Sad People Make Poorer Financial Decisions — Dollars and Sense
If you occasionally fall victim to the holiday blues, you'd better learn to shake it off. A recent study finds that the sadder a person is, the more likely he is to head down the road to bankruptcy.
According to researchers from Harvard and Columbia, people experiencing sadness or depression worry less about the repercussions of their spending habits, which often ends with them in financial duress. The new study's consensus is that the sadder a person is, the more “myopic” he becomes, making him less likely to worry about the long-term effects of his decision-making.
"Across three experiments, the median sad participant valued future rewards (i.e., those delayed by three months) 13 percent to 34 percent less than did the median neutral-state participant," said researchers. "These differences emerged even though real money was at stake and even though discount rates in the neutral condition were already high. These experiments, combining methods from psychology and economics, revealed that the sadder person is not necessarily the wiser person when it comes to financial choices."
Researchers added that the processes that people use to make bad purchasing decisions can be a vicious cycle. “Fully understanding these processes may also help address the economic problems associated with Americans' increasing reliance on credit cards," said researchers in a press release by the Association for Psychological Science.