Building a strong financial foundation for you and your family requires discipline. It requires patience. It requires a steady mindset. But even the best of us have found ourselves spending and making financial decisions based on emotions, whether that’s retail therapy, or holding off on investing due to fear of the markets. We’ve made decisions based on joy or comfort in the short term instead of satisfaction in the long run.
Are you letting your emotions control your finances? Answer these questions to find out.
Do you spend money when you feel sad, happy, or stressed?
You had a bad day at work, so you go on a shopping spree for new shoes. You got a promotion, so you celebrate by taking friends out to eat at a fancy restaurant. You spend money as a reaction or antidote to whatever feelings you have at a given moment, and this makes it hard to save money at a healthy rate.
You don’t need to treat yourself to a costly reward every time you’re happy or sad. This is an easy way to fall into a dangerous emotional spending cycle. (See also: The High Cost of the “Treat Yourself” Mindset)Have you held off on investing because you are afraid?
Fear is one of the most powerful emotions we have, and many people have never gotten started with retirement planning and investing because they are intimidated. They may find the whole process of investing to be overwhelming, or they may have a fear of asking a dumb question. Additionally, they may fear that their investments will lose money. In reality, it’s best to channel fear into investing more, because not having enough money saved for retirement is a truly scary thought. (See also: 3 Steps to Getting Started in the Stock Market With Index Funds)
Have you sold investments when you realized they lost value?
We’ve probably all found ourselves frustrated with certain investments that have tanked, and sold them at a loss. Of course, then we’ve kicked ourselves when we’ve seen those same investments rebound in short order. It’s not a good practice to be emotional…
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