Mind Wandering and Financial Decisions
Mind wandering occurs when our minds travel to past or future-related thoughts. This phenomenon decreases our performance in any task we are engaged in. Mind wandering is one of the most extensive and trending subjects among studies on attention and mental processes. Furthermore, studies infer that people’s minds jump between thoughts up to 50% daily; this phenomenon decreases their focus-related task performances, whether the process involves driving, reading, or using their working memory.
Results in recent mind-wandering studies show that when our minds are focused on the past or future, we experience 1) deterioration in reading speed and comprehension, 2) poor driving experiences leading to accidents, 3) disrupted working memory performance, and 4) negative mood swings resulting in lesser happiness.
Mind wandering and Memory
For some scientists, the association between the state of the wandering mind and the productivity of working memory is a critical area of study. In a recent study, reading and symmetry tests were performed on subjects to monitor the state of the wandering mind’s possible effect on working memory. The results of all three tests concluded that mind wandering negatively affected working memory performance. The same study found that participants who experienced excessive wandering mind states performed poorly in their intelligence tests due to focus-related problems regardless of participants’ educational backgrounds and business lives. Although a wandering mind state can be triggered during the most straightforward tasks, the performance loss is comparatively less. However, wandering mind activity in complex tests becomes more harmful, leading to further performance losses.
Mind Wandering and Mood
The association between the wandering mind and mood is examined in several studies. Unsurprisingly, a syndrome that can affect participants’ half of their days can also affect their moods. To increase efficiency and quality of life, psychologists embarked upon scientific experiments and analyzed whether there were any patterns in the mechanism of the wandering mind state. To illustrate, a study indicates that people were less happy when the state of the wandering mind was active. The average level of happiness during the day was 65% for that study, but when there is an active negative wandering mind in the process, the happiness level could decrease to 43%.
Mind wandering and Risk-Taking.
At the end of the 20th century, studies related to behavioral finance grew after the works of Kahneman and Tversky (1979) and their research on prospect theory. People don’t react the same way in risky situations, and their behavior is not as rational as traditional finance advocates suggest. This indecisive situation and the deep puzzle of human psychology attracted more scientists to analyze whether there are trackable patterns in major financial markets.
A recent study showed that when participants’ wandering mind activity rises, they don’t prefer to embrace more risks and choose to be more risk-averse to any given alternative. Similarly, when subjects have excessive mind wandering, they decide to spend more money to live in the present and boost their moods, but ultimately, they can’t manage their money effectively. In terms of financial health, it has been confirmed that the likelihood of making an efficient investment decision increases with lesser mind-wandering activity in participants. In addition, the same study determined that risk is related to the participant's character, experience, and age rather than their past and family ties. Finally, it was observed that participants unsecured debts increased by 2% on average every time they made financial decisions without thinking thoroughly.
Mind Wandering and Creativity
The latest studies indicate that the wandering mind can produce out-of-the-box solutions in resting periods after an extended effort to complete a difficult task. Just like the eureka moment of Archimedes and the apple incident of Isaac Newton, some of the discoveries of famous scientists show the mysterious workings of the wandering mind at resting periods after a long, exhaustive work. Nonetheless, effective money management and higher risk tolerance demand mindfulness. Wandering the mind has some potential benefits, but the overall picture generates some deteriorating effects for more people in their focus-demanding activities.
Conclusion
In the modern world, where the average person follows hundreds of news every day, it is undoubtedly an expected development that financial decisions that require meticulous and focused thinking can be affected by wandering mind syndrome. To have a healthier financial future, understanding how to achieve mindfulness to minimize the adverse effects of mind wandering. Reducing mind wandering can help individuals make realistic financial decisions and react to changing conditions, which can lead to effectively managing the state of their minds with minimal emotional exposure. In a complex, fast-changing world, learning to be aware of how our emotions, memory, and focus impact our financial decisions can be one thing you can control in what feels like an out-of-control world.
