90% of financial decisions are based on emotion – here’s how to find a balance

Most of our behaviour is driven by emotions, like our relationships with people and things.

Bari Tessler, a financial therapist, said 85 to 90% of our financial decisions are based on emotion.

“Whether it be complex emotions like remorse, greed, depression or more basic ones like fear, sadness and joy, our emotions play a monumental role in our spending habits.”

Finding the balance  

However, it is essential for people to find a balance.

Psychologist Dr Khosi Jiyani said people need to find a balance because it is impossible to separate emotions from spending.

“We need to instead find a support structure that helps us manage our emotions about our money and finances as it helps us make more rational decisions that safeguard our financial future and that of our family.”

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People can help you find the balance

She added that having a strong circle of people means sharing lessons and stories, and holding each other accountable for the financial goals that have been set.

These can be people who are real with you and who you trust enough to talk to about everything, including money.

Talking to them is an important outlet for sharing your emotions and reducing the burden of financial anxiety. 

“It is about shifting from negative emotions about money to more positive ones and learning good habits together.

“They say it takes 66 days to form a new habit or break an old one, so the sooner we start changing our thoughts about money, the better.”

Money evokes strong emotions

Jiyani said it is not just about having a healthy respect for money but also about maintaining self-respect.

“Money evokes strong emotions because we all need it to live; without it, part of our identity as a provider is taken away.

“Money, or the lack of it, can take a real toll on our self-esteem. That’s where a supportive circle can help lift us when things get tough.”

Most of the time, leaning on friends and family is enough.

“But speaking to a professional, whether a therapist or a financial advisor, can make all the difference when things get tough.”

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Good financial management

Rapule Mahlangu, head of associations and affinity groups at Metropolitan, said money decisions can be emotional and that often leads to impulse spending, which can make a bad situation worse.

“But with a solid financial plan, we’ll likely keep our cool.”

He suggests making a mindset shift that helps sticking to a financial plan easier and feels like less of a sacrifice.

“If you indulge in something small, it takes the grudge out of saving or paying off debt.

“But finding spending opportunities that match your budget is also important. Wait for the sales and promotional discounts, or step back and sleep on a decision before you make a rash purchase.”

Dealing with financial loss

Jiyani said it is normal for people to have little control over the emotional impact of loss.

However, there are specific ways that can help buffer the financial impact. “Unlike other forms of loss, financial loss garners much less sympathy.”

She acknowledges that financial stress can be overwhelming, but with the right type of people, you won’t go through it alone.

“Developing a positive attitude toward saving and investing for long-term financial security and prosperity can make a difference in how you experience financial loss and the magnitude of its impact on your life.”  

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Go further, be stronger together

“Surrounding ourselves with like-minded people who help us reset our approach to money and hold us accountable gives us the best chance of sticking to financial goals.

“We can leave guilt behind with a clear plan and focus on making smarter financial decisions.

“Being part of a squad gives us access to shared knowledge, moral support and positive peer pressure,” added Jiyani.

Mahlangu said: “Nobody hesitates to get a physical health check-up, so why do we hesitate about a financial one?

“We have seen that people who surround themselves with the right squad and who seek professional advice approach money differently and make better financial choices.”

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