Many people are hopeless at managing money because their behaviour is irrational. They make plans but fail to pursue them. They overspend out of joy or recklessness. Foolhardy decisions cause guilt and shame, which underlie avoidance. Our relationship with money is complex, but it may be improved.
Discover three insights that may change your attitude to finance management. All too often, our judgment is clouded by particular emotions or mental states. These may be linked to our past actions, health, or family history.
Power of Emotions
When people are scared, ashamed, or envious, they treat money irrationally. It is crucial to be mindful and understand the motivation behind your spending. Only then can rational thinking override emotions. You may be afraid of:
● looking stupid,
● not having enough,
● provoking envy, or
● being humiliated
People avoid doing what they ought to do out of shame. Consumers may think they do not have enough money, that they overspend, or manage money badly. This causes a vicious circle: people avoid facing problems, which leads to more shame.
For example, they keep postponing their meeting with a financial planner or forget to pay their taxes on time. This is not always caused by procrastination and laziness, though. This view is superficial.
Why We Avoid Difficult Decisions
Avoidance is natural human behaviour, according to Nature.com. When something provokes our anxiety or embarrassment, we tend to stay away from it. The short-term effect is the reduction of these negative feelings. As the trick works, humans tend to repeat the same behaviour.
Suppose you know you have been managing money badly. It is time you sat down and took a hard look at your finances. However, the very thought of doing this ramps up your anxiety level. You know you will have to admit that you have failed to save for retirement or your children’s education.
As a result, the task is postponed an indefinite number of times. However, your general anxiety level keeps rising gradually. This behaviour does not return you to the same baseline.
What to Do
Of course, you need to confront the task you dread and face the facts. This will inevitably cause your anxiety to surge, but only temporarily. As you work out a solution, it will decline. Choose the long-term effects (better money management and lower stress) over any immediate calming distractions.
Other Emotional Barriers
Another feeling is guilt. That is when someone feels they have more than their people. You may suppose you do not share enough, or your money comes too easily. Humans also act irrationally when they are envious, greedy, or overly excited.
Finally, one may “jump on the bandwagon”. For example, this happens in forex trading, when individuals mindlessly copy actions of other traders. However, even if thousands of people are doing the same thing, this does not mean they are right.
ForexTime advises clients to avoid taking action when they experience strong emotions.
Today, everyone has the opportunity to make money from home through a regulated broker. In India, you can start small with only $10. It is possible to delegate decision making to an expert through copy trade. However, if you want long-term results and steady income, you will need to work on your strategy. This means you need to foster mindfulness.
Money And Mental Health
Alcohol abuse, depressions, bipolar disorders, or attention deficit disorder — all of these cause irrational behaviour. Thus, personal finances may be affected by problems related to mental health. For example, intoxication leads to inattentiveness and puts employees at risk. People also share sensitive information when they are drunk.
● Depressed individuals have no energy to face financial problems and their careers stall.
● Bipolar disorder includes hypomanic states. These make humans amazingly energetic and overstimulated. Their inhibitions fade and spending increases. ● People with ADD or ADHD can only focus on tasks they find interesting. Any repetitive chores like paying bills are ignored.
You Cannot Escape Your Past
Every family has a history of managing money and psychology associated with it. Financial management may constitute a part of their identity. This determines whether money can be discussed freely, who controls it, whether it is essential, and what responsibilities are assigned to people of each gender.
For example, if a grandfather squanders the family fortune, his descendants adopt a conservative attitude to finances. Subsequent generations may feel the need to correct his wrongs. Going against the family mentality is also common.
The Bottom Line
Emotions exist beyond our consciousness. The key is to identify them correctly. You need to understand what stories and situations affect your relationship with finances.
If you want to improve your money management, be mindful about how you feel. Emotions are not bad. They help us feel alive and understand what truly matters.