Emotions And Financial Decisions: How Are They Related To Each Other?

emotions-financial-decisions-how-they-relate

Often, we tend to associate finances with numbers, formulas, plans, projections and indicators, without considering the deep correlation between emotions and the financial decisions we make. However, Part of improving our financial health involves recognizing our beliefs about money and understanding how they influence our financial decisions.

The origin of our financial beliefs

The first step to improving our relationship with money is to examine our beliefs and past experiences. What did we learn about money at home? The way our parents handled and discussed finances can have a lasting impact on our own financial perceptions and behaviors.

In her book “Know Yourself, Know Your Money,” Rachel Cruze presents four quadrants that describe different approaches to money, influenced by two main emotions (stressed or calm) and two styles of coping. communication (open or closed). These quadrants are: Anxious, Confident, Ignorant and Unstable. Analyzing the environment in which we grew up can help us understand if we are replicating the family model or adopting a completely opposite approach.

Identifying and reflecting on how our childhood experiences affect our current financial situation allows us to recognize areas for improvement. With the right knowledge and tools, we can better understand why we handle money in certain ways, maintaining positive habits and changing those that do not benefit us.

origin-financial-beliefs

The influence of emotions on financial decisions

The solutions to financial problems are not always in the actions we take, but in understanding why we take those actions. Superficial financial decisions are often symptoms of underlying beliefs and emotions. Exploring our past experiences and their influence on our decisions can be a powerful tool to improve our financial management.

You may be interested:  The 8 Differences Between Psychoanalysis and Analytical Psychology

As Rachel Cruze says, “Money has no emotions; you bring the emotions”. This phrase highlights the importance of emotional self-assessment in financial decision making. Communication at home also plays a crucial role. If our parents talked openly about money, chances are we will do the same. If, on the other hand, they avoided the topic, we could face difficulties when communicating about finances with our partner or in other relationships.

How to improve our financial beliefs?

The first step to changing our beliefs about money and the associated emotions is to be aware of them. Here are some questions to help you get started:

Knowing someone who appropriately manages emotions and communication around money can be a valuable example. Emotions like fear can have a significant impact on our financial decisions.

how-emotions-influence-financial-decisions

Conclusions

In my personal experience, having at my side a person who has lived in an environment similar to mine and who has been able to overcome it, developing good communication and emotionality regarding finances, has helped me a lot to improve. For this reason, I always recommend looking for a mentor or coach who helps you see things that you cannot see on your own and that are stopping your progress in growing. Request a personal coaching session to work on these issues and take your personal finances to the next level.

Fears of feeling inadequate or incapable are normal. The reality is that it doesn’t matter where you come from or what has happened to you; The important thing is where you are going and what you want to become. We all have things to improve and change, and life is about a process of continuous improvement for those who decide to learn, grow and change.

You may be interested:  What Are TCAs? 7 Ways to Detect Eating Disorders

In conclusion, understanding the relationship between our emotions and financial decisions is crucial to achieving robust financial health. Reflecting on our past experiences and how they affect our current beliefs and behaviors allows us to make more informed and conscious decisions, thus improving our relationship with money.