In an ideal world, the topics of finances and emotions would not mix. You would be able to handle your finances strictly by making clear, logical decisions without any influence from the emotional side of your brain.
Of course, this is not an ideal world. Your emotions are very likely to get in the way of clear decision making from time to time. Human beings are emotional creatures. So, don’t be too hard on yourself if you do make an emotional choice on occasion.
With that said, understanding how emotion can influence your financial decisions is a good way to avoid making major mistakes. The list below contains three emotions that you need to watch out for while dealing with the financial side of life as these emotions affect your finances.
If you get frustrated with your financial situation, you might end up taking actions that are not in your best interest over the long term.
For example, if you are not making as money as you would like, you might find yourself investing in risky ventures with the hope of hitting a big return. Of course, that kind of strategy is more likely to lead to you losing money than anything else. But your judgement may be clouded by your feelings of frustration.
If you do find yourself feeling frustrated about your financial life, take a step back and hold off on making any decisions until you have cooled off.
While the emotion of excitement is generally a good one, it can still lead to some poor decisions with regard to your financial well-being. Imagine you have just earned a big raise at work thanks to your contributions to a big project – that’s great news! Any increase in income is going to be a significant boon to your financial life. Of course, that is only true if you manage that money wisely.
If, while feeling excited about your raise, you go out and purchase a new car or make some other big purchase, you will quickly have wiped out your progress. As is the case with any other emotions, it is best to let things settle down before you spend any significant amount of money.
Some people choose to spend money in an effort to feel better about something else that is going on in life. In fact, the term ‘retail therapy’ has developed to describe this exact kind of behavior. While it might not be the worst thing in the world to take yourself out to dinner after a disappointing day, you don’t want to get too carried away with this kind of spending.
If you fall into a pattern of spending money every time you find yourself disappointed in life, it will be difficult to keep your budget under control as the months go by. Life is naturally filled with ups and downs, and you are going to need to find ways to ride out those waves without the assistance of your credit card.
Have you ever had these emotions affect your finances? Have you seen other emotions affect your finances?
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