How To Tackle The Emotional Aspect Of Money Through Personal Financing?

Advisor June 12, 2022

More often than not, people tend to look for money tricks and shortcuts. They wrongly assume that there are some secret “hooks” to making, saving, and managing money better. The truth is that there is no such thing as a shortcut to making money. Instead, it is a matter of understanding the functionality of money from scratch – a phenomenon known as financial literacy.

Pixabay / Pexels / No financial guru can help make, save, or better manage money if you are not financially literate.

Financial literacy refers to understanding money holistically. There are some people who work really hard but somehow, they still can not make it. Likewise, other people work hard and make a decent income, but they can never save enough. Some employees dream about an “independent post-retirement life” only to be dependent on their family after retirement.

What is missing in all of these people, you may ask? Well, one thing is obvious: None of them are financially literate. Since financial literacy is not taught in schools, many of us have not gained enough ‘money education’ from our parents. Consequently, we have become a victim of the Rat Race. In other words, we chase money our whole life only to end up drowning in debt, and living a miserable life.

Monstera / Pexels / Financial literacy begins at home; the household serves as the first alma mater of educating the kids about money.

Thus, it is a parent’s responsibility to ensure that their kids are aware of money. When they become a part of the real world, they should be mindful that they do not fall into the trap of the Rat Race – where everyone chases money and ends up in despair.

Money is Spent Emotionally, Not Logically

One fact about money is that a vast majority of it is spent based on emotions, not logic. Think about it: What is the goal of every young couple today? A grand wedding. A Lavish lifestyle. Spending mindlessly on expensive shopping and extravagant dinners. The list goes on and on. Notice that all these things are based on sheer emotions and to quote Hollywood actor Will Smith, there is no logic in spending money on things we don’t need and impressing others by spending money that we do not have.

Alexander / Pexels / Spending money on things to impress others with the money you don’t have only leads to despair.

Consequently, these extravagant spending habits can only lead to serious financial consequences. The couple who spends extravagantly on their ‘dream wedding’ or go on lavish honeymoons are likely to end up drowning in debt. Harsh as it may sound, this is true and natural human instinct. No matter how much you spend, it is never enough.

How to Effectively Tackle the Emotional Aspect of Money?

Here are some easy, yet effective, ways that will help you better manage the emotional aspect of your hard-earned money:

Be money-conscious.
Keep a balance between your income and expenses.
Look at the long run and save money.
Have emergency funds handy.
Communicate with your partner about finances.
Be self-educated about money and make your significant other financially literate.