Your brain and your money

HOW BIOLOGY SHAPES YOUR FINANCIAL PLANNING

It’s easy to think of financial decision-making as purely rational. After all, money is all about numbers, right? But what if the way we handle money has as much to do with biology as it does with strategy? What if our brains and bodies are constantly influencing our financial behaviours in ways we rarely even notice?

Understanding the neurological and physiological factors at play can help us become more intentional about our financial decisions. When we acknowledge how our bodies and brains work, we can start to make choices that align better with our goals and values.

One of the most powerful drivers of financial behaviour is the brain’s reward system, which is heavily influenced by dopamine. This chemical is released when we anticipate a reward, creating a sense of pleasure and motivation. It’s why retail therapy feels so good—at least for a little while. Our brains respond to novelty and instant gratification, making impulse buying particularly difficult to resist. The immediate hit of dopamine can override our long-term financial goals, encouraging us to chase short-term pleasures at the expense of future security.

Now, add stress and cortisol to the mix. Financial pressure, market volatility, or even just the everyday demands of life can trigger our body's stress response. When cortisol levels are elevated for extended periods, it impairs our ability to make clear, rational decisions. Stress can push us toward “fight or flight” reactions—either avoiding financial issues altogether or making hasty, reactive decisions that feel like a quick fix but ultimately cause more harm.

For instance, imagine receiving bad news about your investment portfolio during a stressful week at work, and you’re starting to feel like you’re getting sick. Rather than calmly assessing your options, you might panic-sell, driven by a need to regain control and reduce anxiety. Unfortunately, those stress-fuelled decisions rarely serve us well in the long run.

And then there’s sleep—an often overlooked but essential component of sound financial decision-making. Poor sleep quality or chronic sleep deprivation can impair cognitive function, reduce our ability to evaluate risk accurately, and make us more susceptible to impulsive behaviour. Research has shown that lack of sleep can make us more loss-averse, increasing our tendency to hold onto losing investments or make overly cautious financial choices.

So, what does all this mean for our financial planning? It means recognising that we’re not just managing money; we’re managing ourselves. And sometimes, our brains and bodies can make that task more challenging than it needs to be.

What if, instead of trying to fight these biological forces, we learned to work with them? That might mean setting up automatic savings to remove the temptation of instant gratification. It could involve building financial habits that reduce stress by creating more certainty and structure in our planning. It might also require prioritising self-care, sleep, and mental wellness to ensure our financial decisions are coming from a place of clarity rather than anxiety.

Financial well-being isn’t just about the numbers. It’s about understanding ourselves and the ways our brains and bodies interact with money. By acknowledging these factors, we can make wiser choices that support our goals, rather than sabotage them.

Here’s the question to consider: Are your financial decisions being driven by intention, or are they being hijacked by your brain’s natural responses? Because when we learn to recognise the difference, we can take meaningful steps towards building a healthier, more intentional relationship with our money.