When it comes to money, we like to believe we make rational decisions. But the truth is, emotions almost always come into play, too. The trick is to recognize how those emotions affect your decision making and what you can do to keep them under control.
Learn to Recognize Them
The emotions that can affect financial decisions run the gamut from excitement and joy to loneliness and sadness — and everything in between. Do you feel like buying a round of drinks for the whole bar at happy hour to celebrate an achievement or indulging in an online shopping spree when you’re feeling down? Those are emotional decisions.
Emotions will be a small part of almost every financial decision, but they shouldn’t be the driving force. Once you recognize the emotions that trigger your spending or other financial behavior, you can slow down re-evaluate your choices.
Look at the Facts
Focusing on the financial facts can help you keep your feelings in check. Evaluate your financial situation based on the real numbers, not on how it feels or how you wish things to be. An emphasis on facts can help blunt your emotions and put you in a position to make more careful, rational decisions.
For example, if your credit card balance is out of control but you tell yourself you’ll pay it off when you win the lottery, that’s wishful, not rational, thinking (not to mention extremely unlikely). A rational decision would be to gather your financial information, go through credit counseling and discover a solution that allows you pay off your debt with circumstances as they are right now.
Don’t Fall for FOMO
Whether you call it FOMO, keeping up with the Joneses, or just a touch of that green-eyed jealousy monster, the feeling of not measuring up is often at the root of ill-advised financial decisions. The constant presence of social media in our lives makes it impossible to avoid knowing what others are doing, where they’re going, and what they’re buying.
When we see others’ perfectly curated lives, it can leave our own day-to-day experience feeling less-than and make it seem like we must consume more to keep up. But it’s all an illusion. No matter how it appears online, no one’s life is perfect and no purchase or vacation or gourmet meal is so life-changing that it’s worth going into debt.
Keep your goals and your financial reality in mind when you’re scrolling and see something that tempts you to spend money you weren’t planning on. Any good feelings you have about the purchase won’t last long enough to make it worth it.
