A Positive Emotional Relationship With Money
The primary emotion that drove most of my financial decisions was a fear that I would not have sufficient funds to retire with. Fear is not a great feeling to have, but it can be used to one’s advantage. Fear forced me to keep an eye on my bank accounts and not overspend. Fear also made me want to invest for the future.
Optimism was my second emotional driver. I always believed that in the long-term my investments would payoff. When the markets tanked all around the world, my optimism led me to invest more money in stocks. I managed my fear by aggressively investing when prices were low.
A positive emotional relationship with money led to us eliminating our debts, and building a sound financial base. The result of those actions was that my wife and I retired in our thirties.
Money’s Relationship With Me
Money doesn’t care about me – or anybody else.
A Negative Emotional Relationship With Money
It sounds simple, but if you need to make payments towards unnecessary things – you cannot afford them. If you cannot afford to buy something then WHY do people accept going into debt for it? Emotion. The emotional aspect becomes harmful when people buy things they know they cannot afford, or when people refuse to accept the reality of their financial situation.
It’s hard to tell a child you can’t afford their favorite toy for their 6th birthday. It will be harder still asking them for money after you retire because you didn’t make sufficient provisions for yourself.
Emotions can also dissuade people from making good investment decisions.
If one fears financial products too much, they miss opportunities to let their money work for them. I don’t think I am greedy, but I want my money to grow at a sufficient rate as to at least keep up with inflation after I pay for any service charges and taxes. Letting fear push one into too conservative of an investment strategy can lead to one’s money losing purchasing power over time.
How To Manage Emotion and Money
Money has no emotions, people do.
Money is great in that it is black or white. You either have enough of it to buy something or you do not.
Put any purchase into perspective. Is that new T.V. more important to your family than the cruise you’ve been saving up for? Can you afford both? Have you money left for emergencies?
A salesperson is there to use your emotions to drive your purchase. Don’t let them make your financial decisions for you.
Not all financial decisions are based solely on monetary gain. The best way to manage the emotion and money relationship is to be aware of why you want to buy something, what it will cost you in the short term, and what it may cost you in the long term.