We all have dreams and goals, but sometimes we fail to realize them because our brains get in the way -- often without our even noticing it. Fortunately, we can overcome this problem with a little awareness and determination, employing strategies that can strengthen our financial health.

Researchers have found that we are often more irrational than we think we are. A classic example is if you're asked a question like this: Would you drive across town to save $25 on a $500 bicycle or to save $25 on a $75 blender? Studies have shown that many people would only make the drive for the blender. Why? Because it looks like a bigger saved amount -- it shrinks the price of the blender by 33%. With the bicycle, though, the price only shrinks by 5%. That seems reasonable, but remember -- in both cases, you'd save the same sum: $25. Your brain is focusing on the wrong numbers.

modernistic graphic illustration of man's head with top of it open and rays of light coming out from where brain would be

Image source: Getty Images.

Overcoming your brain when it's being irrational or unproductive can help you avoid spending more than you should and can help you save more for your future, too. Here are some tricks you might employ.

Have specific goals, not vague hopes

One useful strategy is to lay out specific goals for yourself instead of having great aspirations that your brain will pay little attention to. Instead of, say, planning to retire at age 65 and hoping that you're socking enough money away to achieve that, take the time to figure out how much money you'll need to retire with. You might then tell yourself that you want to amass a nest egg of $800,000 by the time you're 65 -- and you could improve that by setting milestones along the way, such as having $300,000 by the time you're 55 and $500,000 by the time you're 60.

Those numbers aren't crazy, either -- check out this table that shows what you might accumulate over several periods if your investments average 8% average annual growth:

Growing at 8% For...

$5,000 Invested Annually

$10,000 Invested Annually

$15,000 Invested Annually

10 years




15 years




20 years




25 years



$1.2 million

30 years


$1.2 million

$1.8 million

Data source: author calculations.

Once you know how much you need to save each year, you can set small goals, such as socking away a certain sum each month toward retirement and perhaps other sums, for college savings, to buy a home, and any other goals.

Think income stream, not lump sum

While the lump sums to aim for in the table are helpful, such big numbers can be hard for our brains to make sense of. For example, it's hard to know what difference a nest egg of $500,000 or $700,000 would make in our retirement. To combat that, try thinking in terms of income streams, because you'll be needing regular inflows of cash when you're retired.

One helpful, though imperfect, rough guide is the 4% rule. It suggests that you withdraw 4% of your nest egg in your first year of retirement and then adjust the annual withdrawal for inflation in subsequent years to have a good chance of making your money last about 30 years. Putting that concept to work, you might look at various sums in terms of what kind of income they'd offer you in retirement:















$1 million


Data source: author calculations.

If you keep that table in mind, you might be more motivated to accumulate $750,000 for retirement instead of settling for $500,000, because you can see an income stream of $40,000 as much better for you in retirement than $30,000. The table might also have you thinking twice before embarking on a $20,000 home renovation if it means you lose out on $800 in annual income in retirement.

hand holding small blackboard on which is written tips and tricks

Image source: Getty Images.

Pay with paper, not plastic

Another financial trick is to pay for as many things as possible with cash instead of credit cards. Yes, credit cards are very convenient, and have many other benefits, too. But credit cards also tend to make many people spend more -- probably because swiping a piece of plastic through a machine doesn't impart the same feeling of handing over some hard-earned paper currency.

A Dun & Bradstreet study, for example, found that people spent 12% to 18% more when using charge cards than when paying in cash. And McDonald's at one time reportedly observed customer tickets rising from an average of $4.50 to $7.00 when they used plastic instead of cash. Another study found that those paying with plastic at supermarkets bought many more impulse items such as snack foods.

One reason we feel more free to spend with credit cards, according to a 2012 report by researchers Promothesh Chatterjee and Randall L. Rose, is that when we pay with plastic, we tend to focus on the attributes of the purchased product or service, while we focus more on the cost when paying with cash. According to a nerdwallet.com article:

A 2001 study by Drazan Prelec and Duncan Simester had the authors tell randomly selected participants in a study that they would be offered the opportunity to purchase tickets to an actual professional basketball game that had just sold out. ... Those who were told they would have to pay by credit card were willing to pay more than twice as much on average as those who were told that they would have to pay by cash.

Automate your savings

Another way to get around your brain and its tendency to procrastinate is to automate as much of your savings as possible. For starters, you might have your employer automatically sock away a set percentage of your pay in your 401(k) or 403(b) account before you ever get your hands on the money. Saving 15% or more of your income is typically a good idea. If that seems like too much, start lower but aim to increase the percentage regularly. (Many plans let you have your savings percent be increased annually automatically.)

Another trick is to direct all money from raises into your savings, so that you keep living off the same amount, while more and more goes to savings each year. You may not be able to keep this up for many years, but doing it to as great a degree as possible can be a powerful strategy.

Check with your brokerage and/or bank to see what automated options exist. Check with your employer's payroll department, too, as you may be able to have funds automatically and regularly transferred not only into a company-sponsored retirement plan but also into other accounts, such as IRAs.

Finally, if you're making loan payments (on a car, mortgage, or whatever) and are almost done with them, consider continuing to make the payments even after the loan is repaid. If you were paying $600 per month, keep doing so, only park the money in a retirement account or college savings account.

Spend a little time reading up on psychology and behavioral economics, and you'll learn about many other fascinating ways we make irrational financial moves. The more you know about them, the more you can avoid them -- boosting your financial health in the process.