Do Emotions Affect Your Financial Decisions?
Find out if your monetary decisions are being swayed by your feelings and how to make the most logical choices with your money.Playlist
When it comes to money, our emotions can have a huge impact on our decisions, whether we’re buying or selling. So, here’s how to react with logic and less with our moods and emotions when it comes to money:
- Say you’re selling something with sentimental value, like a painting your grandmother gave you. Researchers found that 9-out-of-10 people would pick the bidder who loved the painting and planned to hang it, instead of someone who was willing to pay MORE, but only wanted the painting as an investment. And that’s true even if they got hundreds of dollars less than the investor would’ve paid. So, take your emotions out of the equation. Get the item appraised. Or see what similar items have sold for on eBay. Having a concrete reference point makes it easier to be practical when setting a price.
- Using retail therapy to de-stress after a tough day. Plenty of us shop when we’re stressed. But researchers found that even when we’re dreading something, like a looming deadline at work, we shop to calm down. A better financial move: recognize that stress and pre-stress make you want to shop. And instead of swiping your credit card, find a cheaper option like going for a walk. Or getting yourself mentally prepared to meet your deadline – say, by writing down a step-by-step list of what needs to be done.
- Stop shopping on autopilot. A lot of online sites, like Amazon, have one-click buying. Your credit card and shipping info are already registered, so all you have to do is click one button and voila! Purchase made and shipped to your door. The problem is, that’s just impulse buying on steroids. The easier it is to buy things, the more likely you are to do so. The fix? Before you click “buy,” ask yourself why you need that item, how often you’ll use it and if you already have anything that serves the same function.