Four Ways Our Brains Get in the Way of Better Money Choices
Why do so many of us know we should be saving more, spending less, or investing smarter — yet still don’t do it? It often isn’t due to a lack of knowledge or discipline. Sometimes it’s our brains.
Cognitive biases — those invisible mental shortcuts that help us make decisions quickly — can quietly sabotage our best financial intentions. In my personal financial coaching training, I’ve learned four of the most common biases that show up in money decisions: present bias, confirmation bias, status quo bias, and anchoring bias. The better we understand them, the better chance we have of outsmarting them.
Present bias
What It Is: Present bias is our tendency to prioritize immediate rewards over future ones, even when the future payoff is bigger or more meaningful.
Let’s say you want to go on vacation next year. You’ve done the math: you’ll need to save a certain amount every month to make it happen. But you keep dipping into that fund to cover things you want now. That’s present bias at work.
How to Work Around It: Write down your goal and your plan. Then, remove the temptation before it starts. Set up an automatic transfer that sends your monthly savings goal — say, $200 — directly into a separate savings account. You can do this through your bank or even adjust your direct deposit to send a portion of your paycheck to savings automatically.
When the money is out of reach, you’re less likely to spend it impulsively. And once it’s already in the “vacation fund”, pulling it back starts to feel like losing something — which makes you think twice.
Confirmation bias
What It Is: Confirmation bias is the tendency to seek out information that supports what you already believe while ignoring or downplaying anything that challenges those beliefs.
If you’ve ever gone down a rabbit hole just to find proof that your hunch was right, you’ve experienced this in action.
How to Work Around It: Relying only on data or voices that align with your current perspective can lead you to make financial decisions based more on emotion than reality.
To counter this, intentionally seek out alternative viewpoints, especially the ones that make you uncomfortable. Ask a friend to play devil’s advocate. Read essays by people whose financial philosophies differ from yours. The goal isn’t to agree with them, but to test your assumptions — and strengthen them (or change them) based on a fuller picture.
Anchoring bias
What It Is: Anchoring bias happens when the first piece of information you receive becomes the reference point for everything that follows.
Salespeople are experts at leveraging this. Imagine you walk into a car dealership with a $10K budget. You tell the salesperson your limit, and they immediately show you a $15K car. “Just to see how it feels,” they say. You’re not buying it — literally. But when they later show you a $12K car, it suddenly feels like a deal. You’re comparing it to the $15K anchor, not your original $10K plan. That’s anchoring at work.
How to Work Around It: Do your homework, and more than you think you need to. Research price ranges, quality, and features before you start shopping. Use a spreadsheet to map out what matters most to you, what you’re willing to pay, and what fits within your budget. Anchors are powerful, but preparation helps you set your own.
Status quo bias
What It Is: Status quo bias is the mental shortcut that favors keeping things the way they are — even when change would clearly benefit you.
For instance: most high-yield savings accounts right now offer interest rates between 4.3% and 5%. Mine? 3.3%. I’ve known for a while that I should switch to a better one, but I haven’t. Why? Because it’s easier to stick with the system I already have than to research, open a new account, and move everything over. That’s status quo bias in action.
How to Work Around It: Break the big change into small, manageable steps. Instead of “find a better HYSA,” start with “research the top three interest rates right now.” Then compare benefits. Then take the next step.
Small wins help you overcome inertia and give you a reason to celebrate along the way. And now that I’ve said this publicly? I’m more likely to follow through. (See: Present Bias.)
Once you become aware of these cognitive patterns, you can see them at work in all facets of life. The key thing to remember is that we make financial decisions based on logic and emotion. The trick is to try to make as many decisions as logically as possible.
