How emotions impact wealth building

How your thoughts, emotions, beliefs and behaviours prevent you from managing your money well.

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When it comes to women’s wealth building, you may be surprised to know that the problem isn’t usually the money, or lack of it, but it’s more likely to be how we approach it, think about it and how we handle it.

In other words, it’s us and our thoughts, emotions, beliefs and behaviours that often cause problems or prevent us from managing money well.

But we are also the solution.

Once we become aware of, and begin to gain control of these thoughts, emotions, beliefs and behaviours, we can begin to manage our money and start building and keeping more wealth in our lives.

Money evokes strong emotions in all of us. For example, can you recall making a purchase and the transaction was declined? Were you embarrassed, have feelings of panic or fear?

If you have, you know firsthand the large part our emotions play in our financial lives and how common it is to let our emotions overtake our logic. Which can often lead to decisions that aren’t healthy for our wealth or wellbeing.

When it comes to our finances, there are six common emotions that can play havoc on our wealth! 

  1. Jealousy: we’re jealous of what others have and what we don’t have which often creates a tendency to overspend or live above our means. We’re spending to look good, or meet other’s expectations.
  2. Regret: when we feel remorseful for mistakes we’ve made in the past with our money, or guilt or regret for how we’ve spent our money. When we regret what we have done, we often get stuck in the past and tend to procrastinate on doing things for the future.
  3. Embarrassment: we don’t want others to know that we’re struggling to make ends meet. We say yes to eating out at restaurants or spending time with our friends, we often use credit even though we can’t really afford it. We don’t own up to not understanding money matters and financial jargon that we think we ought to know and understand.
  4. Overwhelm: We feel overwhelmed when making big financial decisions, getting started, planning or facing our current money situation, so we end up doing the thing that creates the least pain – nothing!
  5. Overconfidence: we don’t plan or save for the unexpected as we often think it’ll never happen to us. We are super confident in our spending, purchasing and investing decisions that we don’t do the right research or checks.
  6. Fear: we constantly worry about not having enough or losing money, we often end up anxious to spend, save or invest. Being anxious creates a scarcity mindset where we constantly worry about not having enough and this fear just breeds inaction.

Getting to know your emotions

Consider these questions to work out whether your emotions may be influencing your relationship with money:

  • Do you buy “treats” to make yourself feel better when you are feeling down?
  • Do you tend to spend money, go out or buy something as a reward for accomplishing something?
  • Do you buy things you can’t really afford but really want?
  • Do you often go shopping out of boredom or as a distraction?
  • Do you save money to the point of depriving yourself of the simple pleasures?
  • When you want a particular thing, do you save up for it, or just buy it and worry about paying for it later?
  • Have you avoided opening bank statements, bills, and other mail because you are worried or fearful of what they may say?
  • Have you avoided making an investment decision or doing something with your money because you’re afraid of losing it?
  • Do you ignore your superannuation because you think it’s boring, or not relevant to your life right now?

If you answered yes to some of these questions it might be an indication that you are prone to letting emotions drive your spending, saving and investing habits.

Don’t worry, this exercise isn’t a case for beating yourself up, it’s all about creating awareness around your emotions and how they link to your money and your decisions.

Tip: For the next week – anytime you receive, spend or use your money, check in and ask yourself, how am I feeling?

By asking yourself this simple question, you’re creating a connection to your emotions and money. You are practicing money mindfulness.

It can also help us to avoid making decisions that are driven purely by our emotions.

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