How to Minimize Unhelpful Emotions in Your Financial Life

Human emotions are the scaffolding for your financial decisions both big and small. Understanding the psychology of investing can help you recognize how emotions influence behavior and why certain financial choices feel easier or harder to make. While you can’t totally eliminate emotions from influencing your behavior, you can minimize the impact of unhelpful emotions.

Research in the field of neuroeconomics has found that the stress hormones cortisol and adrenaline are activated whenever you make financial decisions. Emotions and investing usually go hand in hand.

Whenever you feel stress it’s important to be aware of your emotional triggers. These are activated by certain things like market volatility or global events and can sometimes derail your financial plan.

Some of your emotions can be helpful by providing positive motivation, nudging you to save and invest in the first place. Other times, emotions can be disruptive to your overall financial life.

Why the Psychology of Investing Matters

One of the best financial skills you can learn is how to spot when emotions are pushing you in the wrong direction. Ideally, your reasoning abilities and emotions should work together when you make financial choices.

The ups and downs of investment markets can directly influence your emotions. That’s where financial planning can provide real benefit. The planning process can help you stay on track when market stresses appear.

The aspirational objective is to internalize what constitutes a good outcome for particular financial decisions in your life. Ultimately you want to have satisfaction with your financial choices and a positive outlook for your future.

Recognizing Emotional Triggers in Financial Decisions

One meaningful way to minimize unhelpful emotions is by acknowledging that emotions are a factor in your financial decisions. That sometimes is harder than it appears as successful individuals often believe that reason and logic alone govern their financial life.

Of course, emotions alone aren’t as potentially problematic for your financial life as the resulting behavior that these emotions generate.

Since emotions are intertwined with human biology it’s generally not productive to think about making decisions devoid of any emotions. Instead, what can be helpful is to add perspective and framing to your financial choices.

Both positive and negative events in your life filter into your decision-making process. Even if these events were many years in the past they can influence your behavior today. Trying to bring your perspective into the present can be productive. Reframing your decisions around how the choice fits with your financial plan should also be helpful.

Using Perspective and Planning to Improve Financial Choices

How you frame the background leading up to your financial decisions is very important. Be particularly mindful of self-talk, your inner voice when considering your financial life. You can easily talk yourself into or out of decisions just through your self-talk.

Harnessing the specific emotions that have the most influence on your decision-making process can yield tremendous long-term benefits. Work to recognize how emotions creep into your decisions. This should help you approach financial choices with heightened awareness of the whole story. Understanding the psychology of investing can help you build a stronger framework for long-term decision-making. Start there. Ready for a real conversation?

Disclosure

Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Investing involves risk, and while remaining invested can support long-term goals, it does not guarantee a profit or protect against losses. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.