Emotional Reason Always Outweighs Financial Reason

Think about the title for a second. Have you ever found yourself saying something like, “I know that I should not do this but I want to!” If you have not, then you are truly a rare breed. Let’s face it most of us do this quite regularly. What most of us do not do, however, is plan for this situation.

If you were to set aside money on a regular basis as part of your monthly budget - yes that means you have to make a monthly budget - into a ‘What the heck’ account (you can call it what you want too ) then you will have accommodated for your whims in a financially intelligent way.

Not only that, if you were to acknowledge that there are times when emotion dictates what you do financially, even though it flies in the face or being responsible, then that is the proverbial first step in recovery. Recovery from what you might ask - from making the banks wealthier by carrying balances on such things as credit cards.

Another place that people often allow emotional reason to outweigh financial reason is in the repayment of their debt. There are good debts (like a mortgage) and bad or sinister debt (like a balance on a department store credit card). The number of times that people pay down their good debt while maintaining their bad debt is too many. Why, because having a mortgage weighs more on people than owing $100 to The Bay for example. Even though financially, that is suicide. The solution is simple – run the numbers and see what helps you the most after tax.

The stories that abound, especially over the last few years, of people who have paid well in excess of the asking price for a home because “they just had to have it” illustrates a syndrome associated with emotional purchases referred to as ‘Buyer’s Remorse’. I have written a number of times about the need to learn your limit before you ever go out and shop for a home.

If you insist on doing something with emotion, make sure to do it intelligently. What I mean by this is simply, run the numbers so that you can quantify your indulgence – in other words know what your whim costs. The only way to do this is with knowledge of where you are spending your pennies. If you know where your pennies are going then you can always allocate a regular amount each month to a whim fund and then when you want to be financially extravagant and inane – go for it.

If you do not know where your pennies are going or if you keep saying to yourself, I make so much money but I am always struggling, then give me a call and we can roll up our sleeves and look at budgeting because that is your salvation.