Originally posted 4/24/2023 by Kaitlyn Ranze
Updated 2/5/2024 by Kenneth Medford
Emotions and finances can lead us to make poorer financial decisions and worsen communication with loved ones. Learning how to manage your money effectively can help reduce stress, boost confidence, and improve relationships. It can also do wonders for your financial health.
In our fast-paced, digital world, big changes have occurred in how we handle our money. No longer is it enough to know how to balance a checkbook or make a budget to be financially literate. Now it’s about understanding and using technology to your advantage, tracking expenses and analyzing data to make better spending decisions.
It has also become more important to manage multiple accounts for different purposes (e.g., business vs. personal). This also needs to be done without getting confused or letting multiple accounts run into the red.
What may be less obvious is how these changes impact your brain, heart, and wallet. Money management touches on many areas of life that have a positive or negative impact on our finance. Everything from stress levels to self-esteem affects your bank balance and, in turn, your financial health. Discover how brainpower and emotional resilience can help you manage money like a pro in this article.
Managing Stress and Boosting Confidence
Money management is a skill that can help you regain control of your finances, reduce your stress levels, and boost your self-esteem. When people feel they have control over the situation, it’s easier to take action and feel more confident about the outcome.
By taking charge of your money and gaining a better understanding, you’ll be less likely to let bills pile up. You’ll be more likely to pay your bills on time and less likely to less financial setbacks stress you out. These are foundational of good financial health.
Taking charge of your finances, takes commitment and discipline. It doesn’t happen overnight, and it’s a skill that must be used often if you want to improve it. The more you put yourself in the driver’s seat when it comes to money, the easier it will be to regain confidence in your abilities.
Managing Emotions and Finances with Money Management
When you take charge of your money, you also take charge of your emotions. Many people who struggle with debt or have trouble managing their finances deal with emotional reactions impacting their spending. All those emotions can affect your spending, savings, debt, and ability to meet financial goals.
When you manage your money, you’re also working your emotional brain, allowing you to make better decisions about your spending.
When you’re not in charge of your finances, it can be easy to get caught up in emotions like stress, shame, or guilt when you’re spending. You may also be susceptible to impulsive spending.
Managing your feelings with money management can help you avoid these pitfalls. It can also help you be more strategic and thoughtful with your spending, which is helpful when working on reducing debt or saving for big financial goals.
Managing Relationships and Improving Communication
Money is a common source of tension and frustration in relationships. Managing money is a great way to help avoid those issues.
Managing your finances can help you avoid the pitfalls of cohabiting with a significant other and feeling like you have no say in the spending or bills.
If you have joint accounts with loved ones and clearly understand how those accounts work, you can avoid many unnecessary arguments and hurt feelings. Having a mutual understanding of your financial plan ensures you will be on the same page as your partner and allows you to reduce miscommunications
On top of all that, managing your money is a great way to help cultivate more open communication with the people in your life.
Being honest about your goals and progress, as well as your spending habits and challenges, is a great way to help loved ones understand what you’re going through and lend a hand when they can.
Managing Expectations and Improving Self-Esteem
Managing expectations is important when you’re in a relationship with someone who has a very different financial situation or goals than you do. When you manage your expectations with clear communication, it helps avoid the resentment or disappointment that could come up if you’re expecting your loved one to contribute to the same financial goals you are.
Managing expectations and improving self-esteem go hand in hand. With unrealistic expectations that are rarely fulfilled, decreased self-esteem is likely to result. It can be difficult to break out of the spiral between unfulfilled expectations and negative emotional blowback. If you’re constantly berating yourself for not being where you want to be financially, you’ll have a hard time moving forward.
If you always feel like a failure because you can’t get a handle on your finances, taking the steps you need to take to get there is going to be a lot of work. Self-chastisement means that we are not able to think dispassionately, in a way that makes step-by-step management possible.
Managing expectations and becoming more empathetic toward your challenges can help you avoid feelings of failure and self-loathing. Instead, focus on taking action and finding a path that suits you. This will help not only your financial health, but your mental health as well.
Why Financial Literacy Is So Important
When you know how money works and how to manage your finances, you have control over your future. By prioritizing understanding, you’ll be able to avoid getting your emotions and finances tangled up. Instead, you will be able to make calm and rational decisions with less stress.
You can avoid the pitfalls of living paycheck to paycheck, struggling to pay your bills, and avoiding important financial milestones (e.g. saving for retirement or buying a house).
Most adults have jobs and bills to pay; it’s expected that you will have to manage your money. What needs to be clarified is exactly how management works and what each piece of your finances means.
You can protect your financial health and position yourself for success by having a solid understanding of finances. For example, understanding how debits and credits add up helps you understand how not to run your budget into the red.
You can avoid pitfalls and setbacks from mismanagement and poor money habits. You can also use your money to achieve the things that matter most to you, like a comfortable retirement or owning a home.
Bottom Line: Emotions and Finances
Money is important, and you need to keep track of it.
By managing your finances, you can track your spending, set goals, and ensure you’re getting ahead financially. In addition, financial management is a skill that can help you restore financial control and enhance your confidence. It’s also a great way to manage your emotions, build better relationships, and improve your self-esteem.
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