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Are We Wired Not to Save?

How our brains keep us from making smart financial decisions

chalk drawing of a brain with money in it

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You’re a responsible adult, right? You have a household budget and track your expenses. Your will and insurance are all up to date. And since the beginning of your career, you’ve maxed out your 401(k) and have been carefully saving for retirement.

Yeah, right.

Many of us know what we ought to do to ensure our financial security in our later years, but few of us actually follow through. Business and behavior experts say there are good reasons for our negligence. In many ways, we’re hardwired to mismanage money.

“Finance is simple but not easy,” says Nick Holeman, a senior financial planner with, an online investment company. “It’s easy to understand at a higher level what you should be doing. But implementing it and sticking with it long-term is when it becomes very difficult.”

A few psychological traits that make the job tough:

Instant gratification

Experts say one of the biggest challenges is our urge for immediate pleasures. It's fueled by the emotional parts of our brains, and can overwhelm the logical side that’s trying to point out we probably don’t need that new pair of shoes or a delicious (but pricey) dinner out right now. That's why some people are more likely to use extra money to indulge in a shopping binge than to tuck it away in a retirement plan.

Kelley Long, a member of the American Institute of CPAs' Consumer Financial Education Advocates, says the answer isn’t to scold yourself.

She admits to bouts of retail therapy, but has found a solution that works for her. As soon as she gets home after shopping, she puts a date on her calendar to make returns. That allows her to rationally review her purchase at home, and decide whether it was necessary. “I also enjoy the feeling of returning something.”

For those with an online shopping habit, she suggests setting up a special email folder so that sales alerts from online retailers are automatically filed away before landing in your in-box, and tempting you to shop.

Digital envy

Of course, we know that instead of spending, we should be saving. The traditional financial advice is to pay yourself first — put aside part of your paycheck before you even see it. By automating the process, and incrementally increasing your savings every year, you can accumulate a sizable nest egg over time.

For people who have trouble budgeting, Holeman of takes it further. He suggests that once you identify your goals and set up a savings plan, try not to worry about other spending. “As long as you save what you need to save, it doesn’t matter what you do with whatever’s left over,” he says.

But many of us are willing to spend money we don’t have by pulling out credit cards or financing purchases. Often, this is fueled by an innate drive for social status and to keep up with our neighbors and friends. That challenge has only gotten worse in the age of social media. In the past, we might have just heard about friends’ great vacations, fabulous dinners and new cars. Now we’re bombarded with pictures and videos of them online.

Digital envy can be hard to resist, studies show.

“There’s a lot of peer pressure involved here,” says Long. Indeed, a 2016 Harris poll found that 1 in 4 people admitted to being jealous after seeing someone posting about a purchase or vacation on social media.

Long says that when she starts feeling overwhelmed by others’ posts, she’ll visit her own profile to be reminded that her life looks good online, too. And she also tries to limit her time on social media sites. Her husband even keeps the apps off his phone.

For ways to save and more, get AARP’s monthly Money newsletter. 

'It can’t happen to me'

Another financial challenge stems from a powerful force called optimism bias. “We just don’t think bad things will happen to us,” says Scott Cole, a Birmingham, Ala., certified financial planner who also has a divinity degree. “We hear of bad things happening all the time to others but believe that we have the ability to navigate our way out of something. In short, we all think we are above average, that it couldn’t happen to us.”

Unfortunately, overcoming the instinct is hard. Optimism is what gets most people out of bed in the morning, and while it doesn’t make sense to adopt a pessimistic attitude, it helps to be aware of this bias. Cole suggests taking a step back to at least acknowledge the possibility that things may go wrong. That will help you see the need to plan for the worst by having proper insurance and an emergency savings fund.

Facing mortality

Even if we can’t predict what will happen to us, one thing (along with taxes) is certain: death. But because we don’t like to think about our own mortality, many people skip the important financial task of writing a will.

Long says she understands the reluctance to plan for our passing, but she urges clients to consider what will happen to their loved ones after they’re gone. Those with blended families or multiple heirs could end up with a fight over assets and property. 

And surprisingly, a will doesn’t have to be expensive. A simple one can cost less than $500. Large companies, and even some small ones, often have employee-assistance programs, which can provide a will without charge or at a low cost, she says.

And that points to at least one psychological trait we can celebrate: Everybody loves a bargain.

Larry Bleiberg is a freelance writer based in Alabama.