Your Money Decisions Are Emotional
Read time: 4 minutes
Welcome to the inaugural issue of Mind Over Money, a weekly newsletter where I provide actionable ideas to help you transform your relationship with money and build financial confidence and independence.
Today's topic: How our emotions drive our financial decisions
A few years ago, I stood in front of a trendy juice bar menu, weighing whether to spend $10 on a smoothie. Logically, I knew I had fresh fruit at home, so I knew this wasn’t a “need.”
But after a long, stressful day, that smoothie felt like a reward—like I was telling myself, “You worked hard. You deserve something nice.”
That wasn’t a rational decision. It was an emotional one.
The truth is, most of our money decisions are driven by emotion—not logic.
We like to think we're rational, spreadsheet-driven adults. But in reality, emotions drive our spending, saving, and even avoiding money altogether.
Behavioral economists call this “affective forecasting”—we spend based on how we think something will make us feel.
And when we ignore this emotional layer of money, our plans fall apart. That’s the reason budgeting apps go unused and why debt-repayment plans stall.
Instead of fighting our emotions, we should design our money habits with them in mind.
Understanding the Real Driver Behind Your Wallet
Money isn’t just math—it’s memory, identity, hope, shame, status, and survival. Your financial behavior is a reflection of your emotional life.
Ever avoided looking at your credit card statement because it made you feel anxious?
Ever said “yes” to an expensive dinner with friends because you didn’t want to seem broke?
Ever turned down an invitation to an epic trip because you thought it was too expensive even though you have plenty of money to fund it?
These aren’t irrational choices. They’re emotionally rational—you’re protecting your self-worth, your relationships, or your mental bandwidth.
One study by the National Endowment for Financial Education (NEFE) found that nearly 9 in 10 people say emotions influence their financial decisions. And it’s not just negative emotions. Excitement, optimism, and even love can lead us to overcommit financially.
We can't eliminate emotion when making better decisions, and we don’t need to.
Instead, we need to integrate it into our decision-making process.
How to Design Financial Systems That Work With Your Emotions
Here are five ways to do just that:
- Traditional budgets are rigid and often feel like punishment. Instead, set aside a “joy fund” each month—money specifically allocated to spontaneous spending that makes you feel good (yes, even $10 smoothies). This satisfies the emotional need without derailing your larger goals.
- Saving for “retirement” feels distant and abstract. But saving for “Freedom Fridays” where you won’t have to work after 50? That hits differently. Make your goals personal and emotional. Attach them to a feeling—freedom, security, pride, peace—so your brain buys in.
- Before making a big purchase, ask: What am I really trying to feel? Is it status? Relief? Confidence? Then ask: Is this the best way to get that feeling? You might find that what you want is a sense of control—and that building an emergency fund would provide that more powerfully than a luxury item.
- Did you pause before impulse buying something and walk away? That’s an emotional win. Celebrate it. Did you finally open that bank statement you’ve been avoiding? That’s huge. Financial confidence grows not just from hitting numeric milestones but from building emotional resilience. Track those, too.
- Find a money buddy, coach, or community where talking about finances feels empowering. Avoid environments that use guilt or shame to drive change—those backfire. Instead, look for accountability rooted in curiosity and growth.
Final Thought: Emotional Doesn’t Mean Weak. It Means Human.
You’re not broken because you feel things when you spend or save money. That’s part of being human.
When you stop trying to “fix” your emotions and instead start designing your financial life around them—with empathy, structure, and intention—you unlock a whole new level of confidence and independence.
Because financial freedom isn’t just about numbers. It’s about feeling secure, in control, and aligned with what matters most to you.
Let’s build from that.
Reader's Question
Every week, I answer a reader's questions about personal finance on LinkedIn. This week's question: "What are your thoughts on upgrading to a more family-friendly home when planning for a child?".
My answer: It’s wonderful to think ahead, but keep in mind that it takes about nine months to make a baby, and another year or so before they’re even walking.
Finance News From Other Corners of the World:
- Fortune recently reported that a quarter of U.S. consumers are now financing groceries with buy-now, pay-later (BNPL), and this is bad news. Vivian Tu explains why that is bad.
- We all know that having a good credit score can contribute to healthy financial plan. But do you know what's a good score? Here is a quick read on good credit score.
