The influence of emotion on our finances

We’ve all heard of the dangers of emotional spending but what about emotional saving? Emotions can wield a powerful influence on our personal finances in a positive way, but they can also have a negative impact on where we sit financially. The good news is, by cultivating a bit of self-awareness you can harness your emotions and ensure they help you achieve your financial goals.

Whether your goal is a big one like saving up a deposit to buy your own home, or a more modest splurge to take off on a much needed holiday the best laid plans can be derailed, if you follow your heart rather than your head.

Our decision-making abilities – from those big life changing financial decisions, to the small “treat yourself” purchases – are strongly influenced by how we are feeling at the time. Marketers know that we are not just buying ‘things’ – we buy (or try to buy!) space, love, happiness, freedom… the list goes on.

The influence of emotion on our finances

Developing awareness and discipline

If you find that your spending is influenced by how you are feeling, you are not alone. The most common trigger for overspending is stress, with 29% of people surveyed splashing out in response to stress.i It’s not just stress causing us to overspend though. In the same survey, sadness was cited by 13% of respondents as a reason for buying up big, with sadness also considered to lead to particularly extravagant purchases.

This so-called “misery is not miserly” phenomenon is backed up by a study where participants who watched a sad video offered to pay nearly four times as much money to buy a water bottle than a group who watched an emotionally neutral video.ii

Getting that warm glow without spending a cent

The best way to counter an emotion led-spending spree is to be aware of how you are feeling and acknowledge that the buzz you get from your purchases is unlikely to last longer than leaving the shopping centre carpark. Think about other things that make you calm and happy that don’t involve spending money, like having a chat with a friend or going for a long walk.

With cost of living increases and interest rate rises putting pressure on household budgets, it’s also a good idea to keep track of your spending and having a set budget with some allocation for the odd splurge will help you put some limits around your spending while not feeling totally deprived.

Keeping emotion out of investing

Negative emotions don’t just cause us to overspend.

Emotions such as envy and greed can drive risk taking behaviours like gambling or investing in ventures where you stand to gain a lot if successful, but could lose the shirt off your back, if the risk does not pay off.

Fear also commonly drives investment decisions but panic selling when the stock market takes a tumble can mean you lock in your losses and lose the benefit of the rebound that inevitably comes over time. Having a plan in place can ensure that you make considered decisions and think through any possible opportunities carefully. Investing is one area where you certainly need to be thinking with your head and not your heart.

Harnessing emotions to help you reach your goals

On the flip side, positive emotions can be a strong motivating force when it comes to personal finances. It has been proven that people save as much as 73% more when they have an emotional connection to their goals.iii

The trick with this is to have something quite tangible that you are hopeful for or excited about, to work towards. Focus on your feelings. Think about how thrilling it will be when you step off the plane and explore your dream destination, or how gratifying it will be to finally pick up the keys and open the door to your new home.

Money is an emotional business and it’s impossible to completely separate your emotions from your finances – after all, we are only human. However, it is worth developing an understanding of how your emotions impact your finances – for worse or for better. Then you can address the things that are having a negative impact and harness those good vibes to achieve your dreams.

If you need to adjust the way you spend your hard-earned money – call us today on 03 9553 0271. We can put a strategy in place to get you to reach your financial goals sooner.  




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Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.