behavioral self-regulation allows us to act the opposite of our emotions. It’s deciding to benefit or align better with our long-term goals. It is choosing not to go out with friends to prepare for an exam. It’s choosing to go to work because bills won’t pay themselves up. It’s maximizing your Roth IRA because you want to retire comfortably.
- Emotional self-regulation is taking a deep breath and calming down when angry or giving a pep talk before a presentation to boost confidence. It is exercising control or influence over emotions.
So, what does it have to do with your finances?
Lack of executive function affects many areas of our lives. Each skill is essential in helping to accomplish daily responsibilities and objectives. Still, when it comes to finances, it can interfere with planning, budgeting, and focusing on long-term goals, which are crucial to achieving financial well-being.
Poor executive functioning skills lead to:
- Procrastination – Leaving essential tasks until the last minute might result in not paying bills on time.
- Credit card debt – Looking for immediate rewards through impulsive, excessive shopping, and overspending.
- Fail to create and stay on budget – organizing expenses into categories can seem like a lot of work and impossible to achieve.
How to improve these skills and apply them to financial well-being?
Although executive function skills are learned chiefly through childhood, and while we are not born with these skills, we are born with the potential to develop them. As with any other skill, it requires practice and application to sharpen it.
There are many books and resources out there to help improve executive functioning. Some easy and ready-to-apply exercises include:
- Use pen and paper to write down your plan – There’s a special connection between writing down by hand and your brain.
- Don’t focus on organization at the beginning. Write down your ideal financial situation.
- Break big tasks into smaller portions. – For instance, calculate your emergency fund goal and divide it into 2 or 3 steps.
- Celebrate each milestone.
- Motivate yourself! – Motivation is one of the four components of self-regulation. The more motivated you are to pursue your goals, the more you’ll strive toward them.
- Share your goals – It will help you make yourself accountable.
- Reward yourself – It will help you stay motivated. Not all rewards need to be a huge expense.
- Consider something related to your self-care journey.
- Focus on one thing! –You won’t change your behavior overnight. Thus, focus on improving one thing at a time.
- Improve self-regulation:
- Practice Financial Mindfulness
- Journaling – Create a list of your strengths and weaknesses. It will help you practice self-awareness and control purchasing spurs by identifying triggers.
- Delay rewards – Save for that vacation instead of charging it on your credit card. It will help you feel accomplished!
- Believe in yourself – Believe you can, and you’re halfway there. – Theodore Roosevelt
- Surround yourself with positive and supportive individuals.
While executive function skills alone won’t guarantee financial success, strengthening these skills can help you engage in positive financial behaviors like budgeting, saving, and investing. Also, to spend less time worrying about your finances, gain confidence about your financial decisions, and have control over your money to meet current and future financial obligations.
Baumeister, R. F., & Vohs, K. D. (2007). Self-regulation, ego depletion, and motivation. Social and Personality Psychology Compass, 1, 115-128.