After my first child was born, I got a crash course in dealing with extended sleep deprivation. It only took a few months of poor sleep for me to finally comprehend why the Geneva Convention prohibits sleep deprivation as an interrogation tactic.
While my sleeplessness may not have reached the level of a war crime, I could definitely feel a difference in how I reacted to everything in my life. Not only did I spend my days operating in slo-mo zombie mode, but I knew that I kept making short-term decisions that would hurt me in the long run.
My experience is hardly unique. You have probably also faced a zombie day after a bout with sleep deprivation. But chronic sleeplessness hurts more than just your ability to get through the day — it’s also destructive to your finances.
Here are three ways that not getting enough sleep hurts your bottom line. (See also: 7 Ways to Boost Your Finances While You Sleep)
1. Optimism Bias
You may feel irritable after a bad night’s sleep, but your brain doesn’t necessarily agree. A Duke University study has found that people who don’t get enough sleep are more prone to unwarranted optimism. Specifically, lack of sleep makes your brain primed to chase rewards rather than avoid losses. This is called the “optimism bias.”
The study asked participants to engage in a series of economic decision-making tasks, both after a regular night’s sleep and after a night of sleep deprivation. After a sleepless night, the participants were more likely to make decisions as if positive consequences were the more likely outcome. They viewed negative consequences as less of a risk.
This is part of the reason why you’ll find casinos so brightly lit and stimulating. The environment keeps gamblers awake and unaware of their own fatigue, so they keep chasing winnings that they’ll never reach.
But even non-gamblers can be hurt by an insomnia-induced optimism bias. Everything from choosing investments to deciding whether to change careers to operating heavy machinery can be affected by irrational optimism. Getting any such decision wrong can have a devastating effect on your finances (to say the least).
Read More: 5 Expenses to Ditch After Age 30
2. Decision Fatigue
You have probably noticed that it’s harder to get anything accomplished at the end of your workday, even if you enjoyed a perfect night’s sleep the evening before. What you’re experiencing is something known as decision fatigue. Our brains only have so much bandwidth for making decisions. And after making small decision after small decision all day long, you’re left with less mental energy to make the big choices.
Decision fatigue is made worse when you’re tired — “fatigue” is right there in the name, after all. But insomnia-fueled decision fatigue can also reduce your ability to make trade-offs. This decreased ability can leave you vulnerable to bad financial decisions.
Figuring out the best option among many is the basis of modern financial decisions, and it is the most taxing form of decision-making. Trying to decide between a cheaper flight and a more convenient one, or which 401K option is best for you, or even whether to cook the chicken you have defrosting at home or run through the drive-thru, are all much harder choices when you are fatigued.
3. Impaired Cognitive Functioning
Have you ever tried to do simple math when you were exhausted? Anything from addition and subtraction to figuring out simple percentages can be remarkably difficult when you have not had enough sleep. That’s because sleep deprivation impairs your cognitive functioning. In fact, researchers have found that even a single sleepless night increases concentrations of the molecules NSE and S-100B, chemicals that also increase in brains after experiencing a blow to the head.
Yes, one bad night of sleep is like being kicked in the head.
The effects are also cumulative, which means you don’t just feel stupid after five nights of poor sleep — you really are more stupid. This kind of cognitive impairment affects everything from planning, to the ability to pay attention, to memory. This is why drowsy driving is so dangerous, since it’s a skill that requires all types of cognitive functioning.
Even if you don’t get behind the wheel when you’re tired, your wallet can easily be affected by such cognitive impairment. Not only will you overpay at restaurants when calculating an 18% tip is beyond your mathematical capabilities, but you are likely to blow your grocery budget when you can’t easily keep a running tally of your purchases, or overdraw your checking account when you forget about upcoming charges.
And it’s not just you feeling the financial pinch of sleep-related cognitive impairment. According to a 2011 study published in the journal Sleep, lack of sleep costs the United States $63.2 billion per year, primarily due to presenteeism — when the worker’s body may be in the office, but his brain is out to lunch.
Read More: What Was Your Financial Fork in the Road?
The Sleep Solution
Luckily, all of these insomnia-related financial consequences can be avoided if you commit to getting a good night’s sleep every night. If you’re already in a cycle of sleep deprivation, this may sound easier said than done, but there are several things you can do to improve your sleep and combat the money-sapping brain fog.
Before Bed Routine
One of the best ways to prepare yourself for sleep each night is to engage in a bedtime routine. Not only will such a routine put your body in the habit of going to sleep after running through your nightly tasks, but it can also help to combat decision fatigue.
For instance, if you make planning daily decisions part of your nightly bedtime routine, then you will not have to decide what to wear, what to eat for breakfast, or when you will run errands during your day. Making these decisions before bed will give you a clean, decision-free slate in the morning, even if your sleep isn’t perfectly restful.
According to research, our exposure to light helps to regulate both internal temperature and melatonin production, both of which are vital for our sleep and wake cues. Unfortunately, artificial light can easily disrupt our body’s cues.
If your room is exposed to too much light at night, your body will think it is time to wake up. Additionally, trying to go to sleep after watching TV or checking Facebook on your phone is very difficult because the artificial light inhibits the production of melatonin, which makes you feel sleepy.
That means you have a ready-made excuse for turning off your phone at bedtime and keeping your laptop out of your bedroom. Any increase in productivity you may think you are experiencing by answering email in bed is cancelled out by the cognitive impairment you feel from night after night of tossing and turning.
Humans are creatures of habit, and our bodies will habitually do the things that are cued by specific environments. For instance, you probably fasten your seatbelt without thinking about it each day when you get in the car. Your body has learned that seatbelt buckling is what you do in a bucket seat.
This means your sleep can improve a great deal if you only use your bed for sleeping (and, ahem, other bedroom-specific activities). Even reading a book in bed confuses the cues, since your body doesn’t automatically go into the “time for sleep” mode when you get under the covers.
But dedicating your bed to sleep will eventually make falling asleep as habitual as buckling your seat belt. Your brain and body will know to power down for the night once your head hits the pillow.
Defogging Your Sleep-Deprived Brain
Some sleeplessness is outside of your control. If you live in a construction zone, work third shift, or recently had a tiny, anti-sleep dictator join your household, then you might have trouble implementing better sleep habits until your circumstances change.
But it’s important to remember that getting a good night’s sleep consistently doesn’t just help you feel better, it helps your finances, too.