This story is a part of our “Ask a Professor” series, in which Georgetown faculty members break down complex issues and use their research to inform trending conversations, from the latest pop culture hits to research breakthroughs and critical global events shaping our world.
Can not thinking enough, or even overthinking, about your money jeopardize your financial future?
New research from the McDonough School of Business reveals that practicing financial mindfulness can lead to better financial outcomes — as well as more positive psychological well-being.After seeing financial technology companies throw around buzzwords like financial mindfulness, Simon Blanchard, a Provost’s Distinguished Associate Professor and Dean’s Professor, wanted to study exactly what the term means and how, if anything, it could affect someone’s finances.
“When I started learning that companies in the financial space were using this word, I thought that was really interesting because what does it mean to be financially mindful?” Blanchard said.
With collaborators from Cornell University, Blanchard collected data from 2,000 consumers and partnered with two financial technology companies. He administered a survey that measured consumers’ financial mindfulness to determine whether higher financial mindfulness could be tied to positive financial outcomes.
Learn more about financial mindfulness, what it can do for your wallet and some strategies to start incorporating it into your life.
Ask a Professor: Simon Blanchard on Financial Mindfulness
What is financial mindfulness?
In our research, we define financial mindfulness as comprising two key components:
Financial Awareness: This involves a clear understanding of your current financial situation, including your assets, liabilities, income, and expenses.
Financial Acceptance: This entails acknowledging your financial state without judgment, allowing you to make informed decisions without being swayed by emotions, whether positive or negative.
What are some of the emotions that can cloud financial decision-making?
When we think about money, the emotions that often come to mind aren’t excitement from having too much, but rather frustration, anxiety, or even a sense of powerlessness. These feelings can make it harder to exercise self-control and approach financial decisions rationally.
For example, can you look at your credit card statements without feeling upset? Can you review your bank account balance and stay calm, even when things feel tight? These moments can evoke strong emotions, but financial mindfulness helps you manage them. Financial acceptance is not about complacency or saying, “I’m broke, so I’ll just accept it.” Instead, it’s about acknowledging your financial situation without judgment and using that clarity to make decisions that are in your best interest.