Why you should not let emotions influence your financial decisions

Reflect on your last few impulse purchases to make more thoughtful decisions in the future

African American woman opening packages of shoes on sofa. Getty Images

When was the last time you made a sound decision while wiping away tears? Or shaking in fury? Or sweating with stress?

Your judgment was probably off during those emotional moments. Maybe you said something you later regretted – or perhaps tapped a targeted Instagram ad for a pricey jumper, which you bought and never wore.

Feelings influence decisions, including whether we should add an item to a cart.

“Emotions and decision-making are very strongly connected,” says Kristy Archuleta, financial therapist and professor of financial planning at the University of Georgia in the US. “Sometimes our emotions override our thinking process” and “flood our mind”.

To save money, please do not enter your credit card information as you are wading through that flood.

Making a logical decision is tough, particularly nowadays. The Covid-19 pandemic adds a “layer of stress” to our lives, Ms Archuleta says.

As if more than 18 months of that stress were not enough, the holiday season is now ringing your doorbell. As usual, the holidays show up sooner than expected and bring so much baggage.

Along with the holidays comes family and, again, complicated decisions about gathering or not during the pandemic. Or maybe this season brings loneliness and nostalgia. It can certainly trigger financial pressure.

The holidays can “intensify” our emotions, Ms Archuleta says, and make it particularly difficult to “separate our thinking from our feelings”.

Give yourself a 24-hour cooling period. If you want to buy the item tomorrow, you will be in a better head space to do so
Natasha Knox, financial planner and financial behaviour specialist

An example from Ms Archuleta: maybe you overspend on gifts because you are excited to finally see your family or to make up for missing gatherings last year.

Or perhaps you are feeling down about not seeing family or for any number of reasons. Down and depleted, you may order more and more stuff.

What to do if you are emotional shopping?

Before buying anything, try a “body scan”, says Natasha Knox, a Canada-based certified financial planner and financial behaviour specialist.

Starting with your feet and working your way up, she says, check in with how you are physically feeling. Are your palms sweaty? Are your shoulders tense? Are your eyes half-open as you stare at your phone?

How your body feels on the outside can indicate feelings on the inside. For example, maybe you are despondent, enraged, exhausted or bored.

With that information, Ms Knox says, “you can ask yourself: ‘is buying this a great solution?’”

Would buying that jumper fix your boredom, for example, or would you be back to scrolling 30 seconds later?

Ms Knox also suggests giving yourself a “24-hour cooling period”. Leave that item on the shelf for now. If you want to buy it tomorrow, you will be in a better head space to do so.

Step away from online purchases, too, she says. Close the tab touting the perfect jumper that will fix all your problems right now. Sleep on the decision and examine if you feel the same way tomorrow.

Better yet, Ms Archuleta says use some of that time to reflect on when, where and how you would use this purchase.

When you are not shopping, make a plan

Reflect on your last few impulse purchases. Examine what was going on around you, Ms Archuleta says. For example, she adds, was it a hectic morning soon after you got the children out the door? Was shopping a tool to release that stress?

Try to identify themes in your environment and feelings. Maybe you often shop at night, when you are exhausted. Or maybe you overspend on stuff for your children when you are feeling guilty.

Ms Knox recommends also considering the retailer tactics that trigger you to overspend. Is it hard to pass up a two-for-one deal, for example? Or do you typically add a few more items to your cart to score free shipping?

Always make a shopping list. If it is not on the list, it is not in your cart
Kristy Archuleta, financial therapist

This reflection is not meant to shame you about the past. Ideally, it empowers you to make more thoughtful shopping decisions in the future.

For example, Ms Knox suggests using what you learnt to create shopping principles for yourself.

Maybe you do not shop online after 7pm, for example. Perhaps you make a rule to never click on retailer emails (which is easier to do if you unsubscribe).

Or follow Ms Archuleta’s classic decree: always make a shopping list. If it is not on the list, it is not in your cart.

As you set these rules, also consider alternatives to spending to manage your emotions in the moment. If you are stressed, for example, maybe calling a friend or family member would help, Ms Archuleta says.

Ms Knox also recommends determining why you are making these principles and writing down those reasons. Think about what your life would be like a year from now if you are able to better control your spending, she says.

“Ask yourself: “What good is going to come out of this?”

Associated Press

Updated: November 8th 2021, 4:00 AM