Have you ever gone shopping for fun? Or did you pull out the plastic when you were feeling stressed? Maybe you want to improve your home, get rid of your boring clothes, or impress others.
There’s nothing wrong with splurging on yourself, but be aware of the emotions that sneak into your decision. Letting emotions dictate your spending habits can quietly derail your financial goals.
1. You shop to feel better
Emotions can influence our decisions, making us more likely to splurge on impulse purchases. A new outfit or a smart home gadget can inspire you, but then comes the credit card bill, and so does regret.
Set an upper dollar limit for emotional spending and build it into your budget. Be honest with yourself and focus on the root of your emotional state.
Limit your access to credit cards and favorite stores. Before you buy, put the item down and walk away. Mull it over.
There is nothing wrong with spending money on entertainment or hobbies. Just do it thoughtfully, not impulsively.
2. Giving is good, but don’t overdo it
Some people enjoy giving, and the very act of giving can be very rewarding.
However, research, including research from Columbia Business School, reveals that even naive people who enjoy spending money on others can still feel guilty and regret after overspending.
We’ve all felt pressured to spend a lot of money on gifts or holiday donations, especially to support a popular charity in your community. That pressure can feel all-consuming, especially when what you have and what you want to give don’t match.
Offer what you decide is financially appropriate for each event and recipient.
3. Emotions can twist your priorities
Don’t worry about living by the timeline defined by the success community. In other words, don’t feel pressured to own a home in your 30s if it doesn’t make sense to you.
What motivates your biggest financial goals? You might think, “Hey, I deserve a luxury car,” or “All our friends have backyard swimming pools, so we should get them too.” But do any of these purchases get you what you need and want?
If basic needs are yours, it’s good to pursue them. But if you only seek the approval of others, you are probably wasting resources.
You don’t have to sacrifice your financial goals to meet the expectations of others. Spending money to improve your social standing can leave you feeling empty if you don’t appreciate the end result.
4. Avoid habits that interfere with your long life
You may rationally believe that you won’t have much money in retirement but irrationally think that everything will be okay somehow.
According to several studies, people think of their retired people as strangers. This choice of “psychological distance” is prevalent. Research reports that people view retirees as, basically, “others” who will spend less money in some way and enjoy more “windfalls” than current “me.”
Or maybe they have an “out of sight, out of mind” mentality because retirement may still be decades away. Researchers have found that we think “others” will enjoy more windfalls, like winning the lottery, than we do. They are often seen as better people whose lives will cost less or demand less.
You’re creating a better future for yourself by correcting today’s beliefs and setting up as strong a retirement fund as possible.
5. Less anxiety means clearer thoughts
Losing focus on your finances and goals can make it easy to put today’s needs ahead of tomorrow’s needs.
When your mind is full of stress, it’s hard to make smart money decisions.
Stepping back and switching to a positive mindset can help you stay in control and make decisions you’ll feel good about later.
Keep digging
Emotional spending can come in when you least expect it. Protect your long-term goals by developing healthy habits and learning to manage your emotions effectively.
If you’re feeling stressed or dysfunctional, take a moment to think about how your emotions may be driving your urge to spend. Controlling emotions can lead to more informed financial choices and peace of mind.
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