You might think that your emotional state of mind is more the subject matter for a therapist to discuss rather than a financial advisor but my experience tells me otherwise. Your feelings have a huge impact on how you spend, save and invest. Those activities in turn shape your financial future. Do your feelings have dollar signs attached to them? You better believe they do.
When we’re giddy, we can spend too freely without really thinking it through. We can also take unwarranted risks with our investments if we feel on top of the world. Conversely, if we feel down and out, we might try to spend our way out of it or invest in something “exciting” in order to give ourselves a little jolt. Does any of this resonate with you? It does with me because I’ve been guilty of all the above and paid the price for it.
How To Stop Medicating With Money
In my experience the easiest way to quarantine this problem is to implement these four steps:
1. Admit The Truth
In order to solve a problem we have to recognize it first. I suggest you take the time to jot down a few instances when you tried to use money to change how you were feeling or when you used money differently because you were feeling a certain way. Write down what you did and what the result was. This is a hard habit to break and you have a much higher likelihood of ending this cycle if you understand how devastatingly expensive it can be.
2. Talk and Write About Your Feelings
People “act out” their feelings with money because they don’t express them in other ways. Change that by writing down your feelings and talking about them too. Once you do you’ll feel that urge to medicate with money dissipate quickly.
3. Create A Financial Plan
Once you go through the effort of creating a financial plan that includes a budget, you’ll be far less likely to deviate from the path just because it tickles your fancy to do so. The reason? Your plan gives you perspective. You can easily see how a money mistake you make today impacts your future. As a result you will be far less likely to do it.
Having accountability is what puts the cork in the bottle. It’s pretty easy to do silly things when nobody is watching. But if you have a mentor or partner to check in with, it’s going to be a lot harder to do something dumb. I’ve had an accountability partner for more than 10 years. I haven’t been immune from making mistakes. But I make a lot fewer thanks to my commitment to checking in before making major financial decisions.
The holidays are just about here. That gives rise to all kinds of feelings and they change quickly. That opens the door for all kinds of money mishaps to happen unless you neutralize and keep your feelings out of the money equation.
Are you going to use any of these tools? Have you ever tripped yourself up with a money decision because of your feelings at the time? What happened? How did you remedy the situation?