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Home»Personal Finance»Being Optimistic About Finances May Say Something About Your Thinking Skills : ScienceAlert
Personal Finance

Being Optimistic About Finances May Say Something About Your Thinking Skills : ScienceAlert

finvestadminBy finvestadminNovember 18, 2023No Comments3 Mins Read
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Unrealistic and optimistic people may be loved by those around them, but the risky behavior that results from this does not necessarily mean that they follow wise advice. A new study finds that higher levels of financial optimism are associated with lower levels of cognitive ability.

The study was conducted by behavioral economist Chris Dawson from the University of Bath, UK. Dawson looked at the survey responses of 36,312 individuals in the UK and compared their expectations of how their household finances would change over a 12-month period with what actually happened.

Five measures of cognitive ability were also collected, testing word recall, verbal fluency, working memory, abstract thinking, and math ability. Certain socio-demographic and socio-economic controls were applied to the results to account for variations in age, gender, marital status, household size, and other factors.

Pessimists and realists were more likely to have higher cognitive abilities. (Dawson, Personality and Social Psychology Bulletin2023)

The results revealed a link between cognitive ability and how optimistic or pessimistic a person is. Those who scored highest on cognitive ability were 38.4 percent less likely to have an optimistic mindset and 53.2 percent more likely to have a pessimistic mindset. The worst.

People who score highest on cognitive tests are also 22% more likely to be realists, who are thought to be the most objective about situations and the least likely to be positive or negative. Masu.

“This suggests that some of the negative effects of overly optimistic thinking may be a byproduct of the real driving force: poor cognitive performance.” write In his published paper, Dawson said:

As a species, we generally tend to be overly optimistic about some parts of our lives. I plan to live there. or how much money do we have intend to earn. That unrealistic thinking can lead to poor decisions, such as not saving enough for retirement.

This also has some advantages. Past research suggests that optimism is good for our health, or at least certain parts of our health. Our cheerful personality also encourages those we come into contact with.

It’s certainly difficult to predict the future, but it’s clearly in our own interest to be realistic about our financial plans. At least in this area, pessimists tend to have higher cognitive abilities and optimists tend to have lower cognitive abilities.

It is important to note that the data collection and subsequent results are not comprehensive enough to prove that: Causal relationship – one element directly influences another – but there seems to be a connection here that is worth exploring.

This study suggests that smarter people may be better able to suppress unrealistic optimism and be better able to evaluate information honestly.

This is an approach that may leave you feeling less cheerful in the short term, but may lead to better decision-making in the long term, and all areas could be considered in future research. .

“Unrealistic optimism about household finances is a very specific measure of optimism, but insofar as unrealistic optimism extends to domain-general areas, Cognitive ability may also explain why people do not take preventive measures. write Dawson.

This study Personality and Social Psychology Bulletin.

finances optimistic ScienceAlert Skills thinking
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