You might think that all the numbers and all the statistics would make issues to do with money very rational and planned.

In fact the exact opposite is true. Most of the choices we make about money are rooted in our emotions.

Money seems to be able to trigger virtually every human emotion and often triggers many at the same time.

Psychologists say that the emotions most often triggered by money (in order of importance) are Anxiety, Depression, Anger, Helplessness, Happiness, Excitement, Envy, and Resentment. These emotions influence our behaviour significantly:

We want everything now.
We want what others have.
We buy to feel good.

Let’s look at these points in more detail.

We Want Everything Now

One of the advantages of modern life is that we can have most things we want almost instantly.

Information is at our fingertips on the internet; food is available either in minutes off the shelf or ready to pop in the microwave; books can be downloaded online and virtually everything can be delivered to our door.

We are used to everything being instantly and easily available. So why wait until we can afford it? We can acquire now and pay later.

The problem is that it’s so easy to make purchases that we make them too quickly and often regret them later.

Brian was a gadget enthusiast and always wanted to be the first of his friends to have the latest gimmick. He was pretty pleased with himself because he always spent a lot of time researching

the best-value products and searching the internet for the lowest prices.

But he was pretty shocked when he realised that he had spent over £3,500 in the last few months and almost everything was now out of date.

That experience is far from unusual. Just think about a few things you have bought in the last year or two and regretted afterwards!

Here’s the reality. You ended up with junk; the banks and credit card companies got your money. You may have felt good for a short time but that feeling probably didn’t last long and was most likely replaced with regret.

This is a common psychological response after buying things. The marketing gurus call it “buyer’s remorse” and for many larger purchases, they will have a strategy in place to make sure you don’t change your mind once you have bought.

They don’t want you asking for your money back.

It may seem a harsh comparison but using your credit card and spending money is, in many ways, like being addicted to drugs. It is all about seeking short-term gratification and then we want more and it stores up long-term problems.

When we buy on credit, we want the benefits now and forget we have to pay the bills later. Using credit can appear to enhance your lifestyle but soon becomes a ball and chain as paying off the debt drags you down.

The Power of Instant Gratification

There was a fascinating study at Stanford University in 1972 where a group of children were left in a room with a marshmallow and told they would be given a second one if they resisted eating the first while the adult was out.

In a series of follow-up studies, it was discovered that children who were able to defer gratification were actually more successful in several aspects of life than those who wanted instant gratification.

The fact is that sometimes it’s better to be able to wait than to have what you want right now. Being able to buy what you want may make you feel wealthy but, when the bill arrives, the reality is that you are not.

One simple way to get off this instant gratification treadmill is to get into the habit of waiting a week or so before buying something you think you want. Most of the time, you’ll wonder why you even considered it in the first place.

The same argument applies if you are selling something. Often we make decisions to sell based on fear. Somebody makes an offer for your house and you are worried you won’t get a better deal so you end up selling for too little.

The way to handle this is to make sure you get advice from two or more experts before you make a decision to sell.

True wealth is more often achieved by the tortoise than by the hare. It may seem like a challenge to wait a little longer but it usually leads to better results.

We Want What Others Have (Keeping Up with the Joneses)

The biggest reason most people get into debt is that they want to look and feel as if they are better off than they really are.

And one of the biggest factors forcing them to do that is that they want to feel they are keeping pace with their friends and neighbours. Certain possessions and activities become essential because other people are buying them or doing them.

Jim and Rosie stretched themselves financially to add an extension on their house just like the one their neighbours had. They didn’t realise that the neighbours had come into an inheritance that had enabled them to pay for it.

Instead Jim and Rosie added it to their mortgage and then bought a large-screen TV on their credit card to add to the new room.

They didn’t really need the extra room but at least they felt good because they were keeping up with the neighbours.

The problem with this concept—which we call “Keeping Up with the Joneses”—is that the Joneses are very often on the wrong road.

You think they are having fun but they are going broke.

When your friends are always making new purchases, you don’t really know if they have saved up the money, have won the lottery, or are already way overstretched on the credit card.

It all starts early—kids want something because their friends have it and parents are under immense pressure to give in.

A few years ago, the things kids wanted may have seemed quite costly but the cost then was nothing compared to what they want today.

What kind of lesson is it giving to kids that everything they want is easily available and they just need to ask and they can get it?

If you keep on thinking that people will like you more because you drive a big car and wear more expensive clothes, you will end up poor.

On the other hand if you stop caring what other people think and make your own choices, you’ll be better placed to buy what you want.

We Buy To Feel Good

People joke about the term “therapy shopping”—you’ve had a hard week at the office so you buy a new jacket on Saturday to make you feel better.

This type of impulse buying is a serious problem and its chief cause is stress. We think the purchase is going to make us feel better but it rarely does. It may provide a quick rush but the reality is that these purchases are often storing up real stress for later when the bills come in.

When you have racked up a few grand on the credit card and are struggling to make the repayments, then you really are stressed.

The other way that psychology drives our purchases is that we often buy things that we think will make others like us. This can be anything from buying expensive cologne that we think makes us more attractive to buying a new car that is supposed to make people like you more.

It’s crazy but true—and it doesn’t work.

Nothing you buy will make you more attractive, more

popular or more successful.

Whatever psychological fulfilment you thought you were buying, you didn’t get it and you just wasted your money.

People see ability to buy what they want as part of who they are and credit is an important part of that.

But credit only does one thing—it makes everything cost more. You’re not just paying the price—you’re paying the price plus interest. You can’t afford to let your self-image get tied up with your spending habits.

People who look like they have a lot of money have often wasted all their money trying to look that way. The people who don’t look like they have a lot of money often don’t look it because they haven’t wasted money for the sake of appearances.

Remember that distinction I made between Wealth Accumulators and Consumers:

Wealth accumulators live as if they earn half of what they really do. They end up rich and can enjoy anything they like.

Consumers behave as if they earn twice as much as they really do but they end up poor and working in their retirement years.

If you ever find yourself thinking that buying something will make you feel better, it’s time to put your credit card away. If you want to get wealthy, learn to recognise your moods and make sure they don’t affect your behaviour.

Never go shopping when you feel stressed or unhappy. If you find yourself going shopping for fun or to cheer yourself up, it’s time to get a new hobby instead.

If you go shopping with friends for social reasons, perhaps you should find a better way to spend time with them.

WEALTH WORKOUT 7: THE CONSUMPTION CONSPIRACY

Draw up a list of some things you have bought over the last three years that you regretted afterwards.

Item	Reason bought	Times used	Cost

42. Money is Emotional