When spending, control your emotions

When spending, control your emotions

I recently heard a quote that said “80% of personal finance is behavioral.” How does this specifically apply to you? Does a bad day trigger a spending habit for you? If something goes great at work, do you tend to treat yourself? Or the worst of all, if you get a raise, does your lifestyle?

How do emotions, money and behaviors all tie into each other? It’s simple because emotions cause behavior, and your personal finance as a whole is behavioral.

What it boils down to is your emotions can drive your spending or investing habits. Think of it in terms of the stock market. When the stock market is crashing, everyone lets fear take over and they want to sell, sell, sell. Afterward, you hear about the strong and steady investors. The investors who decided on buying stock when everyone was selling ended up making 100% returns if not more.

It makes me laugh because I told myself the next time the stock market tanks, I’m going to buy as much as I can. When the time came during March 2020, I stayed as far away from the stock market as possible because of the fear and uncertainty that came over me from the coronavirus. I could have made tons of money in the past 18 months, but my emotions got the best of me.

Same with house hunting, and it just happened to me. I really didn’t have any intention of moving, much less to New Philadelphia, but a house came up for sale, and it was a newer build, so I went to the open house. I remember walking through it and saying out loud, “I hate how much I like this house.” It was within my price range, and my emotions were going crazy. I was enamored with the new appliances and the potential for what could happen with the basement. I walked out of there high on endorphins because of the overload of what life would look like in that certain house. Of course, being so calculated, I didn’t put in an offer until three days later.

The last example is cars. These are dangerous because of the new car smell, the fresh interior and the unbelievable new technology — it’s overload. Half the sale is made for the car salesman when the customer sits in the car and drives. I remember hopping into the Chevy Cruze I now own after owning a rust bucket, and just driving it down the road with the working air-conditioning and the electronic speedometer (I had low standards) had me sold. I was so sold I didn’t even notice the absolute mess of cat hair that was everywhere. Emotions are the exact reason I don’t even car shop for fun because I know it can get me in trouble.

What do your emotions tell you to buy? Be honest with yourself because they are always talking. I remember coming home from Walmart and all I had bought was a red solo cup and a camouflage T-shirt. It was then I realized I must stop listening to as much country music and stop wanting to be like the singers I was listening to.

Look at the past 10 purchases you made that were outside of the necessities. What were they for you? There are some names that pop up in my credit-card statement that seem familiar: Wendy’s, Miller’s Creamery and Raisin’ Canes. While all of those were not emotional, I know some of it was. Be aware of how emotions run your spending habits and control them for the good.

Holmes County native BJ Yoder is an insurance agent by day and a finance enthusiast by night. This column is for informational purposes only. He can be emailed at benjamin.john.yoder@gmail.com.