Budgeting Tips

Did you know that emotions impact our financial decisions?

Have you ever thought, if I had more money I would be happier? You tell yourself: I don’t know how I feel, I just know that I need money, I’m stressed out, I don’t know what to do… I’m even fighting with my partner over money. Have you ever made financial decisions with fear, sadness and/or anger? This article defines how emotions are a direct factor in our financial decisions and is focused on how our negative emotions can impact our personal finances.

The conclusion that we can draw is that by having greater control and financial knowledge we can turn these emotions around, so you will make better decisions and have greater well-being and peace of mind.

According to P. Ekman and WV Friesen (1976) there are six universal basic emotions:

1- Happiness

2- Surprise

3- Joy

4- Sadness

5- Rage

6- Fear

These are universal emotions that do not vary culturally, we all feel them in a similar way. This article emphasizes how the three basic negative emotions (sadness, anger, and fear) influence us in our financial decision making.

Two studies from Harvard University and Columbia University found that negative emotions affect our mental state, which translates directly into poor financial planning. In addition, they found that two of the basic emotions mentioned above -fear and sadness- we all experience them twice as strongly as the rest of the emotions.

This translates to the fact that when we have to make decisions about our finances quickly, indecisively, with fear or anger, we tend to decide incorrectly or inadequately. When making decisions in our finances, negative emotions tend to predominate in us. The good news is that we can identify these negative emotions and control them to make good decisions.

In the following lines I explain various ways of how to do it, advising you on a Program in which I am very involved and which has helped me to control my finances.

First; Let’s see how we can identify what we feel fear, sadness or anger when we have to make financial decisions.

The sadness It is very common when dealing with expenses, it implies favoring immediate gratification over thoughtful decisions associated with certain rewards. In other words, making decisions while feeling sad or stressed usually has an impact on our finances; For example, when we need to face a large payment, we usually try to get an urgent loan, instead of thinking of alternatives that can benefit us to better control our finances in the long term and thus not assume burdens that we cannot face.

The anger and fear – the other two negative emotions – are also often prominent when making decisions, especially investment ones. The feeling of fear and anger increases when we do not have knowledge about our finances or about terms associated with financial products that we either already have, or that the different banks can offer us (TIN / APR, interest, types of cards…) This lack of knowledge It prevents us from knowing if these products are good for our particular case or not, generating more anger and/or fear.

How can we stop making decisions with fear, anger or sadness? Educating ourselves with financial concepts, something that they don’t teach us at school or university. Learning different techniques that will give us knowledge to make the best decisions for our well-being.

It is normal that the planning of your finances is overwhelming, that you do not know where to start and that everything supposes a risk for you and your family. It is normal that when you have to make big financial decisions, negative emotions predominate over positive ones. That is why we have created a Personal Finance Program that will teach you the best techniques to take control of your finances, manage them strategically and acquire the best habits for you and your family. You will have a financial planner who will advise you throughout the course and you will also have the support of psychologists like me, to help you relieve tensions and negative feelings, achieving greater emotional balance and financial well-being.

We are going to redirect these negative emotions that we all have, so that they do not control us so that we can make better decisions with your money and with your life.

Don’t let your negative emotions control you! Let’s exchange negative emotions for positive ones. There are many techniques that we can apply in our daily lives so that we do not make our financial decisions with anxiety, anguish and speed, and all of them.

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