How Our Emotions Affect Our Financial Habits and How to Manage Them

It’s easy to say that making financial decisions and developing money habits are more logical and rational than emotional. However, the truth is that these two processes are tied closely to our feelings. This is why there are such concepts as retail therapy and anger investing. This is also why financial problems also cause stress, relationship problems, and low productivity at work, among other negative effects.

Further complicating things is that money has long been associated with a lot of positive attributes such as freedom, intelligence, and stability. Some may even equate their financial wellness to their worth as a person. In short, your feelings come into play more often than you realize when you make financial decisions. Thus, it’s best to factor in your emotions when it comes to money matters to ultimately make the best choices.

To help you get better at money matters, below is a list of the most common emotions that can impact financial management habits and decisions. Also included are a few tips to get these emotions under control and not let them get in the way of healthy money-related choices.

Happiness or Excitement

Happiness or excitement can be caused by a lot of things. Perhaps you’ve gotten that promotion you’ve been waiting for, or maybe you’ve finally booked that trip to your dream destination. If you have children, maybe you’re ecstatic that they received academic honors at school. No matter the reason behind it, this feeling of elation can make you feel like you can take on the world. This, in turn, can lead to overconfidence. In turn, you’re more likely to engage in risky behavior.

Indeed, happiness or excitement can make you spend more money. This may be rooted in that impulse to celebrate, to share the feeling of joy with as many people as possible because you’re so proud. It’s easy to get carried away when you’re in this mindset, however. And when you don’t pay attention to how and what you’re spending, you’ll end up biting off more than you can chew. Once the feeling of elation passes, you’ll be left feeling regret or even remorse.

How Not to Let Happiness Lead to Bad Financial Decisions

It’s a good idea to have a separate account that you can use for celebrations. For example, you can create an e-wallet account for all your bills payments and then use your debit card for shopping or eating out. Set a strict spending limit as well, and make sure that the amount is something that you can truly afford. This way, not only will you minimize the risk of overspending but also ensure that you don’t spend money meant for your fixed expenses. If you want, you can replenish your “celebration budget” each month. Still, keep in mind that the amount should not exceed your financial capacity.

You should also consider making a list of big and small goals and how you celebrate them. Even the smallest victories deserve congratulations, of course, but don’t have to spend the same amount of money for everything. What’s more, by “reserving” the biggest celebrations for the biggest victories, you’ll be able to enjoy them more fully.


Anger is one of the most powerful emotions. It can be quite destructive, especially when you allow it to dictate your choices. When your anger is at its peak, you’re more likely to make rash financial decisions. You can even compare this to angry casino players on a losing streak. In their anger and frustration, they lose even more money in a bid to recover what they’ve gambled away. When you realize that even the richest men in the world can fall and have fallen victim to angry impulses, you might end up feeling justified.

The issue here is that you might feel satisfaction immediately following an anger-fueled purchase or investment. This feeling can then make you believe that you’ve made a good decision. However, it’s usually much later that you’ll realize your mistakes. You may end up wasting not only money but also time, effort, and even emotions. In the heat of the moment, anger can make you blind to the consequences of your actions (financial or otherwise).

How Not to Let Anger Lead to Bad Financial Decisions

The saying “don’t make decisions when you’re angry” applies to many aspects of life, including money. Slow down, breathe deeply, and take a step back. Delay making any important decisions until after you’ve calmed down. You may also want to talk to a third party who’s not involved in the situation, such as a trusted friend or a financial advisor. By discussing your feelings with someone who isn’t prejudiced, you can clear your mind of anger that much faster.

Sometimes, anger can also be a manifestation of fear. In this case, a bit of evaluation can help a great deal. If your anger is indeed based on fear, then you can trace the roots of that fear and do something to solve it. You might even feel that it’s simpler to deal with fear instead of anger because it’s easier to pivot and find alternative ways to conquer your fear.


When you’re ashamed, you start questioning your worthiness. The emotion sits deep in your gut, making you feel as if your deepest, darkest secrets have been exposed. This can lead you to overcompensate by making big, impulsive purchases to “cover up” your perceived inadequacies.

What’s worse about shame is that it can easily creep up on you. Even off-hand comments from well-meaning family members or colleagues can trigger the feeling. It can also manifest in social settings, such as when you’re trying to cultivate friendships or pursuing a love interest. Shame can make you feel out of place, which can tempt you to spend money to get that sense of belonging.

How Not to Let Shame Lead to Bad Financial Decisions

The most straightforward solution here is to not equate your worth with money. It can be a difficult thing to do, especially since shame can corrode your self-confidence. A good way to overcome this is to both become more aware of your shortcomings and appreciate your strengths. Then, rechannel your energy into cultivating those strengths.

You should also keep in mind that not everyone will be able to realize your true worth. Keep your distance from these people. No amount of money will make them appreciate you and your contributions, so it’s best to just ignore them.

Finally, another important thing you need to keep in mind is that you can’t please or impress everyone. It’s an impossible and thankless goal. Once you accept this fact, it’s easier to disassociate feelings of shame with the need to compensate with buying new things. Remember to live for yourself and not for anyone’s approval or affirmation.


Anxiety, like shame, is a deep-seated emotion. It combines fear and uncertainty, making you feel uneasy or worried. Most of the time, these feelings are anchored on very real issues such as financial troubles or health problems. These issues can then influence the decisions we make when it comes to money.

For example, if you’re experiencing financial difficulties, you might be tempted to avail short-term loans with ridiculously high interest rates. Meanwhile, those who are suffering from debilitating diseases might be tempted to spend money on expensive alternative treatments. In short, you might resort to spending money you don’t have in an effort to get rid of the unpleasantness of anxiety.

On the other end of the spectrum, anxiety can also make you miss opportunities. For example, if you’re financially stable but anxious to lose money, you may turn down an offer to invest in stocks with high potential. Stock values fluctuate all the time, after all, and your anxiety might hold you back. In turn, you might lose the chance to invest at lower prices. This can bring about feelings of regret, which can then trigger anxiety over money that you could have had.

How Not to Let Anxiety Lead to Bad Financial Decisions

When it comes to dealing with anxiety, it’s difficult to be logical. It’s challenging to think of a solution, simply because anxiety can get in the way of rational thinking. Indeed, when you’re suffering from bouts of anxiety, it almost feels more natural to think of the worst outcomes rather than maintain a positive outlook.

However, the “good” thing about anxiety is that it isn’t as immediate as other emotions. Rather, it has time to build up. This means that you also have the time to deal with it properly, as soon as you notice the signs of mounting anxiety.

To control anxiety and prevent it from influencing your financial decisions, make it a habit to establish facts and avoid making assumptions. When you get the hang of this practice, it’s easier to avoid thinking about what ifs that you don’t have control over. Afterwards, devise an action plan that’s based on the facts you’ve just gathered.

You may also want to talk to someone who can give you objective advice. This could be a trusted friend or family member, or someone with expertise on what you’re anxious about. If you’re dealing with health issues, then talk to your doctor. If you’re dealing with financial problems, look for a financial advisor.


Imagine this scenario: one of your friends uploaded their engagement photos on social media, where the woman is showing off a huge diamond engagement ring. The man proposed in a romantic location, a luxurious island getaway complete with a candle-lit, beachside dinner. Then you think about your own proposal plans and feel a little envious of what they can afford.

This is a normal reaction. What’s not normal or helpful is throwing away your best-laid plans just to match or one-up someone else. This will only lead to financial difficulties in the long run. What’s more, you won’t really feel true happiness or satisfaction if you’re driven by jealousy.

How Not to Let Jealousy Lead to Bad Financial Decisions

Humans are creatures who are prone to comparison. The important thing is that you don’t give in to the temptation to curb jealousy by spending. Self-examination is a good way to stop jealousy from affecting you and how you make decisions. Ask yourself what you truly need and want. Make sure to be completely honest with yourself and take out other people from the equation. Doing this can help you turn your jealousy into motivation.

Indeed, instead of letting jealousy fester, you can use it as fuel to push yourself to work harder to achieve your goals. It can even help make you wiser with money, since you’re making your best efforts to afford your needs and wants.

At the same time, it’s also important to remember that what we see on social media is not the entire picture. Don’t focus on what others are doing and don’t spend money just to keep up appearances. Again, be honest and evaluate what you truly want. Most of the time, you’ll realize that what makes others happy aren’t necessarily the same things that will make you happy. Chase your own happiness and not the picture-perfect ones you see on your social media feed.

Emotions and Financial Habits Are Indeed Related

In summary, the best way to stop your emotions from coloring your financial habits and decisions is to accept that they are related. At its core, money is all about math. What you do with money, however, is beyond math. It involves psychology and dealing with feelings. Once you accept this fact, then you’ll be in better control of how emotions and other external factors can affect your financial decisions.

You also need to be more self-aware of your emotions. In addition, you also need to pay attention to external factors or triggers that affect how you feel. Most importantly, you have to acknowledge what you’re feeling. When you know where you are emotionally, you can then make better, more informed financial decisions.


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