How Negative Thinking Can Help Your Finances

There are plenty of self help books boasting the rewards of thinking on the plus side of things rather than the minus side, envisioning yourself and your situation the way you want it to be and -- in doing so -- becoming a better person. But no one seems to talk about the power of the negative. By thinking negatively, I don't mean acting out negatively -- shutting people down or being rude -- but thinking cautiously, perhaps even imagining the worst case scenario. Let's look at how negative thinking every once in a while might just help your financial situation.

1. If you prepare for the worst you'll suffer less.
In a recent study by New York University and Carnegie Mellon University, students were subjected to annoying sounds like the drone of a vacuum cleaner. According to researchers, the students who expected to hear an irritating noise again and again were more inclined to be extremely irritated by the noise than those who thought they would only hear it once. Researchers concluded that people can remember hardships as being worse than they actually were as a coping mechanism to "brace" for that hardship to happen again. By bracing for the worst, researchers say, we actually suffer less. If we apply this strategy to finances, it is possible in many areas of our lives to brace ourselves and prepare for the worst. While we don't want to become overly anxious, saving money and planning ahead for emergency situations can help endure an ordeal such as a broken down furnace or a reassessment from Revenue Canada.

2. Expect obstacles along the way and you'll have a better chance of reaching your goals.
In a study by NYU psychologists Heather Barry Kappes and Gabriele Oettingen, it was found people who fantasized about their "desired futures" were less likely to put the work in to achieve their dreams. In other words, individuals who saw themselves achieving great success were most likely to do nothing about it. Studies have also shown that those who see obstacles on the way to achieving their dreams are much more likely to experience success than those who see only the end result. In the NYU study, those who saw obstacles along the way felt energized to tackle them while those who envisioned only their achievements felt less motivated to do so.
Turning to our finances, if we foresee obstacles ahead, we're being realistic. Anticipating challenges can motivate us to take practical steps such as creating financial goals, outlining a budget and planning ahead when it comes to important steps like saving for a child's education, a trip or retirement.

3. A healthy dose of pessimism can help you achieve balance.
There are times when too much of a sunny, happy, idealized approach can create an imbalance. American author Barbara Ehrenreich talks about how blind positive thinking lead to the U.S. financial crisis in her book Bright-Sided: How Positive Thinking is Undermining America. Handling situations in life -- whether it's work or money related -- with a bit of pessimism really means taking a practical, cautious approach. Since we can't conquer everything we want to all at once, we've got to think analytically and set priorities. So, if you want to go on a big trip this year, rather than putting it on your credit card and thinking positive thoughts like "I will pay this off soon," create a financial plan outlining how you'll pay it off and what you'll give up (dining out? daily lattes?) to put towards the trip. Thinking negatively doesn't mean setting yourself back, but it could mean setting a pace for yourself that is doable and balanced.