Your Brain on Money

Our recent webinar, “Your Brain on Money: Friend and Foe,” looked at why smart, capable people still struggle with saving, spending, and investing. It’s not a character flaw—it’s how our brains are wired. 

Below, I’ve pulled together some of the key questions we tackled, along with insights from both me and my colleague, Steve Ahern. 

How do early experiences shape the way we handle money? 

We all carry a personal “money story”—a mix of childhood memories, family habits, and big life events that quietly influence how we treat money today. You might not be able to recite that story on command, but you live it every time you make a financial decision. 

For Steve, early lessons were all about trade-offs. His parents chose homemade batons and hand-me-down bikes so they could afford bigger experiences like traveling and house-swapping in Europe. That taught him that spending less on “stuff” can create room for richer experiences. 

My own defining moment came later, at 18, when I inherited money from my aunt, invested it during the early 2000s downturn, panicked, and sold at the bottom. It was a painful introduction to how emotions can drive investing—and it ultimately pushed me toward helping other people avoid those same missteps. 

Understanding your own money story matters, because it explains why you react the way you do—and gives you a starting point for changing what isn’t serving you anymore.  

How is my brain wired to make investing harder? 

A lot of “bad” investing behavior is simply normal human wiring. Some of the biggest culprits: 

• Loss aversion 
  Losing $1 feels worse than gaining $1 feels good. When your investment statement is down, it feels like something is wrong, even when volatility is normal. 

• Present bias 
  Brain imaging shows that when people think about their future selves, their brains respond similarly to how they respond to a stranger. That makes saving feel like sacrificing for someone you don’t know. 

• Confirmation bias 
  Once you have an opinion (“this stock is a winner,” “the market is about to crash”), you instinctively seek out information that proves you right and ignore evidence that you might be wrong. 

• Craving certainty 
  We’d rather hear a confident, simple story than sit with “it depends” or “no one can know for sure.” That’s why bold headlines and loud predictions can be so compelling—and so dangerous. 

When you layer these together, you get behavior like panic-selling during market drops, chasing hot stocks, holding too much cash, or switching strategies at exactly the wrong time. The challenge isn’t just finding the right investments—it's learning not to let your wiring run the show. 

What can I do when my mind works against my own financial interests? 

You can’t turn off emotion, but you can build guardrails. One of Steve’s stories from the early 2000s is a textbook case of what happens without them. 

He worked with a young professional whose tech company stock had soared. On paper, this client was worth tens of millions. He’d already bought the big house and the Ferrari, and he was convinced the company was “going to the moon.” 

The advice was simple: sell some stock, pay the taxes, reduce the loans, and secure the basics. But the narrative in his head—this can only go higher—was louder than any outside guidance. Weeks later, the stock collapsed. He owed taxes on exercised options, couldn’t cover his debts, and ultimately lost nearly everything. 

That story isn’t about intelligence. It’s about: 

• Being captured by narrative bias (“I know how this ends”) 

• Overconfidence in a single outcome 

• A lack of systems (like diversification or staged selling) to protect him from himself 

The antidote is structure: asset allocation, diversification, risk limits, and a written plan you can lean on when your emotions are loudest. 

Why is saving so hard, even when I really want to do it? 

Most people don’t struggle because they’re irresponsible. They struggle because saving runs directly into how our brains function: 

• The future you feels abstract. 

• Daily life creates constant demands on your money. 

• Willpower is inconsistent at best. 

Two levers make a big difference: 

1. Make the future specific. 
   Don’t save for “retirement.” Save for: where you’ll live, what your days look like, the trips you’ll take, the support you’ll give your family. The more concrete that picture is, the easier it is to treat saving as funding a real future—not just denying yourself in the present. 

1. Rely on systems, not willpower. 
   If your plan is “move money into savings when I remember,” life will always get in the way. Automatic 401(k) contributions, automatic transfers to savings, and “pay yourself first” structures remove dozens of decision points every year. 

We call this the knowing–doing gap. You already know saving is important; your job is to design your setup so doing it becomes the default. 

What’s the easiest way to build better savings habits? 

Start small and make it automatic. A few simple steps: 

• Use your 401(k) if you have one. 
  Turn on contributions and at least get the full employer match. That’s an immediate return you can’t get anywhere else. 

• Pick a realistic starting percentage. 
  Maybe it’s 3–4% of your pay. You can always increase it later as you get comfortable. 

• Split your direct deposit. 
  Many payroll systems let you send money to multiple accounts. You can automatically route part of each paycheck to: 

• Retirement savings 

• A “vacation” or “fun” account 

• An emergency fund 

Over time, we’ve seen clients who do this consistently build substantial balances—sometimes millions—without ever making a “heroic” decision. They simply committed once, automated it, and let time work. 

How can I feel calmer when markets are volatile? 

Volatility is part of investing, but anxiety doesn’t have to be. Here’s how we help clients stay grounded: 

• Turn down the noise. 
  24/7 financial TV is designed to keep you watching, not to make you a better investor. The number-one question we get is, “I saw this on TV—what should I do?” Most of the time, the answer is: nothing. 

• Use mental buckets, not a single number. 
  Instead of seeing one big portfolio value, think in terms of: 

• Short-term cash for 1–2 years of spending and emergencies 

• Intermediate-term bonds and income assets 

• Long-term growth assets (stocks) 

When markets drop, it’s typically the long-term bucket moving around—not the money you need in the next year or two. 

• Keep an emergency fund. 
  For many retirees, we suggest 1–2 years of expenses in cash or cash equivalents. When the water heater fails or the car needs replacing, that money is there, and you’re not forced to sell investments at bad prices. 

• Rebalance regularly. 
  We bring portfolios back to their target mix, which often means trimming what’s done well and adding to what hasn’t—another way to buy low and sell high without trying to time the market. 

One of my favorite investment sayings is: 

“Your portfolio is like a bar of soap; the more you touch it, the smaller it gets.” 

A solid plan and a disciplined process almost always beat emotional, headline-driven decision-making. 

How do I actually enjoy spending my money? 

We see plenty of people who are great savers but uneasy spenders. They feel guilty every time they use the money they worked so hard to build. 

From years of conversations, one theme stands out: 

• Experiences tend to bring more lasting happiness than things. 

When you spend on experiences—trips, family outings, shared adventures—you get: 

• The anticipation as you plan 

• The enjoyment while you’re there 

• The memories you revisit later 

Steve talks about how he once prided himself on not spending. Over time, he realized his family wasn’t having as much fun as they could—and that intentionally spending on experiences like Disney trips or planned vacations created far more value than another “perfectly optimized” savings month. 

We’re not here to tell you what you should value. Our role is to help you: 

• Make sure your long-term needs are covered 

• Understand what you genuinely enjoy 

• Give yourself permission to spend on that without guilt 

Is my daily Starbucks really what’s derailing my finances? 

In most cases, no. The “latte factor” gets attention because it’s simple and blame-y, but it often misdirects your focus. 

Writer Nick Maggiulli suggests focusing less on $5 decisions and more on $50,000 decisions. The bigger levers usually are: 

• Housing (buying or renting more than you can comfortably afford) 

• Transportation (expensive car payments, frequent upgrades) 

• Education and debt (loans disproportionate to income) 

That doesn’t mean small choices are irrelevant. But instead of obsessing over coffee, we encourage clients to: 

1. Automate savings first so big goals are funded. 

1. Spend intentionally on what actually brings joy. 

One person might love high-end coffee and not care about cars. Another is the opposite. Our stance is “wealth management without judgment”: get the big things right, automate your savings, and then build a spending pattern that fits your values. 

What if my spouse and I see money completely differently? 

Different money stories in a relationship are the rule, not the exception. That doesn’t mean you’re doomed to argue about money forever. 

Some approaches we’ve seen work: 

• Swap money stories, not accusations. 
  Share what money looked like growing up—scarcity, abundance, secrecy, stress, generosity. It’s much easier to understand each other when you see where the patterns began. 

• Treat it like a shared project. 
  Instead of “Who’s right?” try “What’s the life we’re trying to build?” and “How do we get there together?” 

• Create a regular ritual. 
  One couple Steve works with has a monthly “money dinner.” They go out, bring a list of topics (bonuses, worries about kids, upcoming big expenses, trips to plan), and review progress every month. It’s structured, predictable, and takes a lot of pressure off day-to-day conversations. 

You don’t have to agree on everything. You just need enough shared understanding and structure that you can move in the same direction. 

How can I help my kids develop a healthy relationship with money? 

Kids of all ages are constantly absorbing messages about money. You can shape that story deliberately, without disclosing every detail of your finances. 

With younger kids, a few tactics help: 

• Use spend/save/give buckets. 
  When they get money, help them divide it into what they can spend now, what they’re saving for later, and what they want to donate. 

• Give them controlled freedom. 
  Kid debit cards with set limits can teach them how it feels to make trade-offs. When it’s their balance dropping, they evaluate purchases very differently. 

• Let them overhear healthy decision-making. 
  They don’t know you’re funding a 401(k) instead of doing something else, or choosing not to buy something because you’re prioritizing a different goal. Narrating some of those choices (in simple, age-appropriate terms) helps them see money as something you manage thoughtfully, not something that just causes stress. 

With adult children and inheritance, many parents are hesitant to talk. You don’t have to share exact numbers, but you can share: 

• Your values and hopes for how the money will be used 

• The basic structure of your plan 

• The roles you’re asking kids to play (executor, trustee, etc.) 

Those conversations tend to prevent more conflict later than silence does. 

When I retire, how do I become comfortable spending what I’ve saved? 

The shift from accumulator to spender can be emotionally challenging. You’ve spent decades being told to save; now you’re being told to draw down. 

This is where a financial plan becomes essential. A good plan will: 

• Show your expected income streams and spending 

• Stress-test for bad markets, inflation, and surprises 

• Clarify how much you can spend and still be okay 

Then, when you’re asking, “Can we afford this trip?” or “Is it okay to help our kids with a down payment?” the answer isn’t a shrug. It’s a data-backed yes or no, rooted in your long-term goals. 

That clarity is what allows many retirees to finally enjoy the money they’ve worked so hard to earn. 

What’s one simple step I can take this month? 

If you’re ready to do something but don’t want to overhaul everything at once, start here: 

• If you have a 401(k): 

• Turn on contributions if they’re off. 

• Make sure you’re at least getting the full employer match. 

• If you don’t have a 401(k): 

• Set up an automatic transfer from checking to savings or an investment account the day after payday. 

And when you get your next raise or bonus, try living on your old income and sending most of the increase straight to savings. It’s one of the least painful ways to accelerate progress. 

Final Thoughts 

Your brain on money can be both friend and foe. The same wiring that kept our ancestors safe can push modern investors toward fear, overconfidence, and short-term thinking. 

But with the right systems, conversations, and planning in place, you can: 

• Save more consistently 

• Spend more joyfully 

• Invest more calmly 

• Communicate more openly with family 

And you don’t have to do it alone. 

If you’d like help building a plan that works with your human wiring—not against it—the team at Sachetta is here to talk. No judgment. Just clear, thoughtful guidance. 

About the Author:

Michael J Callahan, CEO,  CPA, CFP®, MST, is a Certified Financial Planner™ practitioner, Certified Public Accountant, and holds a Master’s Degree in Taxation from Bentley University. Mike has been involved in personal financial planning, as well as both business and individual taxation for more than 20 years.