Home > Personal Finance > How a Personal Finance Failure Can Be a Good Thing

Comments 0 Comments

Just about everybody experiences money problems. Unless you’re born into the upper crust, odds are you or your family will go through some sort of personal finance catastrophe at some point. Actually, in all likelihood, you’ll probably go through many trying financial times over the course of your life. Financial issues can harm family relationships and impact your health. And even if you’ve done everything you should have to prepare for an economic downturn or medical catastrophe, you can still end up seeing your savings and safety net vaporized with a single mistake.

Money and personal finance issues are more or less a fixture in our lives. We’re always striving to keep our heads above water, to pay the rent or mortgage, and if we’re lucky, try to save for a new toy or vacation. When times do get really tough, however, there isn’t much to say that’s positive about the experience. You simply have to try and weather the storm the best you can and hope you’re not too much in the red when things calm down.

Surprisingly enough, researchers are now starting to say that those times of intense stress and struggle related to money might actually be a good thing — at least one way. Money problems may make us mentally sharper.

Personal Finance Issues & Psychology

Though our personal finance problems may feel like they’re sending us into a mental tailspin, a new study says we’re actually more psychologically nimble when we’re experiencing strife related to money. The study was published in the Scandinavian Journal of Psychology, and found that while having financial issues on your mind can bog you down, it doesn’t necessarily affect every mental task you do. It all has to do with “working memory,” according to the researchers.

“Recent research has shown that poverty directly impeded cognitive functions because the poor could be easily distracted by monetary concerns. We argue that this effect may be limited to functions relying on working memory. For functions that rely on proceduralized processes however, monetary concerns elicited by reminding of financial demands would be conducive rather than harmful,” the study’s abstract reads. “Our results supported this hypothesis by showing that participants with lower income reached the learning criterion of the information-integration categorization task faster than their more affluent counterparts after reminding of financial demands.”

Essentially, the research team came to the conclusion that worries about money don’t hamstring all of our mental processes, though it may feel like it, and that people with more financial trouble in their lives can perform better in certain cognition tests.

The British Psychological Society’s take on the study lays out an example:

A trucker is likely to rely much more on the relatively automatic and instinctive processes that make up safe, effective driving. This is not to make a facile argument such as “financial stress is good for the poor,” but rather to make the point that even if such stress does impede some parts of poorer people’s lives, in other capacities they will be able to operate strongly in spite of, or even in small part due to, this stress.

Getting Your Money Problems in Order

While the results of this particular study may be surprising and a little bit encouraging, you’re still going to be much better off — mentally speaking — if you can get and keep your finances in order. That’s no easy feat, of course, and many people spend their entire lives trying to wrangle their finances and money problems into submission. But, as we all know, things can happen that can derail even the most carefully constructed plans.

Though there are money lessons to be learned seemingly everywhere — from TV shows to movies, and everywhere in between — sticking to sound advice from the experts is your best bet. What they’ll tell you is to slowly and methodically build up savings accounts for emergencies, and then to start saving for retirement and investing. Yes, it’s easier said than done, but if you don’t have some sort of plan, you’ll find yourself in a hole in your later years.

The best thing you can do to prepare for a financial emergency is to plan for one while you can. Recessions are going to happen, and stock markets are going to dip. But if you plan ahead, you’ll be able to save yourself a lot of mental grief.

This article originally appeared on The Cheat Sheet.  

Image: Geber86

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team