SMS 154 – Your Emotional Brain is in Control

Personal finance is 90% behavior and 10% math – this is a spectrum

We have two brain – the logical brain and the emotional brain

Your emotional brain is in charge and your logical brain is just there for support.

You can gather all the knowledge in the world but if your emotional brain is not onboard it just won’t happen.

If our emotional brain is in charge what is the problem? – We often evaluate our decisions using logic

How to you know you are making an emotional financial decision with bad logic:

  1. Justification mode – “It’s an investment”
  2. Excitement is your emotion – the logic is usually flawed
  3. No decision is an emotional decision – fear is a dangerous emotion
  4. The sacrifice is not obvious – monetary sacrifice followed by the opportunity cost
  5. Your decision reduces the control in your life

If you find yourself making bad or regretful decisions you may need a new approach to keep your emotions from getting the best of you.

10 Tips to help you take control of your emotions (from Psychologytoday.com):

  1. Power Up – be aware of your emotions
  2. Rewind – step back, how did I get here
  3. Fast Forward – play our scenarios to see where it will lead
  4. Zoom in – peel back the layers
  5. Monitor the volume – listen to your inner voice or support system
  6. Adjust the brightness – look at both the positive and negatives
  7. Press Pause – sleep on it
  8. Stop – it’s never too late to stop a bad decision to mitigate the damage
  9. Turn off – time to collect your thoughts
  10. Recharge – make sure you are in good mental state for decision making

Strategies for managing your emotional brain for personal finances:

  1. Acknowledge your emotion – know which emotions are in play, there is always at least one
  2. Put the problem in front of the solution – we often have a solution where no problem exists
  3. Use your support system – people that care about, but are not emotionally in your decision
  4. Write it down or say it out loud – does it still make sense
  5. Have a value system – avoid decisions altogether
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