People are emotional.
Mixing money and emotions is never a good idea and usually never ends as well as you’d think. Has it ever?
There are some major milestones in life where your emotions just can’t be the judge of how you use your money, it’s just ironic they are life’s biggest purchases or expenses. It’s easy during these times to let your emotions get the best of you, don’t let it as you may regret it in the future.
5 Financial Situations Where Emotion Can Hurt You
That cloud following you, yea, that one full of emotions. Let it go. If you’re about to buy a house, get married, get an inheritance, or even something simple (simple is relative) as investing you should clear up your emotions and make financial decisions based on fact.
Buying a House
This is probably one of the biggest financial purchases you’ll make in your life and it’s also one of the easiest to fog it up with emotions. People often make decisions on which home to buy because of decorations, the wrap around front porch, or it’s simply your “dream home”. These are reasons you should never use to determine the purchase of a house.
You should buy a house because of the price and usability. If the house is not going to work for you and your family and is well above your price range, it’s probably not the best purchase to make.
Getting Married (Hitched)
This is, usually, the happiest time of your life and is filled with so much emotion. You can either start your marriage off on the right foot with little debt or get $100,000 in debt having that royal wedding, yes this happens all the time.
You need to make frugal decisions with your wedding and make sure you’re not spending more than you need to. It’s easy to get caught up in the moment and throw an extra thousand or two here and there to make it feel like it’s better. At the end of the day the only thing that matters is the union of two people, not what table setting you had.
Inheriting a Pot of Gold
It’s hard to think straight after you lose a loved one and it can be hectic and emotional to deal with the financial issues that arise when a loved one passes away. Not only will you have funeral expenses to handle but you’ll also have their estate to handle as well.
How you approach your inheritance, or lack of, will depend on your long-term goals and the current bills at hand. Most financial advisors would look at the inheritance as “free money”. It’s money you didn’t have before so you should look to invest it and let it make more money for you. Treat it like it was never there in the first place.
An inheritance is a good way to start over.
This one is not so heartfelt or emotion driven as the other ones on this list but there are still some emotions when it comes to fighting for your salary increase. Negotiations can be very emotional because of the anxiety or fear that it creates.
When you go to negotiate your salary you’re already at an imbalance. The employer knows more information about the financial situation of the company, your position, and what they’re willing to pay for that position.
You’ll need to do your research and find the industry standard and competitive rates for where you’re currently at in your career to have the best chance. You’ll have to speak your value to the company and your worth which can be pretty challenging on the emotions, especially if they fight back.
This is one that can lose you the most money if you run your investments through emotions. Many people often “marry” a stock or hold onto an investment because of personal connections to a family member or an investment hunch. When you invest you’re not going for popularity, you’re going for return on investment (ROI).
When you buy stock or sell stock because of emotion you can often lose out on potential gains or have substantial losses.