The three key behaviors to achieve financial well-being explained by psychology

Avoid compulsive purchases

Stress and bad mood are often behind impulsive purchases that often end in regret, he says. faut-Buhler. Emotional discomfort causes the control region of the human brain to “switch off”. This is problematic since this area is responsible for managing long-term goals, delaying gratification, and resisting impulses and temptations. Instead, the reward system takes over, demanding instant gratification to feel better. Likewise, time and time pressure are the main enemies of rational thought. “If you don’t have the time to reflect on the behavior, possible alternatives and consequences, the reward system takes over,” he says. faut-Buhler.

Both scenarios often end in those impulse purchases and questionable financial decisions. Therefore, a crucial first step towards more conscious spending behavior is being able to identify our consumption patterns. From N26 they recommend identifying the factors (the start of the sales, for example) and the situations (going shopping after a bad day) that encourage compulsive spending to avoid it.

save without pressure

According to the analysis carried out by faut-Bühler, “the human brain is not made to save or make intelligent financial decisions”. On the contrary, the human being is “programmed to seek instant gratification and the brain rejects waiting or long-term rewards. Therefore, spending is much easier than saving or investing.

To alleviate the pressure of the control system when making conscious savings decisions, N26 suggests defining long-term objectives and making use of tools that allow the process to be automated to avoid having to make active decisions. Digital tools are a good alternative, as they simplify and automate the saving process. For example, N26 allows you to set automatic rules for your slots (subaccounts) that regularly transfer a preset amount. Another function that the user can choose to automate is “Rounding”, which, as its name suggests, rounds purchases to the nearest euro and transfers the surplus to a savings space designated by the customer. It should be noted that in the first year after its launch, this tool allowed N26 customers to save more than 12 million euros.

These are examples of how to establish a saving behavior based on habit, which is guided by the “reward system” and, due to its automation, requires less effort and energy, freeing the user from the pressure or rejection that often involve active saving decisions.

Set realistic goals

Responsible money management habits are not established overnight and setting too many or unrealistic financial goals can even backfire, as “trying to control too many impulses at once increases the risk of failure.””, points faut-Buhler.

Instead, Online Banking recommends breaking down savings goals into smaller milestones and formulating them as specifically as possible. “Meeting goals brings an instant sense of gratification and, due to a process of positive reinforcement (reflected neurobiologically in a burst of dopamine), the person is more likely to repeat the behavior that led to that success.” Ultimately, this will promote financial well-being and improve the relationship with money, since the joyful emotions of success and achievement will be associated with saving.

N26 is building the first online bank that everyone falls in love with. valentine stalf Y maximilian Tayenthal they founded N26 in 2013 and launched the initial product in 2015. Today, N26 has more than 7 million customers in 24 markets. The company has a team of 1,500 professionals of 80 nationalities and offices in 10 cities: Amsterdam, Berlin, Barcelona, ​​Belgrade, Madrid, Milan, Paris, Vienna, New York and São Paulo. With a European banking license, state-of-the-art technology and no branch network, N26 has redesigned banking for the 21st century and is available on Android, iOS and the web. Valued at more than $9 billion, N26 has raised nearly $1.8 billion from the world’s most recognized investors, including Third Point ventures, Coatue Management LLC, Dragoneer investment Group, Insight venture partnersGIC, TencentAllianz X, Valar ventures (Peter Thiel), horizons ventures (Li Ka-Shing), early bird venture capital, greyhound capital and Battery venturesas well as members of the board of directors of zalando Y Redalpine ventures. N26 currently operates in Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.

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