Don't Let "Lizard Brain" Derail Your Finances

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When it comes to your personal finances, you're in the driver's seat, right?

So how come — sometimes — that "quick trip" to the mall can end up a daylong spending extravaganza? Why is it that occasionally, the tiny tingle of desire becomes a thunderous nagging, and you're suddenly the proud owner of some shoes (or a car, or a state of the art bit of tech) that you can't really afford? Or why, when the market wobbles, do you cash in your investment chips — even though you signed up for the long term?

Meet your lizard brain.

What Is the Lizard Brain?

The lizard brain — which is also known as our reptilian brain or chimp brain — is the oldest and least evolved part of our human brain. Sitting near the spinal cord, this tiny clump of cells is similar to what you might find between the ears of a lizard (or a fish, for that matter). While the rest of the human brain moved on, this crucial little powerhouse drives our most basic (and primitive) needs. It is what we have to thank for our desires to survive, reproduce, hoard, and dominate.

And if it sounds like we don't have a need for such base motivations these days, then think again. The lizard brain is what drives fight or flight — a crucial physical mechanism at times even today.

The problem, really, is that the lizard brain struggles with identifying some of our more modern struggles. And because it developed to save our lives, it is also able to override the more rational and logical areas of the mind. It is hard wired to take control, especially when we feel under pressure, stressed, or emotional.

Feel Compelled to Eat That Pint of Ice Cream? Blame Your Lizard Brain

You might recognize the interventions of the lizard brain in yourself. Think of the times that you are seized by an overwhelming impulse to do something, and it happens so quickly your logical head has not processed the decision. That "heart over head" type of brain hijack is initiated by the lizard brain. Maybe you feel a compulsion to eat the contents of the snack cupboard, have another sneaky drink, spill your juicy gossip, or splurge on something out of your budget. If you know you shouldn't do it, but go ahead anyway (and perhaps later regret it), then that's the lizard brain.

The lizard brain is not fundamentally bad. In fact, for millions of years it has done a great job of keeping us alive and out of trouble. But when it comes to your cash, it can be the personal finance saboteur sat right in your own mind.

Personal Finance and the Lizard Brain

There are some ways that your mind can make you rich. And then there are some that can make you substantially poorer.

Even those most sophisticated of money minds can suffer. The last economic crises have proved rich fodder for psychologists watching the way the human brains of traders and investors react to sudden changes in the market. Overall, the answer seems to be that they do not act rationally, preferring short term horizons and certainty, despite investing being a long term game.

One reason for this is the pleasure/pain principle. We tend to worry more about the pain of losing money, than we celebrate the success of winning an equivalent amount of money. Therefore stress kicks in at the prospect of losing out, and we allow the lizard brain to take over. A series of knee jerk reactions kicks in, and before you know it, your rational decision making is out of the window.

On a more individual level, the lizard brain can cause us to act on impulses without the calming influence of rational thought. So if you have a compulsive spending problem, or get swept along by the moment and find yourself picking up far more at the mall than you intended, then the lizard brain might be to blame.

Reining In Your Lizard Brain

Your lizard brain might not always be your best friend, but it is one of the things that is keeping us alive. Even if we no longer have to dodge passing saber tooth tigers, or high-tail it away from a rampaging mammoth, that fight or flight mechanism gets us out of trouble today, too.

But stopping the lizard brain from accidentally getting us into trouble is an ongoing process. Understanding the situations in which we make impulsive financial decisions is a starting point. Simply by noticing the impulse, you have the time to more rationally assess the decision you're about to make. And stopping just a moment — however brief — to understand your basic impulses might be enough to prevent you from making a poor decision.

You can't live without your lizard brain, so better to start making friends with it. Acknowledging the tendency to act on impulse might be enough to bring it in line and make sure you're not being hijacked by your own little personal finance saboteur.

What do you think? Does stress cause you to make financial decisions driven by impulse rather than logical assessment? How do you keep your lizard brain in check?