How to make financial decisions

Should people of lower cognitive ability be trained to be more financially patient? Apparently we don’t make financial decisions in as rational a way as we might like to think. Although financial studies can be carried out in situations that perhaps don’t accurately mirror the situations in which we might find ourselves in the real world, when deciding how to spend money, there are a couple of interesting studies out that supposedly shed more light on what happens when our financial decision-making is going on.

One study shows that men with more testosterone are likely to punish others involved in transactions, even at their own financial expense, and the other shows that apparently people with superior cognitive ability take more risks, and are likely to postpone immediate pleasure for greater gains at a later date.

Using the Ultimatum game as a testing ground, it was found that men with higher testosterone levels were more likely to reject low bids, even if it meant that both parties would then lose a cut of the final pool. The game features a budget from which a proposer offers a portion to a responder. If the responder rejects the proposal then both parties lose out.

‘Twenty-six male students played the Ultimatum Game with real money after having their testosterone levels measured by saliva swab over three days. Terence Burnham at Harvard University found the students with higher testosterone levels were more likely to reject a poor offer from the proposer: 45 per cent of the men with above-average testosterone chose to reject a low $5 offer from a budget of $40 compared with 7 per cent of men with below-average testosterone.’ 

It has been proposed that a reason for rejecting low bids is to build up a reputation for being, well, basically, ‘hard’. A low offer can be seen as an insult to the responder and to repeatedly refuse these offers means that perhaps one then is less likely to receive a low offer in the future, as by rejecting offers, the responder is ‘educating’ the proposer.

In the Proceedings of the Royal Society, Terence Burnham said: ‘If our understanding of Ultimatum Game rejections and other related phenomena can be improved through studies of hormones, morphology, and neurological activity the ramifications for economics might be quite broad and positive.’ 

In other research, carried out at the University of Bonn and the Institute for the Study of Labour, in Germany, by Thomas Dohmen and colleagues, it was shown that cognitive abilities might be related to financial patience and risk aversion. There is thought to be a relationship between prosperity and high IQ, and this study attempted to tie up these factors.

Just over 1000 German adults were tested, using subscales from the Wechsler Adult Intelligence Scale. David Wechsler, in 1981, wrote: ‘Intelligence is multifaceted as well as multidetermined…What it always calls for is not a particular ability but an overall competency or global capacity” (1981, p. 8).

According to Wechsler, intelligence is influenced by personality traits and other nonintellective components, such as anxiety, persistence and goal awareness. These nonintellective factors are important, according to Wechsler, but he remarks, ”no amount of drive will develop a dullard into a mathematician” (1981, p.8).

On the basis of this rather condemnatory approach to intelligence, half the participants had to then make a series of choices between either a guaranteed lower amount ranging from 10 euros to 190 euros or a 50 per cent chance of winning 300 euros. This then looked at their financial risk aversion. Remaining participants were then tested for their financial patience, choosing between 100 euros today or a series of larger amounts in 12 months time. There was a one in seven chance that participants would receive the outcome of one of their choices.

Armin Falk, from the University of Bonn, says, of the results on financial decision-making: ‘The more intelligent the test subjects were, the more patient and tolerant of risk they were.’ The researchers said that with cognitive ability assumed to be at least partly inherited, these new findings could help explain the intergenerational transmission of poverty and socio-economic status.  Whether or not this is the case, I would next like to see research carried out that tests whether these men who rejected low bids would also reject this hypothesis. People talk about ‘being able to afford to take risks.’ I would have thought that that is precisely the point. If you are poor, then you are more dependent on knowing for certain where your next money or meal is coming from, and not gambling it away.

Other research, carried out by Jaideep Bains, PhD, a University of Calgary scientist and his team of researchers at the Hotchkiss Brain Institute has discovered that neurons in the hypothalamus, the brain's centre for stress responses, interpret 'off' chemical signals as 'on' chemical signals when stress is perceived. "It's as if the brakes in your car are now acting to speed up the vehicle, rather than slow it down." says Bains.

 Normally, neurons receive different chemical signals that tell them to either switch on or switch off. The off switch, or brake, only works if the levels of chloride ion in the cells are kept at a low level. This is accomplished by the transporter protein KCC2. Stress can lower the activity of this protein, causing the brake, a neurotransmitter called gamma-Aminobutyric acid, not to work properly.

A loss of the brain's ability to slow down could explain why too much (although how much is too much is a question in itself) stress can have such a terrible effect on people's lives.

"There is still much work needed in the basic science of this phenomenon before there are any new advances in the medical treatment of stress," says Bains, while Yves De Koninck, PhD, and president-elect of the Canadian Association for Neuroscience and professor of Psychiatry at Laval University, believes that "This opens entirely new and quite unexpected avenues for controlling stress responses.” This research may go further to helping us understand why financial decision-making may appear to be irrational – if you are under stress then decision-making gets put under enormous pressure, as is possibly shown by these latter findings. All the more reason for trying to go easy on yourself if you are in debt, or feeling depressed and unable to cope. Just say to yourself, ‘Look after your GABAs and the pounds will look after themselves.’

Hewitt SA, Wamsteeker JI, Kurz EU, Bains JS. Altered chloride homeostasis removes synaptic inhibitory constraint of the stress axis. Nat Neurosci. 2009 Mar 1; doi:10.1038/nn.2274 

How do I choose a Counsellor or Psychotherapist?

Calls to counsellors and therapists are on the increase, as we are subjected not only to stories about the trouble that we are in economically, socially and generally, but also as jobs are lost, debts suddenly become unmanageable and it all gets too much for us. Families and marriages can be put under almost intolerable pressure as financial problems lead to divided opinions on what are basically your living priorities.

However, some of us are put off from asking for help by the fact that it’s almost impossible to choose a complete stranger to whom we know it’s possible we might end up baring our souls.

For those with little or no money, in fact, choosing a counsellor isn’t a problem; there is no choice. The first route to ending up in counselling can be by going to see your doctor and telling them you’re depressed and can’t cope. In many ways, this is the easiest option – you should be referred to an NHS counsellor who will contact you and give you a list of times at which you could come for an initial appointment. No decisions to make over who and what, but a few over when and why and how.

Some might hesitate at this point. The appointment times can be difficult. Many of us under pressure are in this position because we literally have no time. We’re working two or more jobs, we have children, we work compressed hours or whatever, and the hours for appointments can seem a little unforgiving. You can ask for time off work to see a counsellor, but we are in a period where we feel under scrutiny from our employers. It’s easy to feel that we are being watched, and it has to be said that many employers, still make negative and insensitive remarks about depression that make you feel like you would rather run a mile than say you want time off to see a mental health professional.

So, don’t panic. (Even if you suffer from panic attacks.) In fact, although I wouldn’t advocate the use of anti-depressants or tranquilisers alone, seriously, it can be worth chatting to your doctor about your fears, and getting a short-term prescription (if they feel this is appropriate) for anti-depressants or tranquilisers, that will help you to take the deep breath that you might need in order to talk seriously to yourself, not your employer, about your needs.

Look at it this way. You want to earn money. You want to do this the best way you can. Whether or not you like your job, most of the problems you face at work (if you do) will be as a result of the relationships you have with people there. The way in which you relate to people can very much be influenced by factors that you will probably end up discussing with your counsellor. Do whatever it takes to get that first appointment, unless you know that it could seriously threaten your job. Don’t feel bad about phoning in sick, or saying you have a family emergency. Sometimes the end justifies the means. You could be taking the first step that, over time will make you a better and more confident and more productive worker. (Though saying ‘more productive’ kind of sounds a bit Victorian slaver-driver.) Get that appointment, however silly you feel and go, and discuss things.

I will be writing more on what a first session can feel like, but now I’m going to talk about what to do if you haven’t been referred by your doctor.

So you’re in the position of having to actually choose from a selection of counsellors either thrown up by Google or found from the Yellow Pages, or maybe given to you by a friend. I’m going to list a number of things to think about that might help in making that final choice.

In fact research has shown that rather than using check-lists to decide whether or not to choose one option over another, using our intuition can often lead to making a good choice. In the meantime, while you decide whether to trust your intuition (after all, if you’re depressed, you might feel you’ve made some bad choices in the past, and have low self-confidence), here are some factors to take into consideration:

Think about the location of your counsellor: Maybe you don’t have your own transport, or you need to get back in time to get the kids from the childminder, or to pick up from school. Unless you’re very worried about ‘being seen’ choose someone near to you. The less obstacles there are to seeing your counsellor, the more likely you are to go, if you decide they are right for you. Counsellors themselves can be nervous about seeing very local people. (They won’t say this though.) Don’t be surprised if in the future, you bump into your counsellor, outside your session, and they aren’t chatty. They are there for you professionally, and one of the ways they do their job best is by NOT being your friend. Friends have opinions, and are involved in what you do. Counsellors and therapists have a valuable objectivity which means they see you without as much prejudice as your friends do.

Type of counselling:

Ok, I’ll be honest here. I have two degrees, and I still get caught out and ask myself ‘what the hell is that?’ when reading about a type of therapy. It might help to try to understand a little about therapeutic approaches. It’s quite normal to think when your counsellor says ‘I’m a … whatever counsellor’, ‘Well does that work, or not?’ In fact there are a lot of different ways to approach helping people. Yes, they have been tested, but it’s quite difficult to collect data on what helps or not. What is quite evident though is that just seeing and talking to someone who is focussed on you, for an hour of your time, that is yours alone, is helpful in itself. (That’s also why, even if you’re a first-time mum with a baby from whom you don’t want to be separated, it’s still good to get child care just for that hour.) So, if you can, find out a little about different types of therapy, and then at least you know what they’re talking about. Then if you know what you want, check the counsellor’s profile to see if that’s what they offer. Most will offer a mix. Cognitive Behavioural Therapy is very popular (and mostly, effective, at present.)

On the other hand, don’t worry too much if you’re not pre-armed with this information. They are still there to help you, and you alone – when a mechanic fixes your car you don’t really need a degree in engineering so you understand how they’re doing it.

Professional Accreditation:

Would you like to see a counsellor/psychotherapist who is a member of a professional body? If they are, they will make it clear on their profile. BACP is definitely good. There are degrees of affiliation: registration, accreditation and membership. However, there is still the possibility that an unqualified person could help – there are natural and sympathetic listeners out there, and being a member of a professional body doesn’t guarantee success. However, unless you are a risk-taker, (in which case you will need to look at this another way), there is less risk attached to seeing someone who is a member of, or linked to, a reputable organization.

Your Counsellor's Qualifications:

Ask for your counsellor’s qualifications. Ask how long they studied and whether full or part-time, whether from home and with what institution.

Fees:
Fee can be variable. They can depend on the location and the experience of the counsellor. Some are open to negotiation. If you don’t have much money, they might even offer you the very difficult option of paying ‘what you can afford.’ This is enough to send you over the edge in itself. What if you’re seeing them because you overspend? It’s going to be difficult to talk openly about how you spent a grand on a handbag you couldn’t afford, if you also have to tell them you can only pay ten pounds an hour. Anyhow, fees can vary from free to around £90 per 50 minute session. On average, expect to pay about £35 - £45 per 50 minute session.

Finally:
Deciding to go to counselling or psychotherapy is a massively important step for you to have taken.  Now, take your time, and try to get a feel for what you want, before making the decision about who to choose. You don’t have to stick to the person you first end up seeing. You don’t have to tell them everything all in one go. You can use the first session just to gauge their response to you. Remember they won’t respond as a friend does. You might be telling them about something quite traumatic and feel short-changed if they don’t respond as you expect. Remember they are there to help you, not to collude with your mood. They are not there to feel your feelings (although some will), they are there for you to talk to them without fear of judgement. Just think about how good it is to talk into an empty space, and then rather than focussing on whether you like them or not, walk away at the end of the session and take time to reflect on how you feel afterwards. Counselling isn’t just about what happens in the 50 minutes, but on the impact of that shorter hour on the rest of your life. You might feel angry or impotent during the session and then find that the rest of your week goes more smoothly than you expected, or that you find yourself taking steps you didn’t expect you would – like trying to address a debt problem, or deal with a difficult boss, or a marriage problem, in a slightly different way than you have before. Most of all, you should remember you have a space and time that is your own.

More on debt and depression

 

Buy Nothing Day

Here's an interesting idea - Saturday 29th November is a day when we are actively encouraged to buy nothing. The concept is being supported by Neil Boorman, author of 'Bonfire of the Brands'.

Neil has made a video, 'Habits of the Good Consumer' to support the notion of spending a day without shopping - a concept that probably strikes fear into the wallet of Alastair Darling, whose main concern seems to be to encourage us all to spend, spend, spend. Of course, we assume that there is a difference between not buying and not spending. Even if I don't go out and get my Saturday cup of coffee, I will still be spending, as the gas and electricity companies have so kindly recently reminded me. 

Although everyone keeps talking about consumer confidence and cite the index as proof of what is really happening to us economically, it is interesting to note that this index is based pretty much on sentiment. That is not to discount what it does, or its implications - but the data are pretty soft. One thousand people a month are interviewed  - and their answers to questions like, 'Is now a good time to make a major purchase such as a house or a car?' are used in the calculation. By the way, I think the answer to the question is, 'Yes, completely, if you've got cash!' So these thousand people are then supposed to be representative of the general population as a whole. Maybe they are, maybe they aren't. It is quite good, I suppose, to ask, 'How confident are you, that if you buy something using borrowing, that you can pay it back with no problems?'

But confidence is a strange thing to measure. What if they happen only to ask depressed people?Maybe their answers might be too negative. Or what if there's a high proportion of depressed people (as a real result of the nowyouseeit, nowyoudon't recession) who are on anti-depressants and thus have an unnaturally buoyant view of things? And what is it we should measure when we decide to buy, say, non-essential items? Is it really confidence? To me, it's more complex and weird than that. I can remember getting my first job and earning money. When I went to the chemist and bought four different very expensive perfumes, it wasn't confidence I felt, more a kind of life-affirming rush. It created in me the feeling that I really was someone, and sadly, it still does. When I go to the library and buy a cup of coffee to drink, it really tastes different because someone has made me that coffee and I have paid for it. I feel like a member of society. Handing over money is a wonderful thing to be able to do. I have at various times of my life been without it, and the overwhelming feeling that I had for most of that time, (apart from hunger) was of being excluded, of not being a member of a club that everyone else was in. I would walk down the high-street and feel like a child on the outside, looking in, watching all the pretty girls and suave-looking men coming out with their bags. Now I know a bit more, I know that a large proportion of these will be actually paying for their goods with dream money. I do occasionally even feel slightly validated by not-spending.

We shoppers owe more than £1.5 trillion in personal debt. What has this actually given us? Well for some of us, that money went on essentials - I used my credit card to fund motherhood. Not exactly responsible you might say, but then I strongly believe that I am bringing up future citizens of the world, and I want them to have a good bond with me. I wanted to be around for the first few years of their lives, rather than go out to work, which it seems is what the government would have preferred. There is plenty of research showing that children benefit from their mother's presence in their early years (or, the continued and stable presence of an adult whom they feel safe with.) So, while a childminder might do, or another family member, I felt that they would benefit most from being around me. Also, motherhood is a funny thing: um, I just plain wanted to be with them. However, time with my children means in effect that I am constantly being pressured to buy (or, consume?) an almost endless stream of plastic crap that is impossible to keep working, keep together or even dispose of responsibly. 

Sharing, swapping, repairing, fixing, even creating - all of these are things that can really help to hold off the plastic crap consumption. I feel personally, that as a mother whose child-rearing skills and responsiblities are completely unacknowledged by my government that we should all be engaging in far more barter and skills-swapping. Let's stop all that money flowing around, and the government skimming off tax with every transaction, and start keeping some of the taxes for ourselves. Until I get paid for being a mum who is doing her best to bring up happy, fair-minded children and turn them into reasonable young adults, I will do my best, not to spend money doing this, and to exchange skills with others instead. 

On the other hand, I would also quite like to encourage the creation of a day that acknowledges the sacrifices that parents make - and no doubt this would be completely cashed in on by merchandising companies if such a thing were ever to take off. And I would want a cut. Oh and can we have a plastic crap consumption index, too please?

www.Mother2Goddess.eu

Alone Grieving at Christmas

Christmas is coming up and this is a very difficult time of year for many of us who might be alone, or struggling to bring up children on their own, and also possibly suffering from problems with debts, or with job losses. 

On I'm A Celebrity last night, Esther Rantzen was overwhelmed by a wave of grief as she was reminded of not only all that she had left behind, but also the very sad fact that even when she returns home, her husband won't be there. 

This is a very public reminder to those of us who struggle with feelings of loss, that grieving can be unpredictable, public and overwhelming. It knows no social boundaries. It comes in waves, and can be embarrassing - it can get you in the supermarket, or going for a walk, or waiting for a bus. You might hear a song, or even walk past someone's garden with plants in that your lost loved one used to like (or dislike.) If you are having problems coping with these feelings, there are many bereavement organisations that can help you out - just having someone to chat to about these things can be incredibly helpful. 

It is sometimes hard talking to family members - you might know something about the person who died that no-one else knows, or might be angry that they have left you struggling alone. They might have abused you, or not told you they were dying. They might have got themselves killed by doing something stupid. Or by sacrificing themselves for the greater good - you might selfishly hate them for having joined the Armed Forces, for example, or even for having been a revolutionary, sticking up for a principle. You might think that some of what you feel is inappropriate. Family members might be angry at you, or each other, especially if the person concerned was a suicide. This is why it helps to talk to non-family members, so that you can step back from the agreement that has to be involved in the social family process of 'creating a memory' of a loved one.

Some forms of separation can leave you feeling like you are grieving for someone who has died. If you find out that your partner has been unfaithful and they leave you for a new love, this is like another form of death, as you mourn the loss of the person who you believed in, as well as the loss of your old, trusting self, and the birth of a new, more (it can feel like) distrustful person.

There are some great books on grief; Elizabeth Kubler-Ross wrote and explored the process of grieving in an intelligent way. For children coping with loss, Michael Rosen's 'The Sad Book' is an absolute (and acknowledged) masterpiece, for which he deserves to win just about every prize going. Also, Sharon Creech's 'Walk Two Moons' and for younger children, 'Badger's Parting Gifts' by Susan Varley. 

Although confronting and exploring grief can seem very frightening - it is sometimes a bit like in the fairy tales: turn around on the monster and confront it, and it can become more of a companion. It might be with you for life, but it should eventually shrink and become more manageable. 

Do see your doctor and think seriously about anti-depressants and/or counselling if it all becomes too much. These are very effective forms of therapy (usually most effective together), and should get you through the worst of the process. 

And finally - back to Christmas - if you are feeling bad, think of others. This is one of the best ways to lift you out of yourself for a while. Locally, Gosport Voluntary Action are always looking for help.  It wouldn't do any harm just to go along and say hello to the lovely people who work there. This is not to say, 'snap out of it,' or anything like that, but if you can find others who need a hand, or support someone more vulnerable than yourself, by whatever means you have at your disposal, then this may well help you to restore your sense of self, and your feeling of being a capable, loving person, if this has been in any way diminished.

Mother2Goddess