Emotional Competence

7 Emotions and Their Affect On Your Finances

Emotions and Your Finances: How Do They Affect You?One basic principle that can help everyone manage their finances better is understanding money is emotional. It was one of the very first lessons my father taught me because he knew I needed to be able to recognize when my emotions were interfering with my ability to make value-based decisions, thus slowing down or preventing goal achievement. Thanks to my father’s guidance, I have a very good grasp on my money emotions today and continue to teach the girls to recognize when their emotions are clouding their good judgment.

Everyone experiences emotions, both and good, and yet too few of us realize how they affect us financially. The truth is our emotional competence plays an instrumental role in our overall financial success, and our lack of emotional competence hampers many from building the life they want for themselves and their family.

Every single client I have worked with has wanted to grow their wealth and achieve goals, such as buying a new home, sending kids to college and retirement. Their first (and sometimes sole priority) is wealth accumulation. They assume a lack of investment knowledge or current market conditions are what prevents them from growing their assets. While those factors certainly can and do play a role, it is often their emotional competence or ability to make good, thoughtful decisions in times of high emotions or chaos that plays the biggest role in their ability to achieve their goals.

7 Emotions That Prevent Goal Success if Left Unmanaged

These are common emotions that we all feel at one time or another. There is nothing wrong with feeling these emotions because we are emotional beings. What you want to be aware of is how these emotions affect you and your ability to make good decisions with your money. Some emotions you may discover don’t have a significant impact on you, whereas others do. Once you are aware of which emotions affect you the most, you’ll be able to better identify and cope with your emotional triggers.

Fear Stops You From Moving Forward

Fear is a very powerful emotion that both serves and hurts us. It can protect us from danger; it can also prevent us from trying something new. It causes some people to only see negative outcomes. Or stops people from saying “yes” to goals they have worked diligently to achieve, like retirement, because they are scared of the unknown. The best defense against fear is to admit that you are scared and ask yourself why. Once you shine a light on your fears, they tend to lose power as logic and good planning take over.

Fixing Boredom with a Shopping Spree

Retailer love boredom because many people cure it by shopping, whether they head to the mall in-person or go online. Some even go with the intention of not spending a dime and just plan to window shop or browse, but all too often, they pull out their credit card to buy something to help alleviate boredom or loneliness. Both are normal feelings but shopping doesn’t really solve the problem long-term. Instead think of better, more productive ways to occupy and fulfill yourself, such as joining an adult sports league or a book club to help socialize and meet others.

Anger Leads to “I Deserve This”

Anger can be a scary emotion. Many of us were taught that anger is bad. And certainly if it causes you to lash out or even turn violent, then your anger has become a serious issue that requires professional assistance. For most us, though, while anger is a normal response to something that upsets it, we tend to defuse our frustration or anger by treating ourselves to something. Anger (and disappointment) is one of the biggest fuels of an “I deserve this” mindset. When you find yourself saying (whether mentally or out loud), “I deserve this”, I encourage you to ask yourself if you’re really angry or upset instead. It’s okay to be angry or upset but buying yourself something is a short-term solution. Truly addressing your anger or frustration is the better answer.

Green with Envy and Playing Keep Up

Envy is one of those emotions that we don’t like to discuss. It paints us in a poor light, so we pretend that we’ve never felt envious of someone else. But I suspect almost every single one of us, myself included, has felt a pang or two of envy at some point in our life. What really matters is how we respond to those feelings. Many respond by trying to “keep up” or worse — out do. To turn the tables and make them envious of you. Some even go so far as to spend money on things they care very little about, just to impress or gain approval of others, leaving them with little money for the things that truly matter. It’s better to admit, even if just to yourself, that you are envious and use it to motivate you to work even harder to achieve your goals.

Stressed Out and Spending Mindlessly

Life is busy, chaotic and often stressful. When we are pushed to make snap decisions in those moments, we are sometimes too exhausted or forget to make value-based decisions. We make the easiest decision in the moment, even if the long-term effect is negative. We need to be aware how our mental and physical state affects how we choose to spend our money. For example, instead of making the home-cooked dinner you planned (and bought the groceries for), you pick-up fast food instead. This doesn’t mean we can’t change plans or even that spending money to help alleviate some stress, such as hiring someone to clean your home, is bad. It’s not, provided it is a deliberate choice that aligns with your values and fits your budget versus a knee-jerk reaction.

Happy to Spend

We don’t always realize that positive emotions can have a negative impact on our financial health too. So how can happiness be bad financially? After all, isn’t money happiness something we all seek? I do believe money happiness is our ultimate goal. However, when we are happy, we sometimes leave logic behind and spend without thinking of long-term consequences, especially when we are celebrating good news. Think of the person who buys everyone a round of drinks because they got a promotion. Again, there is nothing with celebrating good news, just always make sure it is a conscious choice, not an impulse, and is in alignment with creating your ideal (and thus happy) life.

Love to Say “Yes”

Every parent can likely relate to this one. We love our kids and we want to give them everything their heart desires. So we say “yes” to everything they want, whether we can afford it or not. Beyond the risk of entitled kids, you are also jeopardizing your family’s financial foundation, which subsequently puts your children who you love so deeply at risk. You should never feel obligated to spend money on someone to prove your love, whether it’s your kids, spouse, family member, friend or boyfriend/girlfriend. Yet too many of us equate love with spending. You need to be aware if you have this tendency AND if you have people in your life who take advantage of it. Real love is not only unconditional, it shouldn’t have a price tag either.

Identify An Emotional Decision with A Simple Question

These are, of course, just a handful of emotions that affect our financial lives. Regardless of whether it is one of the above emotions or an unlisted emotion, this question can help you regain control, “Will this bring me closer to my goals or am I feeding an emotion?” This question has saved me countless times and can do the same for you as long as you answer honestly. Remember, there is no shame in feeling the way you do. Be honest with yourself and face your emotions head-on; they are not your enemy.

What are your emotional triggers? How do you recognize the signs?

Shannon

November 16, 2015  •  31 Comments  •  Emotional Competence

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  1. Monday, November 16th, 2015
    I used to have the emotional trigger of unhappiness leading to "I need this." Once I started telling myself that I had enough and believing that stuff didn't change my unhappiness I started spending less. Now when I feel the unhappiness settle in, I look for other solutions like working out, spending time outside or allowing myself a good cry to get the unhappiness out of the system. Like any emotional trigger, it's really important to acknowledge it when it's happening. If you can identify it while you are feeling it then it's easier to change your behaviors.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Being able to acknowledge and recognize which emotions tend to affect us in less positive ways is so powerful, Shannon. I'm glad you find a more constructive way to acknowledge any unhappiness, including just allowing yourself to feel unhappy.
  2. Monday, November 16th, 2015
    Boredom is my weakness. Need to get out of the house? Need to stretch my legs? Need to get out around people who aren't my husband and kid? I used to at least try to go shopping for things we needed like groceries, but our grocery bill was out of hand too. Now I try to go for a walk.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Many people don't realize how boredom affects them and those trips to the mall or grocery store add over time. Or become an emotional crutch. I'm glad you figured it out Emily and found a better way to handle those times when you either need a break or are bored. Thanks for stopping by and commenting!
  3. Monday, November 16th, 2015
    I'm in the "I deserve this" camp. Not too surprisingly that's a big part of what led me to getting into debt while in college. It can be so easy to justify buying something if you're mad, down, frustrated, etc only to find out that thing you bought will likely do nothing to solve whatever the issue is. So much of it comes down to knowing yourself and what sets off that emotion. I've found having physical reminders is a great way to help curb these emotions. Even if it's something as simple as a note asking how this purchase will help you reach a certain goal is a great place to start.
    • Shannon Ryan
      Thursday, November 19th, 2015
      It is incredibly easy to justify purchases when you're feeling emotional, particularly when you're doing with anger. It seems far more constructive than letting the anger fester, but of course, you really haven't actually dealt with the emotion and only created a habit for dealing with anger and frustration. Yes, knowing your triggers is key and having physical reminders to ground yourself is a great idea.
  4. Monday, November 16th, 2015
    "I deserve this" is a big one! When I was a huge emotional spender back in college, I used this reasoning quite a bit and racked up credit card debt to prove it.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Everyone is guilty of an "I deserve this" purchase or two or more. Thankfully, you're in a better place now, even though I know cleaning up the past is still hard work. :)
  5. Monday, November 16th, 2015
    I've fallen for some of these in the past. Before we moved to Grenada we used to go the mall on the weekends to get out of the house and to kill time. Now we don't do that. We just work or spend time with the kids instead. I'm glad we broke that bad financial habit.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Killing time at the mall is an American past time, I think. And one retailers strongly encourage! One of the many good things about kids is they offer a big reason to stay home and keep you hopping!
  6. Monday, November 16th, 2015
    I think I've done just about all of these in the past, but stressed/mindless spending is one thing I always fight. Sure when things go as planned I'm great with money, but when do things go as planned? :) I have to be more prepared for handling stress and not spend at the same time.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Stress is tough because it is something that can be difficult to minimize because we always seem to have some sort of stressor in our life. For me, it is important that have ways to combat or alleviate stress, like my daily workouts, to help clear my head and help me make good decisions. I know you exercise regularly too and maybe it's figuring what other activities are stress alleviating to you and incorporatubg them into your daily life.
  7. Monday, November 16th, 2015
    I've been guilty of all these at some point, but stress and boredom were probably my biggest triggers. I deserve this also came in to play quite bit. It's funny how I never equated emotions with spending for so many years, but most things in life do have a psychological component.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Many people do not realize how their emotions affect their finances, but truthfully, they play a huge a role in how people spend their money. Like you said, almost all things have a psychological component to them.
  8. Monday, November 16th, 2015
    I think boredom is something that people NEED to avoid at all costs. My problem is eating and drinking when I'm bored. I don't NEED an afternoon pop or coffee, but I tend to indulge in both, plus snacks. It's just a natural thing to do now when I'm bored. The same can be said about money. My wife and I are really busy and I feel like if we weren't we'd spend more on clothes, food, renovating our house, etc. But when you're busy and engaged in life you typically find less time to spend money.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Boredom is one of those things that seems more like an annoyance and not something really bad but it does cause a lot of people to do things that ultimately may not be the best for them, like overeating and shopping. I do agree that when you are busy, it's a lot easier to avoid temptation, whether food or a sale at the mall.
  9. Tuesday, November 17th, 2015
    I can identify myself with probably too many of these unfortunately. One practice that I have been trying to help me is meditating and feeling instant gratitude for what I have. At first it was hard to put these into practice but feeling gratitude made me instantly stop comparing myself. Thanks for the tips!
    • Shannon Ryan
      Thursday, November 19th, 2015
      Gratitude is a great response and one of my go-to's as well, Jen. I am also a big fan of meditation because it does help ground and center you. Thanks for stopping by and commenting!
  10. Wednesday, November 18th, 2015
    I shopped when I was bored all the time in my early 20s. I wish I could have even half of the money I wasted back! I would go and buy expensive makeup and overpriced clothes =/
    • Wednesday, November 18th, 2015
      Haha Holly I can't even imagine you doing this! It's like the twilight zone!
    • Shannon Ryan
      Thursday, November 19th, 2015
      Boredom causes so many people to head to the stores. It's not fun thinking about the money you wasted but at least you stopped making the mistake and spend on the things you actually care about now.
  11. Wednesday, November 18th, 2015
    I have never let fear creeps in because when I do, everything is ruined and opportunities are blocked. So I try as much as possible to be excited about opportunities and face all challenges not to feel fear, Shannon. Fear is something bad that we shouldn't feel most of the time.
    • Shannon Ryan
      Thursday, November 19th, 2015
      Fear can really get a stranglehold on some people. It's great that you don't let it, Jayson!
  12. Wednesday, November 18th, 2015
    Hi, Shannon

    Each of these seven emotional feeling give us the reason to use money to buy something. We can boil down to the word "entitlement".

    This word can destroy many people financial situation because they just satisfy the immediate desire without thinking about the future result.

    Enjoy your post.

    - Stella
    • Shannon Ryan
      Thursday, November 19th, 2015
      Very true, Stella. Because so many people can satisfy their emotions though spending, they do and definitely do think about the future consequences.
  13. Friday, November 20th, 2015
    Really great points. I think you got all the emotions covered up there when it comes to money. I'm pretty good with not letting my emotions get the best of me when it comes to money, but we're ultimately humans so there's is no way to remove it entirely from the equation. The main emotion that affects my spending nowadays is the stressed out one...when you're busy and feel like you have no time, you pay for conveniences. I should try being more organized though. Fortunately my son is still young and doesn't ask for anything, but I can see feeling bad for not spending on things that many other parents spend on. You don't want the child to feel left out.
  14. Saturday, November 21st, 2015
    Great post! The "happy but negative" one surprises me - but it's true!
  15. Tuesday, November 24th, 2015
    Great post! I know the fear and insecurity I faced going into parenthood led to some purchases that were more emotional than logical. Luckily they were relatively small and didn't do much damage, but looking back I can see that my nesting urges were taking over and there was really no need for so much fussing over the nursery!
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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