“Our emotional responses to money, due to past experiences and mistakes, can affect our ability to make smart money decisions today,” says Kimberly Palmer, a personal finance expert at NerdWallet and the author of “Smart Mom, Rich Mom.”
Money can provoke powerful emotional reactions, affecting the quality of our lifestyle, such as extravagant spending or making purchases that you cannot properly account for. People must examine their emotional connections to money to help them make better financial decisions.
“Approximately 85% to 90% of our money decisions are established on our emotions,” says Bari Tessler, a financial therapist in Boulder, Colorado, and author of “The Art of Money Workbook. “We need to be discerning of what our money emotions are so we don’t become overwhelmed or carried away.”
In an experience she had, Tessler said she found herself breathing somewhat faster when she went with her husband to purchase a car. She discovered that she was anxious because she dislikes making hasty decisions concerning money. So she and her husband took enough time to talk about the purchase.
Consequently, “we made the best decision that we could,” she says.
These tips can help you take charge of your emotions and thus help you make better financial decisions.
- Examine your own money story
When Los Angeles-based author and producer Rebecca Walker began requesting stories for her essay collection “Women Talk Money: Breaking the Taboo,” she found that many people have different approaches to money based on how they feel about it. Some feel ashamed for having money, and others feel guilty over being more financially stable than their parents, while some have regrets over previous poor financial decisions they made.
In her essay, Walker urges readers to examine their own money stories — those experiences during childhood that affected how they think about money. “I want them to find at least one story that they’re clenching onto about money, one memory or believe that has been controlling their lives about wealth or lack, and begin from there to change that story.”
- Reflect on recent money experiences, too
In her book, Tessler encourages readers to recollect how they felt during the three last times they had money dealings. Feelings of shame, anger, fear, guilt, joy, sadness and happiness are familiar reactions. “Maybe it’s reminding you of a past money mistake you made.” Understanding your emotions will make you find the best ways to work on them.
- Carry out a body check-in
Performing a body check-in, as Tessler did at the car dealership, is something Tessler recommends. Pay attention to physical sensations, including your breathing, and observe re-surfacing feelings or memories.
If you discover you’re feeling anxious, for example, then you can take a pause or step out briefly before proceeding. “The emotions we feel when we use money do not completely vanish, but we can work on them and reduce the intensity,” she says.
- Find your peculiar calming strategy
In her book, “Finance for the People,” Los Angeles-based financial educator and musician Paco de Leon suggests generating a list of techniques that help you calm down and ensure to use them before making a big financial decision. She suggests ideas like taking a walk, reading a book and playing an instrument.
“We can be more reasonable and make better decisions after we’ve dealt with our feelings,” she says.
- Address your debt
De Leon says that being in debt, whether it’s credit card debt or student loans, often makes people feel ashamed. She recommends changing how we feel about our debts by writing a letter to them. “Express your feelings about your debt. Thank your debts for coming in handy when you needed it,” she writes.
It is easier to handle debts once you process those feelings. Also, she suggested paying off debts using the snowball method, which suggests paying off the smallest debts first.
- Let go of your past mistakes
We must forgive ourselves for our past mistakes.
Self-compassion is a vital tool, says Michael G. Thomas Jr., an Athens, Georgia-based financial counsellor and founder of Modom Solutions, a financial coaching platform. “It is easier to extend compassion and kindness to other people when they make a mistake,” he says. But it is also important that we forgive ourselves for past mistakes we’ve made. This can help us make significant advancements.
Since money is essential for every business, following these tips can help you deal with your emotions and thus, enable you to make better financial decisions that can help your business make progress.