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Emotions at Play: To Spend or Save?

Whether we like it or not, emotion plays a part in almost everything we do; from making a move at the end of a date to hitting the snooze in the morning before work. Emotion is that little bug in your ear that can sway your decision making, no matter how logical you may try to be. That’s why strong emotions, such as love, can make you feel so crazy. 

Pig - Love 2I’ve worked on the Feed the Pig campaign for several years, and as a member of its target audience I know firsthand that emotional spending is a common struggle for my peers. This is especially true when it comes to holidays, like today, Valentine’s Day, when Americans feel compelled to spend that extra dollar to show someone that we care, no matter how unnecessary and unrealistic it may be.

A few weeks ago, we sat down with National Financial Literacy Commission members Kelley Long, CPA/PFS, and Clare Levison, CPA, for a Facebook chat with consumers about finances and the role that emotions often play in our decisions. Here are a few of the top Q&As from the event:

 

How do you suggest managing the balance of emotion vs. logic?
You have to allow yourself a vice. It's ok to put a little play money in your budget. Just make sure that it doesn't mean incurring debt or scrimping on savings.

How do you battle the urge for retail therapy?
Here's how I've learned to avoid giving into emotional shopping: when I find myself wandering into a store when I KNOW I don't need anything, I say to myself, "Will buying clothes that I might want but didn't think I needed before right now help me get closer to my goals this year?" Reminding myself that I have savings goals, like a vacation and an iPad, helps me to walk away. It can also be very helpful to take a list, and if you feel too weak to stick to it, don't go into the store. Window shopping is not a good "fun" activity for everyone.

What are some of the worst and/or best ways to let emotions influence your finances?
First, it's important for everyone to realize that, no matter what, they have an emotional relationship with money. Examining your money "story" is key to changing any financial habits if you're unsatisfied with where you are when it comes to your finances. There are many books and articles out there that can help uncover your money story and rewrite it in a way that works for you and your goals.

Start paying attention to any triggers that might cause you to engage in negative financial behavior. Do you shop to reward yourself? Comfort yourself? Do you have trouble sticking to a dining budget after your second glass of wine? Being aware of what is going on in your head when you overspend is the first step to finding an alternate way of handling those situations. For example, if you know that you usually overspend as a reward to yourself after a stressful week, plan ahead to do something else to reward yourself instead of hitting the mall. Perhaps you can cook dinner with friends or plan a movie night at home at the end of the week.

Use emotions to your advantage to positively influence your finances by posting reminders of your goals in key places. For instance, I have a post-it note next to my mirror that reminds me of the vacation I'm saving for; I also changed my computer screen saver to a tropical picture. Those visuals keep me excited about the trip and remind me that if I stick to my savings plan, there won't be financial stress about spending the money.

How do you help your clients address the emotional side of their financial habits? How do you personally cope?


Claudia L. Cieslak, Communications Specialist, American Institute of CPAs.

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