How To Eliminate Emotional Decision-Making in Financial Matters.

Estimated reading time: 10 minutes

Being on top of your finances and ensuring that you are financially healthy is important. And aside from making practical plans, there is the aspect of emotions. Do you experience moments where, because of emotional stability, you end up going on a shopping spree? Do your emotions subject you to excessive spending? Well, I want us to address this and figure out how to eliminate emotional decision-making in financial matters. It is important to know that as long as you allow your emotions to control your spending habits, you will never experience the financial freedom you desire or achieve your financial goals.

• The impact of emotional decision-making on financial matters.
  • • Happinness.
    • Anger or sadness
    • Low self-esteem
    • Anxiety
    • Jealousy
    • Shame and guilt
• How to eliminate emotional decision-making in financial matters.
  • Find your identity
  • Seeking professional help will help you eliminate emotional decision-making in financial matters.
  • Hire a financial advisor or/and a financial coach
  • Identify your money scripts.
  • Ask the big-picture questions.
  • Establishing financial goals is key in eliminating emotional decision-making in financial matters.
  • Know when to move on
  • Take some time to cool off
  • Let your future guide your financial habits.
• Conclusion

The impact of emotional decision-making on financial matters.

Nobel prize-winning psychologist Daniel Kahneman performed a study that showed that we make financial decisions based 90% on emotions and only 10% on logic. This proves how our emotions can affect our decisions. Ever heard of anger investing or retail therapy? They go to show you the impact. But to dig a little deeper, let us look at some emotions that affect our financial decision-making.

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Happinness.

The truth is that whenever we get a promotion, bonus, return on our investment, or a better job with higher pay, we get excited. When this happens we might get tempted to buy that car we dreamt of having. or move to that estate we have always wanted. And unfortunately, that might not be the best move if we factored in our current financial position.

Anger or sadness

Anger can lead to bad financial moves. Like maybe because of heartbreak or a loss of a job you decide to invest impulsively in that project without doing due diligence. Or because of heartbreak, you decide e to go on a shopping spree to make yourself feel better. Both decisions can lead to bankruptcy, especially if it is prolonged. And it is especially worse with anger investing because there is a likelihood of losing all your money should the deal go sour.

Low self-esteem

This can lead to you trying to keep up with your peers. It can also lead to people-pleasing and F.O.M.O. Unfortunately, low self-esteem can lead to you borrowing in a bid to follow the status quo and be a part of the ït crowd’ Have you ever bought something you know you cannot afford just because you wanted to fit in? Or maybe taken that trip because you did not want to miss out on all the fun? Maybe you have experienced a change in your financial position but you still want to do the things you did before. This can be detrimental, leading to more stress, and can be fatal if not dealt with.

Anxiety

This can occur when you have a debilitating disease that causes you to want to seek expensive alternative treatment. While it is okay to seek medical treatment, it is important to be rational with your financial decision-making to avoid the pitfalls that come with emotional decision-making in financial matters. Another example would be to withdraw your money from the stock market when there is a slight downturn without seeking professional advice first. There are moments when the market is volatile and your irrational decision might cost you.

Jealousy

Have you ever felt the need to one-up someone? Maybe they went on a vacation to Greece and your plan was to do a staycation for Easter. But because of jealousy, you go to Paris instead, knowing very well you cannot afford to do so right now. Or you buy a car because someone else bought a car.

Shame and guilt

Picture this scenario: you hurt your loved one (Spouse, parent, sibling, or otherwise) and because of guilt, you decide to overcompensate by buying them a gift you know very well you cannot afford to cover up your inadequacies. Guilt is dangerous, as it is deeply rooted. It can make you feel undeserving of forgiveness. And sometimes the guilt is there because you have not been honest with the person you have hurt. Unfortunately, if not dealt with, you can spiral out of control in your spending.

How to eliminate emotional decision-making in financial matters.

Find your identity

Not knowing who you are is very dangerous. It causes you to follow the status quo, which oftentimes leads to the wrong path. Do you know who you are? You see as a Christian; it is important to know that you can only find your identity in Christ. He is the one who created you. He knows you and He knew you even before you were born. The first step is to believe in Him and accept Him as your Lord and Savior. To know who He says you are, you need to read His word.

The cure for low self-esteem is finding your identity and your purpose. Once you have found your identity, you will not feel the need to please other people or put yourself in situations that cause you to spend more than you have. Again, finding your identity will help you overcome jealousy and envy. This is because you will recognize that we are all on different paths and whatever God has for you is for you and that is okay.

You will not feel the need to compete with someone else as you recognize you are uniquely you. The word of God contains the blueprint of who God says you are. And again through reading His word you will experience a renewal of your mind which will lead to you cultivating the nature of Jesus and jealousy is not one of them.

When you find your identity, you recognize that Jesus determines your worth and therefore money and status do not define you. You will be okay in seasons of financial difficulties because you will recognize who He says you are and therefore no need for validation.

When it comes to shame, realizing that as human beings we are prone to sin, you will not feel the need to hide your mistakes. Realizing that Jesus paid the price for your sin will lead you to overcome shame when you sin. Jesus wants you to receive His grace, especially when you sin. And while the other person might decide not to forgive you, honesty is always better than hiding the mistake.

When you hide the mistake, you only create more problems in the future. Unfortunately, when the truth comes out, which always happens, what you were afraid of happening will happen. Don’t allow the enemy to guilt-trip you. Open yourself up to God. He knows you and He promises that when you repent, He will forgive and remember your sins no more.

Seeking professional help will help you eliminate emotional decision-making in financial matters.

Therapy will help you manage your emotions and help you have a high emotional IQ. Being able to manage your emotions will prevent you from making financial decisions based on your current emotional state. Instead of retail therapy, you will have someone who will help you deal with your problem instead of numbing it with clothes and other material things.

No purchase can heal a broken heart. And unless you deal with the junk within, you will not experience the financial freedom you dream of. Yes, it will be uncomfortable, but imagine the joy of financial freedom. Even Jesus endured the joy set before Him because of the reward ahead. Do it for your future or even for your future children if you want to have kids. Find your motivation and do it. It is worth it.

Hire a financial advisor or/and a financial coach

Having a financial advisor will help keep you accountable. It will be difficult for you to spend extravagantly when you know you will have to deal with someone else asking you why you did it. A financial coach will help you shift your perspective and have a mindset shift. They will also help you learn about your relationship with money. They will help you understand your beliefs about money. A financial coach will help you understand why certain behaviors creep in and where they came from. This will help you shape your mindset to reflect a healthy view.

A financial advisor simply helps you determine the viability of your financial decisions based on your financial position.

Identify your money scripts.

These are the ideologies you learned about money from your parents, your guardians, important life events, and society. Sometimes it’s difficult to separate your emotions from your finances. And that is why you need to ask yourself these questions beforehand;

• How do you use money today and what role does it play in your life?
• What was your earliest memory of money?
• What core values do you believe in? Are your financial decisions supporting them?
• What is your greatest financial fear?
• What was your socioeconomic status growing up? And how did you feel about it?
• What did you learn about money from your parents or other family members?

Awareness is the starting point for change to occur. Asking yourself these questions will help you identify the root and therefore find the strategy you need to unlearn. Understanding that emotions can affect your judgment and being aware of your triggers will help you learn how to manage your emotions when it comes to financial decision-making.

Ask the big-picture questions.

During market downturns do not act on impulses. You could decide to stop checking your investment daily. And instead, look at it quarterly or even monthly. Again, instead of looking at just that one month, look at the months prior so that you can know the trend. Could it be a cyclical downturn? Focusing on the bigger picture will help you avoid emotional decision-making in your finances. And again, it will enable you to look at the facts instead of focusing on the feelings. Focus on what you know is true and write it down. Alternatively, you can ask yourself if your goals are in line with your current financial position.

Establishing financial goals is key in eliminating emotional decision-making in financial matters.

These financial goals will help you avoid overspending when you are emotional. You will not see the need to buy a house because you have received a bonus. Instead, you will know what you will spend that windfall on. Financial goals help you find structure as you will have clear goals established in place.

Check out this tool on personal budgeting

Know when to move on

Sometimes it might be a good idea to move when you are ahead. Wanting to push when things are going well can be disastrous. It is good to establish principles that tell you when to move on. This will remove emotions from the process and help you move on. Having a financial plan is the key to this.

Take some time to cool off

Whenever you want to make a purchase when you are angry, give yourself 24 hours before proceeding with the plan. Who knows? You might actually realize that you don’t need to purchase it after all. When it comes to investing, taking time off might help you discover more about the investment before committing through researching. Sometimes being slow to act can be what helps you avoid financial pitfalls. Have you ever, after napping, realized that your actions would have led to dire consequences? Or maybe regretted after you bought something? Instead of always acting on impulse, take a deep breath and think things through. Emotional maturity stems from patience and wisdom. Even the Bible tells us that a hasty person ends up in ruin.

Let your future guide your financial habits.

Do not allow your past to determine your financial mindset. If you grew up in poverty, don’t allow yourself to develop a scarcity mindset or worse lead you to spend and overcompensate for what you lacked as a child. Money trauma is real, but you should not let it define you. That is why it is important to seek professional help so that you can unlearn and heal. A healthy person is more inclined to make emotionally sound decisions in their finances. Don’t also hoard your finances for fear of being broke. Find your balance.

Conclusion

• 5 UNIQUE FINANCIAL TRUTHS CHRISTIAN MILLENNIALS SHOULD KNOW.
• THE POWER IN ACKNOWLEDGING YOUR PAIN
• Are You Ready To Let Jesus In?
• How To Achieve Your Financial Goals. (Christian Millenials)
• The 6 biggest financial mistakes Christian millennials should avoid now!

Emotional stability is important in your financial decisions. You should not allow your emotions to cause you to make financial decisions that will lead you to poverty. Self-awareness is essential in your financial freedom journey.

The plans of the diligent lead surely to abundance and advantage, But everyone who acts in haste comes surely to poverty. Proverbs 21:5