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How Financial Stress Can Fry Your Brain

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The worry over making ends meet can be as draining as a leaky faucet — the constant drip, drip, drip of stress lingers behind every decision, annoying you. Distracting you.

A study published this month in Science magazine analyzed the impact of financial stress on one’s cognitive performance, and the results showed that those in poverty exhibited a diminished capacity for decision-making.

Why? The mind can only process so much, and worries about finances hog mental real estate.

Tight Budget, Tight Mental Space

A group of psychologists and economists tested this concept in shoppers at a New Jersey mall and farmers in India who reported varying levels of income.

The shopping mall experiment involved presenting people with hypothetical financial dilemmas, then asking them to take a cognitive performance test. In India, performance was measured before and after harvest — the farmers were poor before and rich afterward. The researchers accounted for several variables in both tests, like math anxiety, low incentives for correct answers, nutrition and work effort.

The thoughts and worries that came with poverty continuously drew on mental reserves, taking away from a person’s capacity to problem solve on other tasks. It’s different than the fleeting distractions people encounter on a daily basis.

“If I am driving and someone is riding past on a unicycle, I get distracted, and then I’m back in a few moments,” said Eldar Shafir, a behavioral scientist at Princeton University and co-author of the study. He spoke about the study to Scientific American. “I spend an enormous amount of time on [financial concerns] and I keep coming back.”

The findings highlighted how the circumstances of poverty can impede one’s ability to escape it, but Shafir noted that poor people aren’t doomed to make bad decisions.

“What’s nice about these studies is we showed the low-income people do exactly as well as high-income people when they aren’t worried about their finances,” he said in Scientific American. “This is a clear way of showing it’s not about being a poor person. It’s about being in a moment of poverty.”

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