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How Do Our Emotions Affect Our Financial Management?

Updated on June 6, 2018
denise.w.anderson profile image

An Education Specialist, Denise teaches the principles of Emotional Health for the establishment and maintenance of high quality families.

We speak volumes by what we do with our money.
We speak volumes by what we do with our money.

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Money can either be a frustrating problem, or the answer to our prayers! It all depends upon what is happening in our world. Money is required for us to live. We exchange it for goods and services, use it to provide for our necessities, and save it for future needs. When our emotions are on the rocks, what happens to our financial management skills? Are we able to make wise decisions, invest in our future, and provide for our own? Can we recognize the warning signs before we end up in financial ruin?

The emotional connection

Our emotional health affects every aspect of our lives. It is like the glue that holds us together. It starts with our core concept of who we are and the relationship we have to those around us and goes on to color our thoughts, feelings, desires, and actions.

In The Personal Pinwheel diagram, we see that the center of the pinwheel is labeled "Emotional." It touches all other areas of the pinwheel, the physical, spiritual, social, and intellectual. When the pinwheel is cut on the diagonal lines and the corners with words are brought in and attached to the center, the pinwheel is able to spin. When something happens to the center of the pinwheel, all of the outer wings are affected. If the center disappears, everything falls apart.

The Personal Pinwheel by Denise W. Anderson. Print out the pinwheel. Cut on the diagonal lines from the outside to the circle in the center, then fold the corner with the word toward the center and secure to a pencil eraser with a pin.
The Personal Pinwheel by Denise W. Anderson. Print out the pinwheel. Cut on the diagonal lines from the outside to the circle in the center, then fold the corner with the word toward the center and secure to a pencil eraser with a pin.

The core skills

The five core skills that comprise our emotional health are the very skills we need to be successful financially. They include:

  1. Problem solving - we depend upon our problem solving ability to make wise decisions regarding what we need to purchase and where the funds come from.
  2. Conflict resolution - our conflict resolution skills enable us to work with others in our world to set up a financial management system that governs what we do with our money.
  3. Communication - effective, regular communication about money alleviates misunderstandings and distrust. When others know what we are doing and why, they are more likely to support our plans.
  4. Resilience - we all experience financial setbacks. Resilience is the ability to bounce back afterward. Whether it is finding new employment, moving to a new location, or even going back to school, we try one thing and then another until we find something that works for us.
  5. Resource management - money is a natural resource. Our understanding of this vital part of our lives gives us the ability to manage our money successfully. It becomes a tool that enables us to function effectively in society.

Our emotional stability gives us the foundation to prepare for our financial future.
Our emotional stability gives us the foundation to prepare for our financial future.

Putting our skills into action

As a natural resource, money exists in raw form in our environment, just like water, minerals, and land. We obtain money by tapping into the economic cycle; i.e. gathering raw materials and turning them into products, selling and distributing products to consumers, and providing consumer services.

Our career and job choices determine the amount of money we receive and how we receive it. Once we have money, our financial management skills provide a blue-print for its use. This is done through the following process:

  • Putting the money in a safe place - having our money in a financial institution provides banking services, including (but not limited to) checking, savings, money market, debit cards, credit cards, and bill paying services, along with protection of our assets.
  • Taking care of essential expenses - paying the “bills” first gives us stability. Expenses such as a place to live, electricity, running water, and transportation usually come in the form of monthly statements. Paying these expenses on time increases our credit rating and establishes our financial security.
  • Giving a percentage to charity - giving back to society through charitable donations creates an attitude of gratitude. When we give, we are more likely to care about those who are in less desirable circumstances. Setting aside a certain amount each month for giving puts us in a position to be an asset rather than a liability.
  • Saving for future needs - creating a nest egg of funds allows us to make major purchases without incurring debt. We use these funds for such things as appliances, home repairs, school tuition, and vehicles. The more we set aside, the sooner we are ready for the unexpected.
  • Budgeting wants carefully - the remainder of our money is allocated for food, clothing, communication, entertainment, and other personal and family desires. Keeping these expenses within reasonable limits allows us to have discretionary funds for the things that we really want.

We don't have to spend out money right now. It is okay to wait.
We don't have to spend out money right now. It is okay to wait.

Emotions and money

Our financial management skills are tested regularly when we enter the market place. Advertisers know that spending money is an emotional experience, and they do everything they can to get us to open our wallets.

If we decide ahead of time what we will purchase, how much we will spend, and when we will walk away, we can get out of the store and back home with money still in our pockets. Remember, there is always a sale, and if we don’t find what we are looking for today, chances are, we will find it later.

We run into problems when our emotions are awry. Our core skills are compromised by the instability of our emotional state, and we fall prey to a number of financial ills. These are shown in the table below, along with their emotional counterparts:

Financial Issue
Emotional Counterpart
Tight-wad
Anger
Impulse buying
Fear
Excessive debt
Jealousy
Fraud
Sorrow
Shopping addiction
Misery
Gambling
Stress
Getting behind on bills
Overwhelmed
Greed
Hate
Returning goods already purchased
Disappointment
Hording
Worry
Indecision
Embarrassment

Any time we succumb to the financial ills listed above, it is necessary to back up and look at our emotional state to see where these problems are coming from. We know that our emotions play themselves out in our desires and passions, and our thoughts govern our emotions. Setting limits and boundaries for ourselves and our loved ones helps us to see the red flags before we hit the crisis point.

Since our emotions are subjective to what is happening around us, the better we get at establishing high quality habits that keep our emotions on an even keel, the better we are at managing our emotional and financial health.

If a family member is having major financial issues, it may be necessary to implement an intervention, just like we would for someone who is addicted. Gathering our family about our loved one and expressing our concern for their financial well-being lets them know that we care for them and love them. We may have to implement some tough love, and get this person professional help to keep them from financially dragging others down with them.

People with mental health issues often have problems with their money. Most communities have organizations that provide financial management services for these individuals. The money that they earn goes into an account with the organization, then their bills are paid and they are given a stipend for personal spending.

© 2015 Denise W Anderson

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    • denise.w.anderson profile image
      Author

      Denise W Anderson 21 months ago from Bismarck, North Dakota

      You are right, Anastasia, our feelings of self-worth are often affected by our money situation. The number one cause for divorce in our country is finances. People come from such different backgrounds and attitudes about money. When we become a family, it is necessary for us to work out our own philosophy and style. This means both how we earn or obtain money, and how we spend it. Keeping our emotions about money in perspective is a vital part of this process. I appreciate your comments and insight.

    • Anastasia E profile image

      Anastasia Egleston 21 months ago from United States

      I've been around people that get so angry when they don't have enough to buy certain things. Then all that anger goes out on loved ones and it's really sad. It's not worth getting angry over finances even if we feel were lacking. Money problems cause extreme self-esteem issues and there's no sense in it. As humans we have this really bad habit of getting too emotionally involved in things.

      This was very informative for me and I really liked your pinwheel diagram Denise. Thank you for explaining the correlation between emotions and financial issues. Good luck everyone!

    • denise.w.anderson profile image
      Author

      Denise W Anderson 2 years ago from Bismarck, North Dakota

      You are so right, William! It is how we look at money that causes us problems, not the money itself! Money is such an essential part of our lives that it gets tangled up with our thoughts, feelings, and actions more than we realize. I am glad that you found the chart helpful. I appreciate your feedback!

    • lifegate profile image

      William Kovacic 2 years ago from Pleasant Gap, PA

      Hi Denise,

      "Money can either be a frustrating problem, or the answer to our prayers!" That is so true. Money in and of itself is neutral. It's how we look at it through the lens of circumstances. I liked the finances vs. emotion chart as well. Thanks for putting this together.

    • denise.w.anderson profile image
      Author

      Denise W Anderson 2 years ago from Bismarck, North Dakota

      Thanks for your thoughts, Chitrangada. Money and our emotions can really get tangled up in strange ways if we are not careful!

    • ChitrangadaSharan profile image

      Chitrangada Sharan 2 years ago from New Delhi, India

      Brilliant hub and so analytical!

      You are so right in pointing out that the five core skills that comprise our emotional health are the very skills we need to be successful financially.

      Sometimes spending money thoughtlessly can be related to some kind of emotional disturbance. Panic buying, mindless shopping when there is 'sale' are some of the examples.

      Thanks for sharing this insightful and thought provoking hub!

    • denise.w.anderson profile image
      Author

      Denise W Anderson 2 years ago from Bismarck, North Dakota

      Thanks, Dora. I am glad that you were able to see some things that were helpful for you. Money can be such a sore spot in our lives, but it doesn't have to be that way. I appreciate your comments.

    • MsDora profile image

      Dora Weithers 2 years ago from The Caribbean

      Very good advice, Denise. Your article gives me some pointers to consider for better money management. I think our emotions will not be negatively affected if we follow your blue-print.

    • Aysleth Zeledon profile image

      Aysleth Zeledon 2 years ago from Russellville, Arkansas

      No problem Denise, I always enjoy readying your blogs. Being such a busy person doesn't allow me to spend much time on hub pages as much as I would like to.

    • denise.w.anderson profile image
      Author

      Denise W Anderson 2 years ago from Bismarck, North Dakota

      You are one of the rare gems in this world, Glenn. Most people don't think far enough ahead to set aside for future needs. That is why the credit card companies get so much business! Our wants frequently get ahead of our ability to pay, and we spend ourselves into a hole before we realize what is happening. When our emotional health is strong, we prepare ahead of time and we are able to keep a handle on our spending. I appreciate your insightful comments!

    • denise.w.anderson profile image
      Author

      Denise W Anderson 2 years ago from Bismarck, North Dakota

      You are quite a pair, Eric! Most people in your shoes would have major financial issues! It must be your immense faith that carries you through! Thanks for stopping by and commenting!

    • denise.w.anderson profile image
      Author

      Denise W Anderson 2 years ago from Bismarck, North Dakota

      Thanks, Aysleth. I appreciate you stopping by and reading.

    • Glenn Stok profile image

      Glenn Stok 2 years ago from Long Island, NY

      I have always found it interesting how some people live from paycheck to paycheck. I never could do that. I would think it must be stressful.

      I always budgeted my expenses and I started doing that early in life. Then when I had a big expense for something important, I just took it from my savings, since it was there. But I have friends who need to take loans because they didn't save.

      I learned from your hub that the reason why they don't stop and think ahead financially may be due to an emotional issue that compromises their ability to plan their financial affairs.

      Your hub is very informative and you made this clear how to use financial management methods.

    • Ericdierker profile image

      Eric Dierker 2 years ago from Spring Valley, CA. U.S.A.

      Very interesting. We are what we eat? We are what we spend our money on? Something amiss here. I am crazier than a Loon and my wife is neurotic and a workaholic - but we do great with finances. Never enough and yet always plenty. I better pray on this concept. Thank you for raising it to my awareness.

    • Aysleth Zeledon profile image

      Aysleth Zeledon 2 years ago from Russellville, Arkansas

      Very informative. :-)

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