Making an emotional financial decision is often detrimental to our financial health. Unfortunately, we often measure our financial success only when we compare it to others' financial success. Why is this dangerous and how can we guard against it?

Question

What will be an ideal response?

Answer 1

No matter what mood or emotion you are in, you spend. Success, unfortunately, is often measured by how you look to others. If you drive a nicer car or have a bigger house or more toys then you are perceived to be more successful. And you have to spend to project those perceptions. But perception is not reality. Think about how you felt the last time you spent too much money. What about the stress and worry when your account was too low? Have you experienced a time when you had to decide which bills were to be paid on time and which bills were going to be late? What about buyer's remorse? Remember a time you excitedly made a large purchase only to experience that sense of dread or that sinking feeling later? Associate those feelings with spending too much money or purchasing things you do not need. How much is too much money? Every person's threshold is different. It is between you and your budget to decide. Ultimately, as you know more about your personal finances and employ more tools like a budget to control them, you will make fewer and fewer unnecessary purchases. Think about famous actors, actresses, and athletes who have made millions of dollars but still end up bankrupt. It's not about having more money. It is about managing what you earn and using your money to reach your goals. You will begin to see a shift in your attitude. Instead of getting excited about spending, you will get excited about paying off a credit card, a car loan, your student loans, and eventually your mortgage. You will begin to see past fancy cars and big, expensive homes and lots of play toys as status symbols. Your personal status symbols will become a fully established emergency fund, the elimination of any credit card debt, a paid-off mortgage, and a retirement account that is growing towards your goals. It may not be as outwardly flashy, but it is inwardly much more rewarding and satisfying.