Money – How Emotions Influence Your Financial Personality

Key Takeaways

  • Research shows that emotions drive many of our important money decisions.
  • Five important emotions that affect how we deal with money are self-worth, love, security, power and attractiveness.
  • Having a plan, knowing the facts and not making decisions alone can go a long way toward keeping our emotions and money in check.

Money and emotions. We like to think that they’re not related, but they really are. More and more research is showing that we make the majority of our decisions emotionally. That’s disconcerting. Dr. Ned Hallowell, an author and expert in ADD and ADHD, says that there are five ways that we deal with money emotionally.

1. Self-worth. You might have an actual one thousand dollar bill in your possession. It’s rare and valuable. As you admire it, it just has to make you feel good about yourself.

2. Love. Money lets you do something generous for the people who you love. For instance, you can buy a plane ticket for your son or daughter to fly to their vacation destination. That’s all about love.

3. Security. You may take that thousand dollars we spoke about earlier and put it into a savings account or an emergency fund at the bank. That’s about security.

4. Power. You might make a deal with your grandchild and say, “Hey, look. If you can make it through college, I’ll give you one thousand dollars.” That’s about power.

5. Attractiveness. You go out to the spa and then you can get a new outfit and get all made up after you’ve been taken care of. That’s about attractiveness.

Of course, the downside of money is that we all surround it with our own personal demons. Our past experiences with money strongly shape how we regard it going forward.

Key considerations when dealing with money

When it comes to emotions and money, Dr. Hallowell says there are three rules to follow:

1. Never worry about money alone. Always have somebody with you who you can trust to talk to about money.

2. Get the facts. Get all the intel you can about the money issue that’s concerning you right now.

3. Have a plan. At our firm, we make sure everybody’s got a plan they can refer back to. It keeps you rational so you can stay focused on your goals when really bad emotions might affect how you’re dealing with the money at the current time.

If you want to learn more about emotions and decision making with money, I recommend Dr. Daniel Kahneman’s book Thinking, Fast and Slow. Kahneman argues that there are two ways of thinking: the fast way of thinking and the slow way of thinking. Without realizing it, we can fall into some real cognitive traps and have lots of little biases clouding our judgment.


Psychology and money. Emotions and money. These things are with us every single day. By understanding the connection between the two, we can learn from our mistakes and make smarter financial decisions in the future. We’ve helped many of our clients with the psychological and emotional aspects of money. Feel free to call us anytime if you’d like a consultation.

Until next time, enjoy. Gary
800-480-7913 |

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