I recently received a question from a listener: “I’m getting the idea that emotions are bad for financial decision making, that they can really lead us down a bad path. Is that actually true?”
Since research shows that 80% to 100% of our financial decisions are made emotionally, this is an important question. Emotions are not bad for decision making and neither are they good. They can be hurtful, or they can be incredibly helpful. It’s really how we respond to the emotions that’s important.
A person can actually make better financial decisions if they are aware of emotions and tuned in to what’s going on in their emotional system—if, approaching a financial decision, they notice, “I’m feeling sad,” or, “I’m afraid,” or whatever emotion might come up around that decision. To many of us, myself included, this awareness does not come easily.
We can get into trouble with financial decisions and emotions when, at one extreme, we aren’t conscious of our emotions, or at the other extreme, we are flooded by emotions. In either case, we may jump into action or avoid taking action because of those emotions. This is often where overspending and other poor buying decisions come from.
Is the answer to become more mindful of our emotions? Mindfulness is one important step, when we can realize we’re feeling sad, or angry, or whatever the emotion might be.
While awareness is hugely important, it alone is not enough. It’s also essential to become able to actually feel the emotion rather than talk about it.
You might assume that, if you’re aware of an emotion, you have to be feeling it. Not necessarily. I fully realized this just a few years ago. In all my therapy and growth work, I had talked a lot about emotions, especially sadness, but I had rarely felt sadness. Getting to a point of tears or really feeling sad was very difficult for me. It’s important that we feel those emotions, which requires us to stop the thought that’s attached to the feeling and actually feel the feeling.
For example, anxiety can be a difficult emotion for me to feel. Now, one of my traits is being able to quickly go into action and get something done. That’s a strength in many ways, but sometimes the reason that I go into action so quickly is because I am uncomfortable with anxiety. I start feeling anxious about something, and in order to relieve or avoid the anxiety I might take action too quickly. This can lead to unwise financial or business decisions.
Another way we can avoid feeling emotions is to focus on trying to figure out where the emotion is coming from. We can spend lots of time trying to figure this out, as if we don’t have permission to feel an emotion unless there’s a logical reason for feeling it. It took me a while to understand that I don’t need permission or a reason to feel the emotion. If I’m feeling it, it’s real. Once that feeling has passed, I’ll get clarity around where it came from.
Typically, feeling a difficult emotion such as anger or sadness is not a pleasant experience. As I did this work, I found that the emotion would transform; it would get lighter, and I typically would get clarity. It’s the same with more pleasant emotions like joy or happiness. Emotions don’t stay intense; they dissipate.
The idea that relief comes from allowing ourselves to feel the emotion can be frightening. We may fear we’ll be overwhelmed by the emotion and never come out.
If you are unaccustomed to feeling emotions and are exploring this work, I suggest you start out by putting a time limit—maybe five or ten minutes—on your practice at feeling emotions. When you’re done, you can go about your day, and you can come back the next day or later and feel it again. It may take a lot of these sessions to begin to work through just being with your emotions. I have learned through this kind of practice that it’s possible to approach these feelings without being taken over and without being overwhelmed.
How does all of this relate to money? Since our money decisions are so strongly driven by emotion, the more we are aware of and in tune with our emotions, the more we are able to make financial decisions that support our wellbeing.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.