Keeping emotions out of financial decisions can have a positive effect on your finances
Have you ever purchased anything on the spur of the moment (such as a dress or pair of shoes) and when you got the item home you realized you didn’t really like or need it? Everyone wants to make smart financial decisions but unfortunately sometimes people allow their emotions to take the lead. There are times in which if people allow their emotions to lead their decisions it can have a negative impact on their financial situation.
Here are some common mistakes people make by allowing emotions to get in the way of financial decisions:
- Ignoring financial issues-It is important to address financial issues as they occur. Ignoring a financial issue such as increasing debt or other issue can have a negative impact on your financial picture the longer you avoid addressing them.
- Procrastinating on financial decisions-One of the main obstacles to planning effectively for your long-term financial goals is procrastination. We sometimes have a tendency to put off making important financial decisions due to lack of confidence. Typically, the lack of confidence is due to the fear of making a mistake. In this situation, you can easily overcome this obstacle by educating yourself. Enroll in financial classes or workshops. If you need more guidance, consider hiring a financial planning professional.
- Doing things the same way you always have-People have a tendency to do things the same way they always have because they are uniformed or afraid to make a change. By reading financial magazines and visiting financial websites it can increase your awareness and knowledge.
- Letting short-term market volatility interfere with your investment plan- When creating your investment strategy it is important to have a long-term perspective based on your goals and risk tolerance. You will be more likely to stick to a long-term strategy and not tempted to sell investments at the wrong time.
- Not asking for help-Trying to do it all yourself could be a big mistake. If you feel you overwhelmed or need additional expertise, you may consider hiring a professional. A financial planner or investment professional can create a long-term strategy to help you achieve your long-term financial goals.
Do any of the above sound familiar to you? If so, the good news is by recognizing and understanding these behaviors and emotions you can control them and avoid making poor financial decisions that could negatively affect your financial future. So the next time you make a financial decision (or not) stop and think-“Am I making this decision based on sound information or am I allowing my emotions to get in the way?”