Human beings make most decisions at an emotional level, which often contradicts logic. This can certainly be true when it comes to shopping.  

For instance, following each holiday season I resolve to buy holiday gifts throughout the year, taking advantage of 12 months of discounts. Instead, I end up procrastinating, opting to make time with family and friends a priority – not shopping. As a result, I desperately buy things at the last minute, paying a premium to ensure my family members will have gifts from me. This behavior is explainable and predictable, because all human beings struggle with emotion vs. logic. 

The Link Between Emotions and Your Wallet


In my case, it would make sense for me to budget for gifts throughout the year. I could divide the cost into 12 months, place it in my variable spending category, and save money and time. By doing so, I can take advantage of discounted items and have time to obtain the best prices rather than buying under pressure and paying a premium for it.  It would be a no-brainer. Of course, such “logical” thinking doesn’t always win out.

A study1 conducted in 2012 cites the example of the Michigan lottery as demonstrating the dangers of emotional purchasing and poor planning. Winners of the lottery received lump-sum distributions of up to $850,000; however, most could not manage to hold on to their wealth. Some ended up on public assistance, in worse shape than when they started. Their impulse buying proved detrimental. Currently, more than 3,500 lottery winners in Michigan live on food stamps.

Have you ever wondered why there are so many promotions and ads at the end of the month when paychecks are due?  It's because when people get paid they, feeling flush and generous, respond to promotions by spending on impulse. Companies know this, and they increase their marketing campaigns at those times to trigger the short-term, emotional gratification that our brains crave when shopping. Just be aware and plan accordingly, asking yourself, “Do I want it or need it?” If you do need it, or if it will make a huge difference in your life and you can pay for it right away without touching funds that are earmarked for other important goals such as financial independence, then go for it.

How to Overcome Your Emotions


Even though logic is the language of the mind, emotion is the language of the subconscious – therefore, it often defeats logic when it comes to making decisions. Be cautious of this, resolving to build your spending plan without allowing your emotions to take over.  Here are some ideas for doing so:

  • Make a list before shopping. Studies by the ING Group2 have shown that 57 percent of people save money when they create a list prior to hitting the store. Set a budget for annual gifts 12 months before the holidays, and find ways to be creative, such as giving experiences over material things.
  • Pause and think twice before buying large items. When making major purchases (for example, over $500), take some time between deciding to buy and making the actual purchase. Prioritize your expenditures by categorizing them in terms of cost and effect. For example, you should pay your health insurance and car insurance before booking a short-term vacation. Or pay the premium in your life insurance to protect your family in case of an accident before upgrading to a flat screen TV from a more modest television that still works fine.

A Final Word

Common emotional purchases include “buying things in anticipation of money that is not guaranteed to arrive” or “buying things that are just too good to be true.” These may provide short-term happiness; however, they’re just as likely to result in long-term regret or debt.  A CERTIFIED FINANCIAL PLANNER™ professional can help you stay focused on your outcomes and ensure you achieve them. Use the “Find a CFP® Professional” search tool to find one near you.

When it comes to mind vs. heart, recognize your propensity to think with your emotions. Take a deep breath when it comes to money. Your priorities should almost always be focused on your long-term financial independence and not immediate satisfaction.   

  1. http://www.cnbc.com/id/100649487
  2. http://www.ezonomics.com/polls/do_you_spend_less_when_grocery_shopping_if_you_have_a_shopping_list