Why I Believe It’s Impossible to Make a Logical Money Decision

Start using your emotions in a constructive way.

I’ve seen it countless times: smart people who know they should be spending less, saving more (or both) and yet they continue to do the exact opposite. Financial gurus have long been lecturing us to “get out of hearts and into our heads” by making smart money decisions. But in my more than 10 years of financial coaching, I’ve come to the conclusion that it’s impossible to make a logical money decision. And, as it turns out, science agrees with me.

Neuroscientist Antonio Damasio, the co-director of the USC Brain and Creativity Institute, has proven the act of deciding occurs in the part of the brain that experiences emotions. This means that although we’d like to think we make money decisions logically, we don’t. We make them emotionally.

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I know this from personal experience, too. When I hit financial rock bottom almost two decades ago, owing three payday lenders and being delinquent on all of my bills, I had recently graduated college with — ironically enough — an accounting degree. I was definitely making emotional money decisions, not logical ones.

So, does this means we’re doomed to make terrible financial decisions despite our best efforts? Thankfully, no. We simply need to learn how to emotionally charge the money goals we want to accomplish.

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Using Your Emotions

Here’s the three-step process I use to help my clients change their money behavior by harnessing the power of emotion:

  1. Identify the emotional payoff you’re receiving from the negative behavior.
  2. Decide why you want to change it and possible actions to take.
  3. Supercharge the new result with positive emotion so it has a greater draw for you than the old one.

As an example, let’s pretend that I’m overspending on restaurants and want to change that behavior. What’s the emotional payoff I’m getting from dining out all the time? For me, dining out is a way to connect with my loved ones. I accept lunch and dinner invites from friends and family whenever they’re offered because it makes me feel socially connected. That’s a wonderful feeling … until the email from my bank pops up in my inbox warning me that I’ve already spent $600 on restaurants this month.

Why do I want to change my dining out spending habits? I’ve dreamed about seeing the castles of Scotland since childhood. This would be the trip of a lifetime, and I get excited just thinking about it. My only problem is the lack of money in my vacation fund. If I could redirect $250 per month of my dining out spending into my savings, I could make the Scotland trip a reality within the next year.

I can supercharge my positive feelings about the Scotland trip by surfing travel websites and checking prices for flights, hotels, etc. I could print out pictures of Scotland’s castles for my financial vision board. I might even change my phone’s ringtone to bagpipe music. My husband and I could watch documentaries on the history and geography of Scotland and discuss which spots we want to visit on our vacation.

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Here is what will happen: Any time I am tempted to overspend on restaurants, I’ll be surrounded with reminders of my impending trip to Scotland. I’ll have the choice between two options: food or the Scotland vacation. By supercharging the vacation with excitement and positive energy, I’ll be more likely to vote with my dollars in favor of saving for my Scotland trip.

Plus, I can always find ways to connect socially with friends and family that don’t involve pricey restaurant tabs, like meeting for coffee earlier in the day or inviting them over to my house for a less costly dinner in. By supercharging my goal with emotion, it makes my former bad spending habit less appealing.

So, yes, we make money decisions with our emotions, not logic. But that doesn’t mean it’s a bad thing. Use those emotions to change your bad spending habits and realize your goals.

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