An estimated 80 percent of our decisions are made emotionally. Our brain is divided into three sections. The upper brain, or cerebral cortex, is where we reason. The middle brain, or limbic system, is where we react to emotional impulse. The lower brain, or basal ganglia, is what regulates the operations of the body.

The limbic system, where our emotions reside, functions to move us toward pleasure or away from danger. Feelings like fear or anger can cause us to move away from a perceived danger, while feelings of joy or pleasure can impel us toward a perceived benefit or reward.

That aspect of our brain serves us very well when it comes to physical danger or life-enhancing decisions like choosing a mate. It isn’t quite so much help when we need to make financial decisions.

Suppose you and your spouse are talking about spending $5,000 on a trip to the Bahamas. Your middle brain lights up. It sees you sitting on a beach, it feels the light breeze twirling your hair, it hears the sound of the waves rolling onto the sand, and it can practically taste the Piña Colada you’re sipping.

Suppose you’re discussing putting that $5,000 into an IRA instead. What does your limbic system see, hear, feel, or smell? You writing a check? A brokerage statement? There’s no particular pleasure response for your emotional brain to get excited about. No wonder it’s going to urge you away from the IRA and toward the trip to the Bahamas.

When we’re faced with decisions, the option with the greatest emotional payoff tends to win. This is how our brains are wired to make financial decisions in favor of our short-term pleasure rather than the delayed gratification that is in our long-term best interest.

The secret to overcoming that self-defeating programming is to give our limbic system something to get excited about that supports saving for the future. Successful savers and investors learn to link emotional rewards to their financial goals.

Let’s take another look at the choice between an immediate tropical vacation and putting money into an IRA. Someone committed to investing for the future may imagine the same tempting beach scene. What they do, however, is see it happening once a year, or even every day—in the future. They imagine themselves enjoying that beach as one of the rewards of saving for their financial independence.

It’s also possible to trick the limbic system with negative images. Another saver might vividly imagine herself as a bag lady, living out of garbage cans and sleeping on park benches, if she doesn’t write that check to her IRA. This isn’t nearly as much fun as imagining situations that reward investing, but it has the same effect of adding emotional impact to a financial decision.

In either case, the goal is to create an emotional charge from imagining the IRA contribution that is stronger than the image of spending the money today. The scene with the greatest emotional impact wins.

This is one reason it’s important for us to spend some time defining our life aspirations. Having clear images of what we want in the future makes it easier to imagine ourselves there. It helps us link strong emotional rewards to mundane activities like writing a check to an IRA.

The human brain may be programmed for financial failure, but we have the ability to change that programming. With a little effort, we can rewire our brains for financial success.

According to a February 16 article by Craig Guillot at nasdaq.com, “As more young people struggle to qualify for mortgages despite record-low mortgage rates and affordable home prices, some parents have decided to step in and become their child’s mortgage lender.”

If done carefully, such a loan can be a source of income for the parents as well as a leg up for the kids. Guillot offers some excellent advice from Rick and several other sources on ways to prevent lending to your kids from becoming a financial and family disaster.

Read “Is lending to your child worth the risk?” here.

Here’s Rick’s advice, as cited by Kristen Colella in a February 14 article at MainStreet.com: “I would recommend people strongly consider applying their tax refunds to any credit card debt, as most credit card interest is in excess of 10%, making reducing your debt a wise investment.”

To find out how many people intend to follow that advice, you can read “What To Do With Your Tax Refund” here.

If this statement is true for you and your partner, we have a unique opportunity for you.  Dave Jetson and I have partnered together to offer a most unique experience for couples to deal with money issues. The”Love, Couples and Money” workshop will help couples better understand their relationship as individuals and as a couple around money.

This workshop starts at 5:00 pm on Thursday, April 12th and ends at noon on Sunday, April 15th.  The cost is a very reasonable $3,950 per couple that includes meals and lodging!  The workshop will be held in the beautiful Black Hills of South Dakota at the new Terra Sancta Retreat Center in Rapid City.

Make an investment in your coupleship that will pay big dividends for years to come.  Join us for an experience that may change for the better how your coupleship works around money.

1. Build a good support team before you need one. In the middle of a financial trauma isn’t a good time to find professionals you can trust. This is best done when you are not under pressure and can take the time you need to research, interview, and analyze options. Professionals you need to vet and have on call could include an attorney, accountant, doctor, therapist, financial planner, insurance broker, bookkeeper, and banker.

2. Keep your career skills up to date. Most people don’t think of their career as their biggest financial asset. Yet until you become financially independent, there is no asset more important than your ability to earn money. Most employees neglect taking the time and money to invest in improving and refining their skills. This is crucial if you are in a field that’s becoming obsolete (like film photography, print media, or calligraphy).

It’s also important if you put your career on hold to stay home and raise children. It’s not too soon to begin preparing to reenter the work force several years before your children are old enough. Even if you don’t intend on going back to work, keeping your skills sharp is good insurance in case you need to reenter the work force because your spouse loses a job, dies or becomes disabled, or you divorce. Anticipating and preparing for a career change before it’s forced upon you can literally add hundreds of thousands of dollars to your future net worth.

3. Plan ahead for college expenses. Okay, sending your child off to college really isn’t a financial calamity. However, it never ceases to amaze me how many parents wake up in horror when their child is 17 to the fact that large tuition bills will be coming due in a year. All of a sudden college tuition becomes a financial emergency.

In most cases, parents dig deep to fund their child’s education, harming both themselves and the child by suspending what they were saving toward their retirement. Studies show it’s cheaper for kids to put themselves through college than to support elderly parents who didn’t provide for themselves.

If you find yourself in this situation it’s imperative you shop colleges just as you would anything else. Most colleges are not a good buy for the education received. Compare the average salary of the degree you are obtaining with the cost of obtaining it.

If you plan to pay part of your kids’ college expenses, start saving when they are still in diapers. Also consider other options well ahead of time, like kids working their way through college or buckling down and qualifying for scholarships.

4. Invest in your coupleship. The number one destroyer of wealth is divorce. It makes good financial sense to invest in keeping your marriage healthy and strong, giving it some emotional cushion to get through the inevitable tough times that befall any relationship. That includes tough financial times such as a job loss. Many couples help their marriages thrive by setting aside time annually to attend a couples workshop, by obtaining counseling to improve communications skills, or by periodic romantic retreats without the kids.

When it comes to coping with financial calamities, having career options, trusted advisors, and thriving family relationships are as important as building a financial cushion. All these strategies will help you and your family weather the inevitable financial challenges that are sure to come your way.

Zaslow was instrumental in promoting the concept of financial therapy. He attended the first workshop we did at Onsite in 2003. His subsequent column in “Moving On” resulted in launching the concept of financial therapy nationally.

He did a follow-up column on financial infidelity with us several years later that was also the first time the concept appeared nationally.

I remember Jeff best for his rapid fire style of interviewing. I told my wife that being interviewed by Jeff was similar to being caught in a blender. His style of questioning was intense and relentless.

We’ve lost a true talent and an inquiring mind who always seemed to find himself on the cutting edge of the topic at hand.

My thoughts and prayers are with his family tonight.

The provision is included in the “Highway Investment, Job Creation and Economic Growth Act of 2012″ currently before the Senate Finance Committee.

According to Michael Kitces, CFP, author of the Nerd’s Eye View, “The most direct implication of the new rules is that the opportunity to maximally stretch an IRA for the next generation may be significantly curtailed.”

Spouse beneficiaries will still be eligible to stretch. The stretch rules will no longer be available to any beneficiary old enough to be within 10 years of the decedent’s age, nor any beneficiary young enough to be a minor.

Says Kitces, “The new rules appear to be targeted squarely at preventing the stretch IRA during a generational shift from the original owner to the decedent’s adult children.”  You can read more here.

For more on Charles Dicken’s 200th, click here.

You can, as long as you remember that the only thing really “unknown” about most potential financial calamities is their timing. We know perfectly well we’re likely to have emergencies; we just don’t know exactly what or when. They may take the form of expensive car repairs, trips to the emergency room, the loss of a job, or a significant investment loss. The question really isn’t “if;” it’s “when.”

Here are four tips on preparing for the inevitability of a financial calamity.

1. Get out of debt, now. Since most financial disasters have a lack of cash flow at their core, existing debt payments will only multiply your financial distress. The double whammy of a financial catastrophe is not being able to make your debt payments and adding the trauma of a home foreclosure, a vehicle repossession, or ruining your credit rating when you can least afford to. In addition, one option in a financial calamity is borrowing the needed funds to get you through to the other side. If you are already heavily in debt going into the crisis, it’s highly unlikely you can borrow more just at the time you may really need to.

2. Build an emergency reserve and leave it alone. Based on the high unemployment of the last three years, I shouldn’t have to build a case for having six to 12 months of household expenses in a reserve account. No matter how secure you think your job is or how much you hate having money sitting in a money market account earning next to nothing, you need an emergency reserve. This is not an investment, it is insurance against inevitable financial calamities. Also, never raid your emergency reserve for unplanned lifestyle expenses. Vacations, Christmas, taxes, and new vehicles are not emergencies. You need a separate savings account for these anticipated expenses.

3. Insure yourself against the unknown. Insurance is one of the most efficient tools you can use to protect yourself from financial calamity. Adequate auto, renters or homeowners insurance is always a must. If you have young children you need a minimum of $500,000 of life insurance on both working and stay-at-home parents. Younger people also have a greater chance of becoming disabled than dying, so adequate long term disability covering two to three years of income is important. Having the right insurance is important as well. I don’t recommend cancer, flight, or credit life insurance. They are expensive and largely unneeded if you have your base insurance needs covered.

4. Diversify your investments among asset classes. The best insurance you can have against inevitable economic plunges is to own some of what’s going down and some of what is inevitably going up. While getting out of the market prior to a downturn and buying back in at the bottom sounds logical, believing you can execute that strategy is insane. Diversification doesn’t just mean owning different types of stock funds or buying from different investment brokers, either. It means having lots of asset classes in your portfolio like global stocks and bonds, real estate, commodities, TIPs bonds, and alternative investments. The easiest way start building a diversified portfolio is to find a diversified mutual fund that will do this for you. A couple of examples are First Eagle Global and American Capital Income Builder.

Protecting yourself with these four strategies can ease your fears about what financial calamities might happen. You’ll know that whenever they do, you will be prepared.

This is the essential point of an article by financial planner and journalist Tim Maurer published February 2 at Forbes.com. Maurer challenges planners to “Do Your Job” more effectively. He includes a suggestion from Rick that planners need to pay more attention to listening to clients.

You can read the full article here.