Today I have a wonderfully important guest post from Eileen Adamson. Eileen is a Your Money, Sorted coach, working online with UK based women. She can help you to develop a better relationship with money and feel calm, relaxed and positive about money. This will allow you to feel confident, in control and able to make good financial decisions. Through creating a good relationship with money, you can then live the life that YOU want to lead. Over to Eileen…
If you can manage emotions around money more effectively, then you can easily reduce your spending. Before you can start to manage emotions, we must first think about how our emotions affect our finances.
It used to be thought that finance was purely about the practicalities of numbers and figures, notes, and coins. However, more recently research has shown that a huge part of being able to manage your money well is in being able to manage emotions well.
As a money coach, I help people to deal with emotional issues around money, many that they didn’t even realise that they had. There are many emotions that affect people and we will look at 5 of the most common ones. We will discuss ways in which you can manage emotions more effectively to help you to manage your money more effectively.
Shame is an emotion that can affect people badly. Many people feel ashamed that they are in debt, or feel humiliated that they find it difficult to manage their money well. There can also be a degree of shame around not being able to provide for their children, if money is tight. Many people also feel ashamed about their shopping habits and can feel distressed about some of their purchases.
The problem with shame is that it is often a hidden emotion. These feelings are rarely shared. The can then fester away inside a person, making the problem grow and grow, until it is out of control.
Tip to manage emotions
A much healthier way to deal with this is to start by admitting how you feel. A brilliant way of doing this is using the “Write and Burn” technique. Just start writing and pour out all these feelings of shame. These feelings do not serve you in any way – what’s done is done and feeling ashamed will not help you in any way. After you have acknowledged these feelings of shame, you will hopefully feel lighter and be more able to deal with the root of the problem.
Instead, look forward and work out how to deal with the specific part that is causing the shame. Think about the following questions: When do I feel shame? What am I ashamed about? What has caused this?
It is then important to start taking steps to improve the situation. What can I do to avoid this in the future? Where can I find help to make changes? Who can support me with this?
This should help you to come up with strategies that will help you to make good choices that will help you to avoid shame in the future.
Another emotion that can hugely affect people and their finances is envy or jealousy. Being envious of others can cause people to try to keep up with “The Joneses”. This can hugely impact on their finances. If the neighbour buys a new car, they can feel the need to buy a better one. This game of being one better is a never-ending cycle that normally ends up in misery for one, if not both parties, as they try to outdo each other with their purchases. For many people this can lead them into debt and financial difficulty.
People who have been playing this game for a while, may find it difficult to take a step back from it. They may feel that the other party has “one up” on them, if they stop trying to “beat” their purchases.
Tip to manage emotions
Take some time to sit back and think. What would make YOU and YOUR family, truly happy? If you were told that you only had a few months to live, would that new sofa still be important? Would a better car than your neighbours be at the top of your list if your time was limited? If you are struggling to work it out yourself, this test might help.
Perhaps you feel that the most important thing in your life IS having better possessions than your neighbours. If this is how you feel, and you can afford to finance it, then fire on – do what makes YOU happy.
However, I suspect that, for many people, there are other things that would be more important. Once you have identified what is most important to you, then you can start thinking about how you can achieve this.
For example, you might want to take the family on a fantastic summer holiday, so set yourself a specific goal. Eg: “By deciding not to change my car, I have saved £250 per month into a holiday fund. By July 2018 I have saved £4500 and have an amazing summer holiday in the sun to look forward to.”
Fear can have a poor impact on a person’s financial situation. This could be a fear of moving money from one place to another eg: to a new account that pays more interest. Many people are also afraid to invest their money, instead leaving it floundering in savings accounts that pay little or no interest. Another common problem is when people are too afraid to switch supplier to get a better deal.
These behaviours mean that fear is holding you back from saving money and earning more money.
Tip to manage emotions
The way to overcome this is twofold.
Firstly, educate yourself. Read as much as you can about investing or switching suppliers. Do a bit of research into difference providers and compare reviews online to ensure that you are happy with the options available to you.
Secondly, you could also enlist some help. There are many money comparison websites, which do the hard work for you when comparing suppliers or bank accounts. If you are looking at investing money, then an experienced and regulated financial advisor, will help you to make good decisions about investing.
Comfort eating is a phrase that is common enough, but what about comfort spending? It is a very similar thing, where people who feel unhappy, bored, or sad, seek solace in shopping. The thrill of the purchase can often help them to forget the negative emotions. However, this thrill is often short-lived and is quickly replaced with the initial emotion, plus a hefty mix of guilt, shame and anger thrown into the mix too.
The impact of this type of spending can be detrimental to a person’s financial state. Often people will feel too down to even think about how to manage emotions. Returning purchases can seem like too much effort and items can lie unused and unwanted, as the bank balance diminishes or the credit card bill increases.
Tip to manage emotions
One way to manage emotions such as these is to first identify them. If you are to control this type of spending, you should learn to recognise the triggers. You could keep a spending diary for a week and ask yourself the following questions for each purchase that was unplanned.
What did I buy? Why did I buy it? What caused me to spend? How was I feeling before the purchase? How did I feel at the time of the purchase? What was I feeling after I got home?
Once you have identified what the triggers are, it is time to think about strategies that you can use to manage emotions and avoid spending. What do you enjoy doing, that would be an attractive alternative to shopping? Inviting friends over, going for a walk, reading a book and exercising are all popular and positive distraction activities.
Sadly, despair is an emotion that many people feel when they think of their financial situation. According to the Money Advice Service, more than 8.5 million adults in the UK (16.1% of the population) have problem debt. With increased costs for everyday essentials, high housing costs, low incomes, and unexpected events such as bereavement and redundancy, it is easy to see how people can get into a spiral of increasing debt. Making minimum repayments on credit cards and store cards might make it seem like the problem is under control, but minimum repayments are the work of the devil! Just £1000 on a credit card, with a typical APR and a £5 per month minimum payment will take 18.5 years to pay off. That's right – 18.5 years to pay off £1000.
Tip to manage emotions
Whether it is soaring debts, or the stress of making ends meet every month it is important to realise that help if available. Please don’t bury your head in the sand, as this will not help your situation. If you have problem debts, and can’t work out what to do about them, then please check out this post for ideas.
Educating yourself about money and money management can really help to make real and lasting changes in your life. Once you have your money under control, it is surprising how the rest of your life will be improved and enhanced.
I hope that you have found this post useful and interesting. Managing emotions is a complex issue and one that won't be “solved” overnight. Taking that first step in identifying how these emotions affect you and your finances, will really help you to start making changes in your life.
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