by John Darer® CLU ChFC MSSC CeFT RSP CLTC
Fascinating article in Newsweek about spending addiction that may shed some light on why some people blow through cash settlements, inheritances and lottery winnings in record time. Scientists have discovered measurable differences between the brains of people who save and those who spend with abandon, particularly in the areas of the brain that predict consequences, process the sense of reward, spur motivation and control memory.
Research has shown that having a good short-term (or “working”) memory is associated with being able to project yourself into the future and plan for it, which is a prerequisite of saving. The article Stop You Can't Afford It: The New Science Behind Your Spending Addiction, by Sharon Begley and Jean Chatzky Newsweek. 11/7/2011, Vol. 158 Issue 19/20, p50-54, discusses past and ongoing scientific efforts to develop ways to "zap" the brain and give it a "reboot".
Rest assured that "Dr. Evil" is not behind the new research
While attorney Jeremy Babener's "assiduous research" as an NYU law student, could not locate a study that backed up the often parroted "90% blown in 5 years" settlement industry statistic (one factoring company operating in the space has also failed to produce a shred of support to its published statement "when cash is received, one study found that 95% of claimants have exhausted their settlement), perhaps another explanation is at hand. What I'm saying is that the basis for the "spend/save behavior" of tort victims may be far more fundamental.
Essentially, we cannot deny that dissipation happens, we have ideas about why, there are some new ideas based on scientific research and there may be a way to change behavior patterns by following the ongoing scientific research and gaining a better understanding of the psychographics on an industry level.
Psychographics is the study and classification of people according to their attitudes, aspirations, and other psychological criteria, especially in market research.