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Net Worth Therapy: Counseling the Relationship Between Your Brain and Your Money

Net Worth Therapy: Counseling the Relationship Between Your Brain and Your Money

May 18, 2022

So far 2022 has been a very trying time for many in the markets. We are in the process of working through a market cycle. The past 10 years plus have been rife with pullbacks, corrections, recession and now inflation. Keep in mind that over time market equity indexes return approximately 9 to 10%. It is easy after 3 years of returns in the S&P in 2019 (28.8%), 2020 (16.26%), and 2021(26.8%) to have feelings of vertigo in a market that has not risen but rather declined in the past several months of 2022.

We seem to have a faulty and glitched relationship with money in our own brains. There are many books, and articles you probably come across discussing this very topic. Or heard it from me. Most certainly in these recent times. Or 2020. Or 2018. Or 2015, 2011, 2008-2009, or 2001…not to be redundant.

There are many studies illustrating how our brains react to certain situations…especially when it comes to gains and losses, recognized and unrecognized, over the years. One of the best books I have read on this is by Jason Zweig[i] of the Wall Street Journal, Your Money and Your Brain.[ii] It is a lexicon of “Neuroeconomic” truths to better understand your “self” in relation to your emotions about gains and losses. A prolific writer, Zweig creates understandable and enjoyable reading about personal finance and your money.

The premise of Neuroeconomics is easy to understand, like a 50/50 brain-food recipe. First, we have Neuroscience.[iii] This is the study of how our nervous system develops, its' structure, and what it does. Neuroscientists focus on the brain’s impact on behavior and cognitive function. Next add Economics[iv], the study of resource use, and we see how money-based decision making, happens inside our brain. Hence: Neuroeconomics[v]. Our brains on money.

It is important for your happiness to understand what the markets are doing to your mental and emotional health currently. Here are some highlights we can learn from Jason’s book:

  1. Studies show that when you are making money, such as watching investments rise for years, if not over a decade at a time, the brain activity of a person is indistinguishable from a person high on cocaine or other similar euphoric inducing drugs.
  2. Similarly, losses find themselves physiologically affecting the same part of the brain that is alerted to situations of life-threatening danger, mortal danger to quote some. This can cause a behavioral reaction of loss aversion at levels that are dangerous to our long-term financial well-being.
  3. The effects on our body physically should not be underestimated either. We can feel it. Think about how you feel when the Powerball machine plays music, and you win. It can be as simple as a free ticket, yet you are elated. And then losing whatever it may be, and that sinking feeling stays with you for days, interrupting even your sleep.

Other insights worth mentioning, are covered in the book such as the works of Richard Thaler, Daniel Kahneman and Amos Tversky, Nobel Laureates of Behavioral Economics[vi]. For instance, how the anticipation of a gain outweighs the actual gain in the way we feel about it. The bigger the gain might be the greedier we feel. Say the odds of winning when you buy one Powerball ticket are 1 in 292 million. When buying 10 tickets you now have a 10 in 292 million chance of winning.  That would be a 0.00000000342% chance vs. 0000000342% chance of winning.

We are driven by greed to do things on the most remote of possibilities. For example, spend 10 times as much to increase our odds by 0. Yet the perceived loss of value on a monthly statement in a moment brings grief, anger, physical and emotional despair. Especially knowing values do return as markets turn. These are behavioral and neurological flaws. Deep ones, but all very manageable.

In the end, we are flawed, as human beings, from the Garden of Eden forward. So why wouldn’t we expect our thoughts about money to be also. We engage in financial planning to forecast the best percentage chances of achieving the life we wish to lead at some point in the future and even now. What an accomplishment that is to have a plan, given that as of 2021 only 28% of households[vii] have a proper financial plan. And 65% of those with a written financial plan say they feel financially stable, while only 40% without a written plan feel that way. There is a 62.5% increase in financial-life confidence by having a written plan over not having one. Yet over 70% do not have a written plan.

So, what is the prescription? Well, 83% of those who set financial goals feel better about their finances after just one year. An instant benefit received from creating a financial plan is feeling better about your situation. No matter what markets do. Financial plans can help you.[viii] Session done and let us know what you think!


[i]                 About | Jason Zweig

[ii]                Your Money And Your Brain: How the New Science of Neuroeconomics Can Make You Rich

[iii]               About Neuroscience | Department of Neuroscience | Georgetown University

[iv]                Economics Definition: Overview, Types, and Indicators (

[v]                 What is neuroeconomics? | Yale Insights

[vi]                What is behavioral economics? | University of Chicago News (

[vii]               13 Important Personal Finance Stats You Need to Know - Savology

[viii]              5 Ways Financial Planning Can Help | Charles Schwab