Harnessing Your Financial Emotions
Your emotions make most of the decisions in your life and our logical brain tries to create sound reasoning to support your emotional decision.
Control: We have the elution that we control things we actually have no control over. If we submit to the fact that our emotions are in charge and we control far less that we think we do you can begin to put in place a framework of a financial value system that will drive our actions.
The problem with making emotional financial decisions is we often evaluate those decision later with logic.
How do you know you are making an emotional based decision?
Ways to control your emotions when making financial decisions
- Don’t rely on your “gut”
- Pause and come at it from a different angle
- Write it down – Pros and Cons (pen to paper awakens the logical brain)
- Get external opinion – hire a professional (lawyer, agent, accountant)
- Don’t marry yourself to an outcome – make it about the process
Solution: Have a value system based on overarching rules that you can rely on for your decision making process.
- Car loan: maximum 3 year
- Mortgage: paid off in 15 years
- I will never pay for a service I can do myself
- I will not commute more than 30 minutes
- Borrowing money for things that go down in value is not an option
- Credit cards are a form of payment never to be used for credit
- I will never use the equity in my house as a source of money
- Replacements decisions are based on an items functional utility
- Never mix money and family