3 Times You Should Slow Down When Making a Money Decision
Written by
Sean Bryant
Edited by
Amber Barkley
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With a new president in office, there is a lot of uncertainty about the economy’s direction in the near term. Fresh off record high inflation, many people wonder what will happen over the next four years.
With so much uncertainty, most financial experts warn that making significant financial decisions requires extra caution. It’s important to slow down and spend additional time deciding whether a purchase is a good idea or something that can wait.
Keep reading to learn about three times when you should slow down when making money decisions.
When Your Emotions Are Strong
The worst thing you can do is make a financial decision based on emotion, whether excitement or fear. Many things trigger this desire to act quickly.
For example, when the stock market has a severe sell-off, it’s easy to panic and want to sell. Instead of giving in to fear, remember that the average stock market return is 10% annually. There are going to be ups and downs. If you decide to give in to fear and sell, you’ll miss the opportunity when the market goes back up.
“If you take your time to make money decisions — big or small — you are less likely to make impulsive decisions,” said Paul Gabrail, personal finance expert and host of Everything Money. “This is especially commonplace with stock market investing.
“It’s why I encourage people not to let their emotions determine their money moves based on a recent dip, an earnings report or a negative headline. There will always be opportunities. Investing is no different. Slow down, and keep this in mind.”
The same principle applies when you get excited about something. For example, maybe you’ve been looking to purchase a new kitchen appliance, and it ends up going on sale. Well, this is a big expense, and it shouldn’t be made quickly. Before purchasing, make sure the expense fits within your current budget and you have the money to spend.
When Booking Travel Plans
Booking a vacation can be exciting for many people. However, depending on your plans, it can be a significant expense. That being said, it’s important to take your time when planning. Understand your costs. If you’re flying, how much is airfare? How much will the hotel cost? Understand exactly how much you can expect to spend, and make sure there is money in the budget to pay for it.
“As the [adrenaline] of travel takes over the logical spending,” said Partha Dey, senior vice president at Citi, “my motto has always been to curb the over-enthusiasm with [a] little monetary sanity.”
He suggested picking a place, then researching the high and low hotel prices for the area to avoid the surge pricing of peak tourist season. Traveling in the off season can also present opportunities for offers and deals you won’t find during peak season, he said, which “gives more value for your hard-earned dollars.”
When Using Money as a Means for Comfort
People often have different ways of handling stress or anxiety. For some, shopping becomes a crutch. Unfortunately, impulse decisions like these can lead to bad financial moves and regret. If you’re going shopping after having a bad day, take some time to think about that purchase before you make it.
“If you tend to use shopping as a comfort when upset or anxious, it’s best to hit pause in those moments and try to redirect your attention to something more constructive and less financially destructive,” said Destiny Chatman, a consumer expert at TopCashback. “Doing things like going to the gym, talking to friends or a therapist, or taking up a new hobby can relieve the urge to spend recklessly when you aren’t in the best headspace.”
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