It's impossible to completely keep emotions out of finances. After all, money is related to a number of emotions, especially fear and excitement. While it might not be advisable to completely eschew all emotions, you do need to acknowledge how they affect you — and watch out for indications that your emotions could be getting in the way of your financial success.
It is possible to let your excitement get away with you. Consider how you feel when you first get paid. Indeed, studies have shown that people are more willing to spend money on pay day — when they feel flush. So, even though you might be excited about pay day, or an unexpected windfall, it's important not to spend money when you are in that first flush of giddiness. Don't let your excitement, or your relief, overwhelm your good senses. Say no to extra spending, and take a step back. Examine your priorities and make sure that your excitement isn't leading you to make a poor decision.
My husband has a Ph.D. in experimental psychology, and one of the things that he says that studies show over and over again is that fear is a very strong motivator — especially in the short-term. Unfortunately, when it comes to money, the fear-based decision making of the short-term can have very long-term consequences. Making decisions based on fear, whether it's pulling out during a stock market drop or buying into a Ponzi scheme because you're afraid of missing out, can lose you a lot of money.
Your fear of loss can also work against you. If you have a huge fear of risk, you might miss out on opportunities to grow your wealth, or start your own business. While you want to limit your risk, and take calculated risks, you do have to be careful of avoiding risk altogether. That kind of paralyzing fear can keep you from reaching your financial goals.
Despair And Disappointment
One of the hardest things about getting out of debt is getting over the despair and disappointment. It is easy to look at the impossibility of the situation, and give up. Try not to let this despair cripple you, though. If you do, you can become trapped in a debt spiral. Instead, find a little optimism. Make a plan to help you get out of debt, and make progress toward your goals. Once you do that, you will be more likely to notice your progress, and avoid the debilitating emotions associated with giving up on your goals.
Sticking To Your Plan
Making a plan is a good idea no matter your situation. Whether you are creating an investment plan for retirement, or making a debt reduction plan, having a road map to follow can help you avoid the pitfalls of letting your emotions rule you. When you feel like spending money because of a sense of euphoria, or when you are ready to sell a stock because of a market crash, step back and refer to your plan. Having that to fall back on can help you keep your emotions in check — and your finances on the right path.