How Emotions Shape Our Financial Decisions
Breaking the Taboo: How Emotions Shape Our Financial Decisions
Money is not a simple numeric value; it is associated with people’s feelings and deeply connected with our emotions. However, the discursion of such feelings is often a bit taboo. Here’s how emotions influence your financial decisions and steps to navigate them effectively:
Why Emotions and Money Are Linked
Early Influences: One can clearly state that childhood experiences influence financial perception. We have habits still in our subconscious that we’ve learned from our adolescent that, if not addressed stays with us until adulthood and throughout our lives.
Stress Responses: Anxiety about finances can lead to impulsive or avoidant behaviors. Stress comes with a plethora of side effects, such as poor money management skills and more. This is one reason people may make impulse decisions and avoid issues.
Emotional Spending: I know all to well how retail therapy often serves as a temporary mood booster. Shopping can be good for the soul, it can generally be seen as a way of motivation, aides with lifting the spirits, however, it only offers a temporary solution.
Common Emotional Triggers
Guilt: Excessive spending and borrowing also result into shame.
Fear: Stress can create attitudes that drive a scarcity mindset. Poor money management skills affects both saving and investment habits. People may make impulse decision and avoid the issue.
Excitement: Big wins, like bonuses and recognitions, can result in massive spending and/or random splurges.
Other common triggers: Jealously, holidays, sports & entertainment, societal pressures, desire for instant gratification, celebrations, and boredom.
Steps to Break the Cycle
Pause Before Spending: Ask yourself if the purchase aligns with your values. I’ve linked a text sheet (Shopping Questions) that has a few questions for you to go through when your getting ready to spend. You do not need to go through all of the questions unless you choose to. This will help bring awareness and allow you to think through your purchase.
Recognize Patterns: It’s important to keep a journal of spending triggers. By recording all transactions you will get a idea of what causes spending.
Seek Support: Search locally or online for financial therapy as it can help unpack deep-seated issues. Like most talk therapies, utilizing an experience financial therapist can be very useful in identifying underlining causes to address core concerns.
Breaking the money-emotion taboo empowers you to make thoughtful financial choices and achieve long-term stability. This means when you distance yourself from the components of money and emotion you create a space to make clear and sound financial decisions by ultimately developing lasting recovery.