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Stress Affects Your Financial Decision-Making Abilities

Posted Apr 02 2009 12:00am

Are you stressed out about the economy and your finances? We are all tired of getting our monthly statements with the values of our investments going down. But before you change a thing regarding your 401K or general investments, read this. A recent study done at Rutgers University, reveals that stress affects risk taking during financial decision making. The study suggests stress caused volunteers to be more conservative when choosing between potentially positive outcomes and were riskier when choosing between gambles that could result in a loss. The researchers propose that under stressful conditions, we fall back on automatic, lower-level thought processes and we “are less able to utilize more rational and deliberative thinking to assist in making decisions.” They also note that these findings have implications for understanding how our environment might influence decision making. In financial decision making, where rational and deliberative thinking is essential, a stressful environment might hamper our ability to make decisions.

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