5 Ways Your Emotions Are Costing You Money (and How to Stop)

Have you ever gone shopping to cheer up? Or pulled out plastic when you felt pressured? Maybe you want to improve your home, ditch your boring wardrobe, or impress others.

There’s nothing wrong with spending on yourself, but watch out for emotions sneaking into your decision. Letting emotions drive your spending habits can quietly derail your financial goals.

1. You buy to make yourself feel better

Emotions can influence our decisions, making us more likely to splurge on an impulse purchase. A new outfit or smart home gadget can lift your spirits, but then the credit card bill shows up, and so do the regrets.

Set an upper dollar limit for emotional spending and build it into your budget. Be honest with yourself and focus on the root cause of your emotional state.

Limit your access to credit cards and favorite stores. Before you buy, put down the item and walk away. Mull it over.

There’s nothing wrong with spending for fun or recreation. Just do it thoughtfully, not impulsively.

Pro Tip: When shopping online, get 3-15% cash back with easy-to-use rebate services like Capital One Shopping or Rakuten.

2. Giving is grand, but don’t go overboard

Some people take pleasure in giving, and the very act of giving can be enormously rewarding.

However, studies, including research from Columbia Business School, reveal that even altruistic people who enjoy spending on others can still feel guilt and regret after overspending.

We’ve all felt pressure to spend a lot on holiday gifts or donations, especially to support a popular charity in your community. That pressure can feel all-consuming, particularly if what you have and want to give doesn’t match.

Give what you decide is financially appropriate for each occasion and recipient.

3. Emotions can distort your priorities

Don’t stress about living by a socially defined timeline for success. In other words, don’t feel pressure to be a homeowner by age 30 if it doesn’t make sense for you.

What motivates your big financial goals? You might think, “Hey, I deserve a high-end luxury car,” or “All of our friends have backyard swimming pools, so we should get one, too.” But do either of these purchases get you what you need and want?

If the underlying needs are your own, then it’s great to pursue them. But if you only seek others’ approval, you’re likely wasting resources.

You shouldn’t sacrifice your financial goals to meet others’ expectations. Spending money to improve your social standing might leave you feeling empty if you don’t value the ultimate outcome.

Pro Tip: Hedge your bets with gold. It’s been a trusted hedge against uncertainty for centuries. Learn more by visiting our Gold IRAs.

4. Outsmart habits that disrupt your long-term

You may rationally believe you won’t have much money when you retire but irrationally presume that everything will be fine somehow.

According to several studies, people think of their retired selves as strangers. This bias toward “psychological distance ” is prevalent. Studies report that people view their retirees-to-be selves as, essentially, “others” who will somehow spend less and enjoy more “unexpected money” than the current “me.”

Or maybe they have an “out of sight, out of mind” mentality because retirement could still be decades away. Researchers have found we think the “other” will enjoy more windfalls, like lottery winnings, than we will. They’re often perceived as better people whose lives will cost less or demand less.

You’re doing your future self a giant favor by correcting present-day beliefs and setting up as robust a retirement fund as you can afford.

5. Less worry means clearer thoughts

Losing focus on your finances and goals can make it easy to put today’s wants ahead of tomorrow’s needs.

When your mind is cluttered with stress, it’s tough to make smart money decisions.

Taking a step back and shifting to a more positive mindset can help you stay in control and make choices you’ll feel good about later.

Pro Tip: Life insurance is a must to protect your family. Here's a place to get a free, no-obligation quote.

Keep digging

Emotional spending can creep in when you least expect it. Protect your long-term goals by developing healthier habits and learning to manage your emotions effectively.

When you’re feeling stressed or off balance, take a moment to reflect on how your emotions might be driving the urge to spend. Control over feelings can lead to more thoughtful financial choices and peace of mind.