You may have encountered the growing frequency of references to “mindfulness,” broadly defined as a practice of focusing intently on the present moment, observing one’s current circumstance without evaluation or judgment.
It has its roots in Buddhist and Hindu teachings and was introduced in America during the 1970s as a pain management technique. In a world of increasing complexity and stress, the practice of mindfulness has been shown to have tangible emotional and physiological benefits, so much so that an increasing number of major companies like Google, General Mills, Intel and AstraZeneca are offering mindfulness resources and training to their employees.
Mindfulness is increasingly being applied to money management. Specifically, “financial mindfulness” is gaining currency as a valuable complement to the quantitative side of planning and investment as part of a more holistic approach. The practice is emerging as a useful tool in dealing with stress and emotional biases, reducing the likelihood of falling into some common traps and promoting a greater sense of wellbeing.
Researchers at Georgetown and Cornell universities have authored an important paper providing evidence that mindfulness applied to money decisions produces tangible benefits. They note that personal finances are the leading source of stress for most Americans that can impede rational decisions. For example, financial stress can cause some people to avoid potentially bad news or negative reports, a cognitive bias sometimes called the ostrich effect. In the extreme, financial stress can lead to depression or even suicide.
The researchers had noticed a surge in financial products, blogs and apps that purported to offer financial mindfulness utilities and advice, but that a consistent definition was lacking, and the content was varied. They set out to design a series of studies to create a meaningful scale to measure an individual’s financial mindfulness.