Emotions cloud sound financial judgement
When you allow your emotions to cloud your judgment, your finances suffer. This makes sense, but it is still a difficult concept for many people. Many people do not even recognize when they are letting their emotions get in the way of being smart financially. They think that they are being smart, when in reality there are better options. Although the economic conditions, times, popular markets, and your job may change the laws of money are universal and unchanging. If you learn these rules of finance, and apply them, despite how you feel, what you are worried about, etc. these fundamentals will help you secure wealth.
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Even those of us who know better, often make these mistakes, and let emotions cloud our judgment when it comes to money. We would rather use credit than count out coins, because it would be embarrassing. We hear about markets crashing and we make a run on our bank and hide our money under our mattress, even though this is stupid. Letting emotions get in the way of smart judgment is natural, and occurs in all aspects of life, but that should not be an excuse for letting emotions mess with your ability to be financially sound.
How to stop emotions from clouding sound financial judgment:
- Recognize that you do. If you are in denial about it, you will never be able to remedy it. Before you can fix a problem you have to know that there is one. It is okay that you are emotional about money, and not something to be embarrassed about. Money brings position, security, and many other things that bring joy to life, so it makes sense that it can be emotional. However, that does not mean you have to let yourself be emotional about money.
- Save money. If you have a nice chunk of money in savings, say $10,000 or more, you will be far less emotional with your money because it will be less likely to mean your family starves or you lose your home if you make a bad investment, etc. Usually people are more emotional when the risks are higher.
- Use this system: logic says do not spend it if you do not have it. Emotion says to buy it you deserve it, find a way to pay for it later. This is just one example, there are other situations but ask yourself if you seem to be logical. For example, if a bank fails you will be okay because they are FDIC insured. It may take a couple of weeks to get your money, but you will get it. If you don't, that means that the currency has failed, and you will be no better off than you would have been if you had pulled all of your money out anyway. So, while things like getting money out of the bank when it is iffy seem to be logical, if you take it a step further you will see that it just isn't.
