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How Our Emotions Affect Our Personal Finances

According to The Harris Poll (2023), Seventy-nine percent of employees say their mental health is affected by their financial health.

How we feel about money often impacts the decisions we make in life and can affect our overall wellbeing. Whether we’re making impulsive purchases, avoiding budgeting, or experiencing anxiety about money, our emotions can have a powerful influence on our financial lives. Many people often feel fear, guilt, shame, and overwhelmed when considering their finances.

Building your financial future can be complicated, but it doesn’t have to be negative or something to fear. If you’re stressed about money, here are three helpful tips to help you start taking control and feeling better about your finances.

1. Assess Your Situation

The overwhelmingly negative emotions we may experience when thinking about our finances can often feel out of control. Taking a step back and assessing the bigger picture is a great way to put things into perspective.

  • Start with putting all your expenses down on paper. This process may sound scary at first, but it is vital to declutter your mind of all the costs you’re trying to track mentally.
  • Gather your bank and credit card statements and start categorizing your monthly expenses. A budget list is a perfect solution for this. The list is there to help you visualize how much you’re bringing in and how much you’re taking out.
  • By laying it all out, you can identify your needs, wants, and capacity to maintain both.
  • Instead of focusing on negative thoughts like “I spend too much” or “I’m falling behind,” take the information from your budget list to answer those worries.
    • What is taking up most of your expenses?
    • Of that majority, what are absolute necessities that are non-negotiable?
    • What can you cut back on?

By going through this process and asking yourself these questions, you start to shift those worries into a search for solutions.

2. Access Valuable Resources

Knowledge will always empower you when it comes to financial decisions. Many negative emotions we experience with money come from the fear of the unknown. You can trigger your anxiety whenever money is involved if you don’t understand the specifics of your spending.

Once you understand the problems you are trying to solve, you can start learning how to fix them. Educational resources, such as OneDigital’s Financial Academy, can help you reach solutions to the questions you discover when going through your budget list.

Perhaps you discovered you’re not saving as much for retirement as you thought. Instead of leaning into panic, take control. You can search for a solution through learning. Start with relevant articles, guides, books, online courses, or webinars.

Regardless of your unique situation, you are empowering yourself to make informed decisions by learning the specifics of your needs. Ultimately, informed decisions leave little room for fear of the unknown.

3. Take Action

Set clear and realistic goals for yourself. Everyone’s goals and finances are unique; only you know what’s best and doable for yourself. For example, maybe you decide to organize your finances using the 50/30/20 rule. Or perhaps you’ll prioritize building your emergency savings. When you are proactive and working towards a solution, you can combat negative and uneasy feelings. Setting and acting on these goals allow you to set expectations for yourself and eliminate unpleasant what-ifs. The more in control, you are of your finances, the more at ease you’ll feel.

Whatever your goals, don’t hesitate to ask for help to set them in motion. Speaking to a trusted professional can be a great way to help kick-start your new goals.

Ultimately, the negative emotions surrounding our finances often have to do with the feeling of control (or lack thereof). Taking action can allow us to regain control and set us on the right track to finding the financial freedom we seek.
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Investment advice offered through OneDigital Investment Advisors LLC, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.