Identifying the triggers that lead to questionable financial decisions. 

No one is perfectly logical when it comes to money. We try our best, but yet delving into any part of money matters has a strong connection with emotions such as satisfaction, glee, fear, guilt, regret, and many more.

As money choices affect our mental state, likewise too our mental state can affect our money choices. It is a relationship that evolves over a lifetime of consequences.

Awareness is the key to better control. We look into 5 psychological reasons behind financial mismanagement.

#1. Life Feels Out of Control

When you feel as though you are losing control over your mood and your emotions, you will probably start to feel as if life, particularly your financial life, is also out of control.

When your mental health is on the downside, it can be overwhelmingly difficult to think about your financial future. Who can focus on investing or putting money aside for retirement when life feels like it’s spinning out of control? Future plans seem far away and the tiny uncertainty of any risk feels like a huge unknown leading to more helplessness. It feels easier to ignore these and focus instead on something you can manage.

To compensate (or even overcompensate) the feeling of helplessness, individuals put aside care for long-term and focus on what they can do in the here and now. To project an impression of achievement, low self-esteem causes them to splurge unwisely. Spend, spend, spend! The satisfaction of enjoying spending power gives an illusion of control.

#2. Addictions and Temporary Relief

Addictions can be very costly, whether it’s alcohol, drugs, high food bills from overeating, or gambling. Even if you appear to have a normal life outwardly and mask your problem well, your thoughts are still partly about your addiction, which means that there is no headroom to prepare your future. The anxiety that comes with concealing an addiction also doesn’t help.

You’ll do almost anything while you’re in pain to get out of it, even though it’s going to hurt you more in the long run. This is one of the reasons why the word “retail therapy” has been created. Right now, buying something, whether it’s a new pair of shoes or a car you can’t afford, will give you momentary enjoyment. But there is a strong risk that in the long-term, it will cause more financial distress.

#3. Unhealed Wounds

Your subconscious can remember all the other times you had similar emotions when you’re feeling down-and those may just be the darkest days of your life. Very frequently, when your mental health decreases, emotional wounds that have never recovered get re-opened.

And that leads to improvements in financial habits for many individuals. To prevent them from feeling the same pain, a father who was bullied for not getting nice things when he was younger may overspend on his kids. Or to get the attention she craves, a person who has never felt good enough might take out a larger loan than she can afford.

#4. Avoiding Problems

To tackle a high stack of bills or to call the credit card company to fix your late payment requires a lot of concentration and strength. And of course, sitting down to build a budget causes tremendous pressure and facing the truth is always difficult. When you don’t feel your best, it’s far more tempting to stop those kinds of issues.

A reduction in mental health also indicates poorer sleep quality, increased feelings of exhaustion, and more difficulty keeping on assignment. Both of these things make it much harder to think about paying off debt-let action be done on its own. And when you are not in the right frame of mind, it is difficult to build a strategy based on the bigger picture.

Shame, combined with avoidance, leads to a vicious cycle. The normal inclination when you’re loaded with guilt is to stop facing whatever makes you unhappy. The avoidance itself contributes to additional guilt and further avoidance. The next thing you know is that your taxes are overdue, and it’s six years since you agreed to make that appointment to see a financial advisor, and it hasn’t happened yet.

#5. Codependency

  • Do you want to concentrate on making more money, but you don’t have time because ‘you are in love’?
  • Did you give all your money to your partner because they needed it more than you?

Sadly, it leaves very little time for stuff like going ahead with your career or seeking new sources of income to spend all your time satisfying someone else. Codependency lack restrictions, so if their partners ask for money, one usually fails to say no. Or, your desire to please might suggest that to keep your partner satisfied, you overspend on your credit cards.

#6. Pride

Pride can be a downfall and come in many different ways. It may be in the form of ego that your spouse is earning more than you (especially for men). It may be in spending unnecessary wanting to appear better off than you really are.

It’s not a comparison with your family, friends or any other person. No matter what society or Instagram tells you. Do not let your inner insecurity or jealousy that stems for pride destroy your relationships and happiness.

Conclusion

If you recognize any of these signs in yourself or in someone you know, it is time to sit down and have a heart-to-heart talk with a trusted person to dig deep into the root cause of your issues. Only after you recognize the root cause can you address it. Your finances can recover too but you must take remedial action immediately. Go on, you can do it!

 

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How else has your mental state affected your financial decisions?