I took a neuroscientist’s advice for saving money, and it’s transformed my finances

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Chris Hondros/Getty Images

  • Personal finance has always been a struggle for me and has led to doubt about whether I could afford even small purchases.
  • One conversation with a neuroscientist about how humans make decisions turned that all around.
  • Creating a budget that standardizes my spending into a weekly chunk now has me feeling more confident than ever.

After years of feeling as though my finances controlled me and not the other way around, I’m happy to report I have found the solution in the wisdom of a neuroscientist.

Perhaps the insight can help you, too.

Budgeting is about making fewer choices to maximize happiness

I first met Moran Cerf, a neuroscientist who teaches marketing at Northwestern University, over the summer. We chatted about the ways people make poor decisions and how they could make smarter ones.

The conversation was so interesting that I wanted to meet again. A few months later, we convened on the second floor of a Whole Foods to delve yet again into the depths of decision-making. He brought up the topic of personal finance and how to create the perfect budget.

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Reuters

Cerf says decision-making is mentally draining. When we choose what to wear, eat for breakfast, listen to on our commute, eat for lunch, and so on, we sap ourselves of the ability to make bigger, more important decisions.

It’s better, he said, to make one high-level decision – for example, he always orders the second menu item on a list of specials – and avoid small choices that won’t matter in the long run anyway.

When it comes to money, Cerf says the smartest way to budget is to find the timeline that works for you. People eat three meals a day, pay bills once a month, go grocery shopping once a week, and pay college loans over a decade or more. Instead of juggling these timelines, Cerf recommends creating a budget that standardizes them all in one timeline – say, a week or a month.

I was listening to Cerf as a journalist, but as someone who for years has doubted nearly every purchase – largely because I lacked a budget to tell me what I could afford – I was also listening for advice. Maybe this was the lifeline I’d been afraid to seek out, since that meant confronting the problem.

A weekly budget is the sweet spot for me

When I got home later that day, I created a spreadsheet of all my monthly expenses, including savings and investments, and my income after taxes. Then I divided that income into weekly allowances, thinking that’d be the middle ground between a monthly budget and a daily one.

Cerf told me he had heard of people creating half-year budgets and basing their spending habits on that. But that felt unwieldy.

FILE PHOTO: A smartphone app for Lyft drivers is seen during a photo opportunity in San Francisco, California February 3, 2016.  REUTERS/Stephen Lam

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Thomson Reuters

After each week, I colored the total spending in green or red depending on whether I’d come in under or over the budget. At the end of October, I tallied the four weeks. To my surprise, after 31 days that included an unexpected medical bill, a weekend camping trip, multiple long Lyft rides, and a handful of nights eating out, I was still under budget.

Suddenly, I realized I had nothing to feel guilty about. I also didn’t need to try a monthly budget or one for another period since I was lucky enough to find my sweet spot on the first go-around.

I’m still leaving some room for doubt only because my current setup doesn’t allow for major purchases. But since my bank lets me set “goals,” which automatically move money from the main pot to a smaller one by a certain date, I can probably factor that into my regular savings.

I’m only in my second month of using Cerf’s technique, but it has already erased years of self-doubt. By setting a weekly limit, I avoid making hundreds of smaller decisions fraught with worry. Learning the value of that trade-off has made all the difference.