September 21, 2016

Our Emotional Affair with Money

Have you ever argued with your spouse or partner about money? Learn how our emotions affect our relationship with money.
Shellie Kurek Peters, CFP®, ChFC®

Have you ever argued with your spouse or partner about money? Perhaps it was over some small expenditure, like a new golf bag, or maybe it was about a much larger purchase like a car or house. So why do emotions run high at times when we think or talk about money?

It’s not surprising that money and emotions are intrinsically linked.  We are human beings after all, fully wired for emotional response.  Our relationship with money is logically not anything less than one of some level of emotional reaction—fear, joy, sadness, hope, love or even shock.

From early childhood, we begin to experience the world, including interactions involving money.  Looking back, we tend to remember pieces of the experience and apply our own story or meaning to these events.  We carry these stories and their meanings around with us to make sense of the world, and these “lessons learned” also frame our attitudes and actions towards money. 

Early experiences influence our attitudes and actions

In working with a very successful client, she told me that when was young, her parents filed for bankruptcy. The family had to move from their home and live with relatives for many years until, finally, her parents divorced. The fear, shame and loss shaped her life so much so that she worked throughout high school and saved enough money to purchase her own home while she was still in college. She told me that she would never be homeless again.

While her past experiences with money motivated her to create a secure environment for herself and her family, it also affected her ability to enjoy her money and success. She admitted that, for her, no amount of money would make her feel entirely secure.

In our too busy lives, emotions tend to override intellect as we make thousands of decisions, both important and insignificant, in any given day. The more aware we are of our stories running in the background and our emotional response to them, the better we become at choosing to make different decisions that lead to more thoughtful and healthier outcomes.

Good behavior, bad behavior and money

How we label our own actions and those of others as good or bad can influence our decisions about money as well.  If we had a personal experience with someone who did something we thought was bad to achieve personal gain, or if we associate money and wealth with greed, we may be so adverse to any gain for our own benefit that we actually make decisions that hurt our well being. 

If we subconsciously assigned a “bad label” to money, we can hurt our ability to act in our own best interest, like saving for retirement or managing our investments. When we are aware of our attitudes towards money and the stories that shaped them, we can begin to separate the two and take control of our financial responsibilities.

Achieving balance between money and emotions

At its core, money is a conduit, a medium used to exchange for value in our society. In its best use, it serves us, our intentions, what we want for ourselves and our loved ones and supports what we care about.  As we become aware of the many stories we have about money and what they mean to us, we are able to discern whether they still hold true or are holding us back.  Our decisions become more intentional, and in doing so, continue to build on our ability to make money work for us rather than stopping or enslaving us.

The next time you feel a sense of compulsion around money stop and ask yourself, “Where and when have I felt this way before?”  Be curious about remembering some of the stories that have shaped you.  Then ask yourself—is this experience useful to me right now?  It may or may not be.  Only the conscious version of you can best decide.

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Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?

Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs. 

And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are. 

Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?

Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.

Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.

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Shellie Kurek Peters, CFP®, ChFC®

Shellie’s experience includes over 20 years of advising individuals, families and business owners.  Her wealth management and financial planning expertise provides strategies and insights in such areas as: cash flow analysis, risk management, estate and trust planning, investment management, and charitable planning.