How Money Impacts Your Thinking Ability

"The ability to make wise decisions is an important part of creating and living "the good life." Key life choices have a substantial impact on our health, wealth, and happiness. Choosing to marry person A over person B could be the difference between a 40-year fairytale marriage or a nasty divorce. Likewise, deciding to invest money in company X instead of company Y could be the difference between experiencing financial freedom and failing to make ends meet."

"An experiment that asked participants to think about their personal finances and then perform a cognitive function task found that making money top-of-mind (vs not mentioning money) for poor participants decreased cognitive performance (Mani, Mullainathan, Shafir, & Zaho, 2013). Eliciting thoughts of personal finance (vs not mentioning money) had no impact on cognitive performance among the middle class or wealthier"

"We know that fixed characteristics, such as intelligence, have an impact on the quality of the decisions we make. We simultaneously understand that ephemeral and short-term factors shape decision-making quality as well. Decisions made after eight hours of sleep and a full belly are oftentimes better than decisions made after a night of three hours of sleep and not having eaten yet."

The ability to make wise decisions substantially affects health, wealth, and happiness, and critical choices can have long-term consequences. Both stable traits like intelligence and short-term factors such as sleep and hunger influence decision quality. Decisions made after eight hours of sleep and a full meal are often better than those made after three hours of sleep and without food. Low-income social categories are perceived as low in competence. An experiment that prompted thoughts of personal finances before a cognitive task found that making money salient reduced cognitive performance among poor participants but did not affect middle-class or wealthier participants. Understanding these effects can promote wiser decisions.

Read at Psychology Today