Financial Gain through Pain

“There is no coming to consciousness without pain.” Carl Jung, Swiss psychiatrist and psychoanalyst

As the saying goes there is no gain without pain, or as Jung has said, there is no coming to conscious awareness without feeling pain. Sometimes it takes pain to wake us up.

The world is full of examples of the benefits of short term pain. Maturity, growth, empathy, compassion, and strength are just a few of the good things to come from pain.

Take our teenage daughter who dances ballet as an example. Without intensive dance training, regular dance classes and pointe classes, she will not have what it takes to dance, especially on pointe. It takes pain, stretching and perseverance to get her there. Without the daily pain of pushing herself past her limits, she will not see the gains in her ability or endurance. If she avoids pain, she knows the long-term cost; there may be deeper injury in the long term, and she will not advance.

Financial Translation

Let’s translate this issue of pain into our financial situations, and the issue of paying with cash. It has been years since I paid cash for my groceries. Frankly, it hurts to pay cash; to pull $200 or $300 cash out of my wallet is painful. It is hard to let go. On the other hand, paying with credit doesn’t hurt at all – at least not in the moment.

If I used cash, I know I would save money. Statistically speaking, we spend less money when we pay with cash. We are not willing to feel the “pain” of letting go of actual money in hand, and we consider the price tag much more intently. If I “overspend” on groceries, and I am at the checkout, I don’t put anything back on the shelf. My credit card or debit card takes care of the extra. But I know if I carried cash, I wouldn’t spend more than the designated amount. Some stuff would need to go back on the shelf.

The truth is, credit cards, and now tap to pass, have disconnected me from my money. They have disconnected me from the actual pain of paying with cash. I can now rest in oblivious splendour when I shop…that is, until I get the bill in the mail.

More than Heart Issues

At More Than Enough, we talk a lot about the heart issues around money. So much of what we do with money is related to what is going on in our hearts – what we desire, long for, and love. Our hearts are complex, and consequently so are our behaviours around money.

But there is another piece to how we behave around money, and it has to do with our brains. There is a whole field of academia dedicated to the study of our behaviour in this area. Behavioural economics, and the emerging field of neuroeconomics, seeks to explain our decision making, and our ability to process multiple alternatives, and how that leads to decisions about our finances. These areas of study look at the pain centres of our brains and how our brains are affected by our purchases.

What they have found lines up with how I feel when I pay cash: our brains have a physical reaction when we part with money. Paying with cash affects and activates the pain centres of our brains.

Spending until it Hurts

Not so long ago, just after the turn of this century, researchers at Carnegie Mellon, Stanford and MIT, conducted a study that surveyed 26 adults. They were given $20 to spend on a series of products that would be shipped to them. They could keep the money if they made no purchases. The participants viewed the products while lying in a functional magnetic resonance imaging (fMRI) scanner while researchers studied and watched for activation in each participant’s brain. The primary question researchers looked at was whether pain centres of the brain would activate when subjects saw the prices.

“We were so excited when we got the results from the first scans, and saw that the insula, a section of the brain associated with pain processing, activated when subjects saw prices that were too high,” said George Loewenstein, a Carnegie Mellon professor of social and decision sciences. “It was an electric moment.” (www.cmu.edu/homepage/practical/2007/winter/spending-til-it-hurts.shtml)

In their research, they discovered that insula activation – feeling pain – discouraged spending. Further study also confirmed that payment with credit cards had the opposite effect.

“Credit cards effectively anesthetize the pain of paying,” said Professor George Loewenstein. “You swipe the card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.” (www.cmu.edu/homepage/practical/2007/winter/spending-til-it-hurts.shtml)

Other Studies

There are also other studies that reveal we are much more likely to spend money when we use cards versus cash. Professor Drazen Prelec, from the MIT Sloan School of Management studies the psychology and neuroscience of decision making. In an MIT Spectrum article from 1999, he says credit cards are insidious, or subtly treacherous, because they disconnect the pleasure of buying from the pain of paying.

“We organized a silent auction for tickets to sold-out Celtics basketball games,” he says, describing a recent experiment conducted on unsuspecting Sloan students. “We told half the bidders they could only pay with cash and we told the other half they could only pay with a credit card…On average, we found that the credit card buyers bid more than twice as much as the cash buyers bid…That’s got to be crazy, right? It suggests that the psychological cost of spending a dollar on a credit card is only fifty cents.”

He goes on to say that when people are consuming they are not thinking about the payments, and when they are paying, they don’t know what they are paying for. “When the credit card bill arrives, people find paying it extremely unpleasant–worse than paying parking tickets,” he says.

(http://spectrum.mit.edu/winter-1999/the-psychology-of-spending/)

The Long-Term Gain

Make it hurt.

If you are in trouble financially and need to find your way out of debt, make it hurt and pay with cash. You will be more connected to your money, and know exactly what is coming and going. This “pain” in the moment, will create great gains in your finances, and in your overall well-being: debt-free living with less stress. This kind of “pain” raises our conscious awareness, and we gain healthy financial habits.

Cut your cards or stick them in the freezer.

If you know you can’t say “no” and have trouble using a credit card, cut them up, put them in water and stick them in the freezer, or leave them at home in your sock drawer. Please remember there is no shame in not being able to handle your credit cards. As my husband and financial coach David van Noppen says, “not everyone can use a chainsaw either.”

FACE your finances and find help.

At More Than Enough we often say that Financial Awareness Creates Empowerment. We all need to FACE our financial reality because knowledge empowers us to make better decisions. If you need help on this journey, find the wise counsel and encouragement you need. That is what we aim to do at More Than Enough, as we help people on their financial journeys through regular financial coaching and workshops.

The pain that wakes us up.

When I experience physical pain, I take acetaminophen to mask the intensity of what I am experiencing. At times, I use my credit card in the same way. That little piece of plastic can cover up an entire story of financial complexities that I want to avoid. As the professor says, it acts like an anesthetic.

But if I don’t wake up, I may end up where I never intended to be. In other words, it’s time: short term pain for long-term gain. I am off to get groceries. First stop – the bank. I need some cash.

 

Rebecca van Noppen is Communications Director at More Than Enough. She is also a teacher, home educator, writer, and woman who loves to pray. She works alongside her husband, Financial Coach David van Noppen, to help others find hope and freedom in Christ on their financial journeys.