How Emotions Wreck Your Finances

Let’s face it. When it comes to money management we can be downright horrible. We do all kinds of stupid things with our money. And we do all kinds of stupid things to make it and get more of it. We even do all kinds of stupid things when we spend it. Money makes us stupid. Or does it?

Money has a certain power over us because we give it worth. Money is important to us. Why else would we strive so hard to get more? Money should be important to us because it is a large part of our life. It links us to work, to the things we buy, and to the people we buy from and sell to. It is a form of exchange. The problem comes when we treat it as anything more than what it is.

How do emotions wreck our finances?

  1. We become impulse buyers.
  2. We spend more than we earn.
  3. We end up buying things we don’t need.
  4. We buy things to impress others.
  5. We don’t earn what we potentially could.
  6. We get fired from or quit a good job.
  7. We invest when stocks are hyped.

All of these are irrational decisions we make regarding money. I am sure you can think of many more. In fact, I am sure you can think of a time when you made an emotional decision that really hurt your finances. How did that make you feel afterwards? Probably not so good, right?

In an effort to satisfy our emotions right away we end up having more unhappy emotional reactions down the road. It can turn into a vicious cycle unless you recognize what is happening and stop it in it’s tracks.

How can we overcome our emotions to make better financial decisions?

  1. Slow Down. Nothing says you have to go fast. In fact, fast decisions are often wrong decisions. Salesmen create a sense of urgency all the time to get people to buy. Often what you are left with is buyer’s remorse.
  2. Get outside of yourself. Look at the big picture. Consider how this will effect your money picture over all. Will it help or hurt it?
  3. Ask good questions. Asking questions helps you to slow down and engage the rational mind. It is often enough to help you overcome your emotions.
  4. Recognize your emotions. A healthy dose of self-awareness is often what is needed to recognize whether you are making a good decision or not.
  5. Start Learning. The more knowledge you have about personal finance the better equipped you will be to make better financial decisions.
  6. Get help. Don’t be afraid to consult a professional if you need help with something. Get recommendations from people who are using those professionals. Talk with them and choose who you will work best with, and who will work best for you.
  7. Work on it. If you want better finances, you got to work on it. That really is the only way to make anything better. Start working on it today.

There is a bunch of valuable information about personal finance out there. However, we won’t make the most use of it if our emotions aren’t in the right place. With anything that involves money, emotions are certainly involved too. By improving your emotions when it comes to money, you will certainly improve your financial situation in life. I wish you all the best! 🙂

3 thoughts on “How Emotions Wreck Your Finances”

  1. Great list, Jeremy…

    I will humbly add one more item: Learn the art of contentment…

    “Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things you only hoped for.” ~ Epicurus

    “If thou wilt make a man happy, add not unto his riches but take away from his desires.” ~ Epicurus

    “Money often costs too much.” ~ Ralph Waldo Emerson

  2. Hi Kent,

    Item definitely accepted. Contentment truly is an art isn’t it? I used to be a fairly content person and more recently I have felt society’s push to be discontent. I do need to get back to practicing that fine art form of contentment.
    Thank you so much for what you add to this site!


  3. Very good post,Jeremy.

    I really like what you said about looking past- at the bigger picture. Or outside the box.

    Many people have become shopaholics.
    Some spend to impress which is nonsense.
    Resulting in deeply buried in debt.
    Unfortunately, this when they talk to a financial consultant.

    I would also like to add on the earning more money you cant allow obstacles.

    Turn obstacles into opportunities
    if this a famous quote ??? I have no idea who said it first.

    Finding another way to have a second income is great.Being able to save that second paycheck is better.

    It is all one of the many life’s lessons we all learn from hands on experience.

    Keep up the great job with the blog.

    Bunny got Blog’s last blog post..Bunny’s Breaktime Reads No. 4

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