The Emotional Decision Dilemma

Key Takeaways

  • If you are angry or emotional about something, you usually end up making bad emotional decisions, especially when it comes to money.
  • You need to come up with a pre-set technique such as counting to ten or taking big breaths to disrupt your emotions and bring you back to reality to make a good decision.
  • Having a technique to disrupt your emotions helps immensely when it comes to making financial decisions as it can keep you from making costly decisions and keeps you on track to grow your wealth successfully.

You’ve probably heard that when you are angry or frustrated about something, you should count to ten or take a few deep breaths. It’s important to do something like this to get you out of your emotions and back to thinking clearly. It forces your brain to go to your prefrontal cortex, which is where you make decisions.

If you’re angry or emotional about something, you make decisions in your fear center, and they usually end up not being good decisions. This is especially true when discussing financial decisions, as many of these decisions are made emotionally. In fact, studies show that a vast majority of the decisions we make in life are emotional decisions.

When it comes to making financial decisions, you can really lose a lot of money by making a bad emotional decision. So, how can you stay objective when it comes to making financial decisions? You want to have a pre-set thing you do, or guidance you have for yourself ahead of time when it comes to making financial decisions. For example:

You are going to buy a house and you know up front you can only afford $300,000. But, you see this $500,000 home, and it’s everything you want, so you get really excited about it. This is where you must snap yourself back to reality, count to ten, take some big breaths, use one of your pre-set mechanisms to bring you back to your plan. “No, I can only afford $300,000 with a $240,000 mortgage and a $60,000 down payment. I want to get an 80% mortgage, with a low interest rate, and then I can afford it long term.”

You’ve probably done it before, where you make that mistake, and the next day, you have that regret because you know you made a bad financial decision, that “buyer’s remorse” feeling. If you have a pre-set plan and stick by that technique, something that brings you back to thinking rationally before you make a bad emotional decision, it can help you in a lot of areas.

So, have a technique ready to go, recognize that you need to give yourself a little bit of time, so you can avoid making bad decisions. Don’t get forced in to something you end up not wanting. You want to make good financial decisions, so you can grow your wealth successfully.

Until next time, enjoy!

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