CHAPTER 3 Why Is Money So Maddeningly Emotional?

Around the time of the recession, I was pretty good about saving. I was working at a newspaper. I saved almost $60,000. That was amazing and impressive and then, at the end of 2010, I had a really bad breakup. I was so emotionally devastated. I went through my savings like it was melting ice cream. I don’t even know what I spent it on. It was drinks with friends, getting a whole new wardrobe because I let my ex get to me and he had made a comment about my clothes. I treated it like Monopoly money, like it’s not real.

Recently, though, I was unemployed for a while. I started cleaning out my closet. When I looked into my closet, I wanted to throw up. Because that’s not who I am, I’m more into helping other people and donating to good causes and travel. Plus, it was causing me to have anxiety to see this mess everywhere. That motivated me emotionally to say that I have enough stuff. I don’t need three pink dresses that look almost exactly alike. My best friend says no lesson in life is free. The horror that I felt—the anxiety, the fear, is motivation enough for me to want to save more.

—Carmen, 30s, communications professional, New Jersey

On October 9, 2017, economist Richard Thaler, a professor at the University of Chicago Booth School of Business, won the Nobel Prize in Economics. His name may sound familiar to you if you saw the movie The Big Short (he was the one sitting next to Selena Gomez at the poker table) or like to read best-seller lists, where his book Nudge spent some time in 2008. Thaler’s prizewinning feat was a body of research documenting that—and explaining why—when it comes to making decisions about money (and also about life), human beings are irrational. We do things that don’t make sense. Things that aren’t logical. Things that are not in our best interest—small things, like not being willing to pay a little more for an umbrella when it’s pouring outside, and big things, like not saving enough for retirement. And we do them consistently.

Thaler’s work—along with that of psychologists Daniel Kahneman and Amos Tversky—gave birth to an entire discipline called behavioral economics, which Investopedia defines as “the study of psychology as it relates to the economic decision-making processes of individuals and institutions.” That’s fine for the ivory tower set. But I prefer to think of it as “the study of why smart people do stupid things with money.”

Part of the answer is biology. We are hardwired—much like our caveperson ancestors—to be present focused rather than future focused. We still prefer immediate gratification to gratification that comes down the road. And we have a particularly hard time when down the road is so many years away that we can’t even fathom what it will look like in reality. We know this because researchers have used MRIs to look at our brains in the process of making choices about money. They flash images of things we want, and they chart the activity in our heads. And what they see is that when something we want comes into view, the pleasure centers in our brains light up. When we actually get the reward, we get a rush of the feel-good chemical dopamine. (You can imagine this sort of purchase/reward scenario if you’ve ever gotten a jolt of excitement from buying something on sale.) The problem is, if you ask people to wait for the reward, it’s very difficult to bring about the same sort of brain reaction. You typically have to make the reward much, much bigger in order to do it. And things that are far off in the future—like the retirement we’re all told to save for—don’t light up our brains at all.

So, biology doesn’t help us. And then emotion—how we feel about these decisions, choices, issues, events—comes along and completely does us in.

Emotion is 90 percent humidity when you’ve traveled 500 miles and left your flat iron at home. You’d avoid it if you could, but it’s here and it’s happening and you have to deal with it instead.

Why is that? Again, it’s largely biological. We are human. And human beings are emotional creatures. We not only feel what is happening in the moment, as we discussed in the last chapter, but we also filter those feelings through layer upon layer of what happened to us in the past.

The big problem with this is not that emotions are bad, but that emotions can cloud our judgment. When we are emotional, we are more focused on how we feel and not on what we think, says Dr. Linda Henman, an expert in decision-making under stress. “Logic makes us think, but emotions make us act. We make decisions that we sense will bring about an improved condition, even though we don’t have the facts to back up that conclusion.”

WHEN QUESTIONS DON’T HAVE ANSWERS, EMOTION REIGNS

One reason that money is so emotionally charged is that there are two distinct types of money questions. There are the ones that have correct answers.

• What’s the best rewards credit card?

• Can I get a better deal on cable?

• Is it cheaper to buy or lease that car?

But there is a whole realm of financial questions for which correct answers simply don’t exist.

• What’s the best way to invest my retirement money?

• Will stocks go up or down next year?

• How long am I going to live?

With questions like these the possibility exists that you can do everything right and still not end up with the result you were going for. That’s because of the little wild card called life. It forces us to deal with the unexpected: Layoffs. War. Illness. Floods. My pulse is rising just writing these words. I’m getting emotional and they’re not even happening. That’s how powerful uncertainty can be. It’s a trigger for fear. The more uncertain the outcome, the more anxiety is produced. The more anxiety that’s produced, the more irrational we become.

Now, of course, not everyone feels emotion in equal measure. There are some people who find uncertainty and ambiguity completely terrifying. There are others who can compartmentalize, worrying sometimes but not letting uncertain outcomes bother them at others. And then there are those who find uncertainty at the least interesting and at the most exciting. You know what these people are called? Men.

Bottom line, says psychologist Maggie Baker, is that it’s not good: “Uncertainty amplifies impulsivity and risk taking in a way that usually doesn’t work real well.”

THE F-WORD (NOT THAT ONE)

Of course, uncertainty is not the only factor driving these highly charged emotional bursts. We also bring our own set of personal expectations to the party.

The night before my college graduation, I had a long and somewhat boozy conversation on the porch of a West Philly row house with my friend Kevin. It was one of those “where do you think you’ll be in five/ten/twenty years” conversations. I remember laying my whole life out for him in detail: engaged by 25, married by 26, first kid before 30, running a magazine by 35. He shook his head. “But how do you know?” he asked. “I just do,” I told him, full of misguided confidence and Chardonnay.

The trouble is, when these expectations don’t line up with our realities (a divorce, in my case, and a seismic shift in print journalism) the result is Frustration. With a capital F.

The key to dealing with this is not shutting down emotionally, but rather allowing yourself to recognize what’s going on inside you. Psychologists explain that this is about awareness. Just as you can’t change any behavior unless you’re aware of what you’re doing (see: tracking your spending or keeping a food diary), you can’t deal with your emotions until you’re aware of what they are and where they’re coming from.

IF YOU CAN’T FEEL IT, YOU CAN’T CHANGE IT

Julie, 30s, is a marketing analyst from Baltimore with an MBA. As the work she does might suggest, Julie is systematic in her office and her life. She meticulously planned her finances so that the very day her last car payment was due, the loans for her MBA would kick in. Then, this year, she and her fiancé bought a house, and all that excellent planning went right out the window. “This is the first time in my life that I have had a substantial amount of debt,” Julie says. “I open Credit Karma every day and it gives me heart palpitations.”

Despite those palpitations Julie is fortunate in that she is completely aware of a) her emotions and b) what’s causing them. Many of us don’t see as clearly. Recognizing those emotions—and the reactions that they tend to raise—takes practice. Actually doing the right thing as they swirl about takes both practice and perspective.

The good news is, you’ve already gotten good at not reacting emotionally in other parts of your life. Consider the calculus you go through when having an argument with your spouse—or even a heated discussion with your best friend. When your ire is up (because she was ten minutes late again, because he didn’t put the cereal bowl in the dishwasher again, even though you’ve asked him a hundred times), the temptation to say things you regret later can be enormous. You want to say: You never listen to me. You know how much this pisses me off. And maybe even: I’m done with you.

But you don’t.

Why not? Because you know that you may not be able to take those words back. Your goal in that moment is not to permanently damage your relationship. You really love your spouse. You really, really love your best friend. The unstated and unrealized goal is to temporarily hurt the other person because they did something that insulted you, or made you feel disrespected.

That’s the tip-off. When there is no clear benefit to acting out in that way—to making that particular decision—it is a decision based more on emotion than on fact.

EMOTIONS CAN REWIND THE CLOCK

It’s also important to recognize that what’s happening in the moment may in fact not be responsible for your emotions in that moment. The timing can be delayed, sometimes by hours but sometimes by years.

If we have a particularly bad day at work or don’t receive an invite to a gathering when all our friends do, or if it takes thirty-five minutes for the parking garage to dig our car out of the lot, we have the ability to suppress our emotions. We put on our presentable, public faces. And then we get home and open the Visa bill only to see that our spouse spent $250 on a concert ticket (one he’s seeing with his friends, by the way, not with us) and we lose it. We’re not really mad at him (we’ve spent that much on things where he wasn’t involved). We just need to let it out—and money-related matters are often the pressure valve that pops.

Other times our emotions are tied up in our money stories—in things that happened earlier in our lives. These often show up in life as trigger points. If you’ve made financial mistakes in the past—and you see yourself repeating those mistakes—it’s time for some self-reflection to see what’s setting you in motion. If criticism sends you to the mall, credit card at the ready—just like if criticism sends you to the freezer, spoon in hand—you need to recognize: When I am criticized, I spend money I don’t really want to be spending. Or: When I am criticized, I overeat. Then go back to your story to try to discover the why. Did you see your mother shopping (or eating) in reaction to criticism from your father? Did she seem to feel better as a result?

The one-two punch of emotion + story can even disarm women who are both successful and have their financial houses in order, explains entrepreneurship coach Karen Southall Watts. “In the back of your mind is that little voice from when you were a child that says the mother denies herself the new dress to buy things for everyone else in the family. Or the good girlfriend postpones what she wants on the vacation so the boyfriend can go hang gliding.” It’s up to us to rein it in.

MONEY IS MORE THAN WHAT IT BUYS

But before we get into the how of managing all this emotion, we need to look at one other thing: Money, like no other resource, is not just linked to our survival—we need money to buy food, to pay for a place to live—but also to our social standing and our feelings of self-worth. Money largely determines our place in society, and it’s a big deciding factor when it comes to who our peers are—who we want to and get to hang out with, who wants to and gets to hang out with us. “Wherever your target social group is—whether or not your financial situation matches up to that—is going to have a huge effect on your emotions,” behavioral economist Sarah Newcomb explains. In other words, life turns out to involve playing a never-ending game of Survivor. And when we’re booted off the island, emotions fly high.

It helps to keep remembering that we are, just like those cave-dwelling ancestors, tribal. And if the entire tribe packs up and moves away and we are left standing there (unless we are Matt Damon on Mars and we are a biologist who can grow potatoes in our own manure until Jessica Chastain comes back to rescue us), we die. And we are terrified of death.

All of which goes a long way to explaining the troublesome groupthink that leads to bad financial decision-making. It’s not the flared jeans or uncomfortable modern couches you spent too much on because everyone else had them. There are examples of this in every market bubble and every market crash. “It’s not greed [driving us],” says psychologist Brad Klontz. “It’s fear of being all alone.”

And it brings about a horrible cycle. When we’re worried about our finances falling apart, we’re worried about losing our status and our belonging. In other words, financial stress leads to survival stress. Which leads to health problems, which are expensive and lead to more financial problems, and the whole damn cycle starts over again.

But it doesn’t have to. So let’s take a look at a plan for recognizing what’s happening, the emotions that result, and the behaviors that they can elicit. We may not be able to completely disentangle this mess, but we can make progress in that direction.

GETTING OFF THE EMOTIONAL ROLLER-COASTER

Step 1: Identify your triggers.

The first step to keeping your emotions from sabotaging your finances is to identify them. Are you angry? Scared? Guilty? Tired?

Okay, tired isn’t officially an emotion. Tired is a feeling. Just like cranky is a mood. Because they all have the ability to impact our behavior with money, we’re going to consider them all triggers here. Still, it may be helpful to know the difference, so…

Emotions are immediate physical responses—in the brain and the body—to what’s happening in the moment. They take just fractions of a second, are hardwired and similar across most humans. Emotions bring on feelings, which are our mental and physical reactions. They differ from person to person because they are colored by our personal stories and experiences. And while emotions are fleeting, feelings last longer. But not as long as moods, which are based on things beyond emotions and feelings, including the weather, the light, our health, and our sleep. Moods can last hours, even days.

And although the research on whether women tend to experience emotions, feelings, and moods more deeply than men do is mixed, we do when it comes to the negative ones and particularly those about money. Here are some common triggers and the financial responses they tend to bring about.

Anger: Makes us more optimistic and more likely to take risks than we would naturally be.

Anxiousness or Anxiety: Makes us feel nervous about what’s coming down the road—both short and long term. It can lead to oversaving, being too conservative, and not enjoying the day-to-day.

Fear: Elicits a fight-or-flight response because we’re worried about survival. Can lead to bailing out of the markets when they’re correcting, even though you’ve got plenty of time to weather the storm.

Desire: A deep longing for something that can lead to overspending when you can’t afford it.

Embarrassment: Makes us want to crawl into a hole—preferably one that’s dark and deep. It can result in not taking the appropriate actions to protect and improve your own finances, whether asking to pay less at a group dinner where you just had an appetizer or asking for a raise.

Guilt: Remorse at having wronged others by doing something you know was hurtful—or winning when others lose. We often react by spending way too much on them to compensate.

Happiness: Like anger, makes us more likely to take financial risks than we otherwise would be. In this case, because we’re feeling so buoyant.

Jealousy: When you want what someone else has. Leads to buying things you can’t afford and racking up debt.

Regret: A close cousin of shame. Remorse over making a bad decision in the past can prevent you from taking action in the present. If you regret that you didn’t start saving younger, you have trouble starting because you feel it’s too late.

Sadness: Feels like a big void—a physical hole somewhere around your heart. We often try to plug that void by buying stuff.

You want to get to the point where you can tie how you’re feeling to what you’re doing. Sadness and anger are particularly good places to start because they’re such clear feelings with very clear ties to specific behaviors. The last few times you felt sad or angry, what did you do to deal with those feelings? Now, flip the question. The last few times you felt emotional about money, what had happened in your life to get you there? Sometimes it helps to involve another person in your introspection. A friend. A spouse. They may be able to see you more clearly than you see yourself.

The last big money fight I had with my husband is an example of that. In order for this story to make sense, you should know that this is the second marriage for both of us. And, though we have a joint household account, we haven’t otherwise merged our finances. Anyway, my husband—who is eight years older than I am—was about to retire from his job of twenty years. He made some sort of offhand comment about how he’d saved so well that even if he didn’t earn anything for the next four years, we’d be okay. He wouldn’t have to start tapping into his retirement. He wouldn’t have to take more from me.

And I lost it. Not immediately, but bit by bit. I dug into the numbers of how much it costs us to live, what I pay for and what he pays for—and how his savings wouldn’t go as far as he thought and that maybe he should do some consulting. It devolved from there. But let me just say that ugly crying—on my part—was involved.

Though I was still smarting the next day when he came home, I was ready to let it go. That’s when he told me the fight wasn’t really about money at all. The fight was about independence—specifically mine. I work a lot. I like to work a lot. I don’t want anyone questioning how much I work. His take was that when he stopped working, I was terrified that he was going to want me to, say, go out to lunch or an afternoon movie, things that would threaten my ability to work. So, I was pushing him to continue to earn to get him to continue to work so that I could do the same.

Pretty good for a guy with a BA in political science.

Talking about money is, unfortunately, harder than it should be. A 2014 study from Wells Fargo says that for 44 percent of Americans it’s harder than politics, religion, even death. But give it a go anyway. If you can’t do it with your spouse, try a friend. And if you can’t talk, journal. Start making notes of these emotional periods and your financial actions. That may be what you need to do to spot the links.

Step 2: Give yourself permission to feel that way (but not to act on it).

Once you’re starting to get a grip on the emotions/feelings/moods that drive particular actions, you can start trying to separate them. The idea is to allow yourself to have the feelings while keeping your finances moving in the right direction. How?

First, acknowledge that they have a right to be there. We have been told by teachers and parents to think logically about money and take emotions out of it. Not possible. We can’t pretend that our financial decisions aren’t woven up in all of our dreams. What we can do is take a look at the underlying need that we’re meeting with our financial strategies, then see whether it’s a healthy strategy to meet that need.

Perhaps you’re feeling insecure or lonely and so you raise your hand for the spa weekend with the group of women you want to be closer to. It’s more money than you wanted to spend and you’re not really a massage person, but you do it anyway. Ask yourself: Is this sustainable? Are there ways I can do that without a) spending as much money and b) taking part in an activity I don’t really enjoy? You can start to take emotions out of it when you recognize that you’re using money to serve emotional purposes—but there are other ways to solve the problem as well.

It’s also important to forgive yourself for letting those emotions mess you up in the past. Regret is one of the least helpful emotions when it comes to finances—and life. It’s what gets in the way of calling the friend you were supposed to call last week, then a few days ago, then yesterday. When you feel so bad about not doing it, it makes it that much harder to pick up the phone. And it’s what gets in the way of not hiring the financial advisor, not juicing up your savings, not making so many of the money moves we wish we had made before. Channel Elsa. Let it go. Then take one step in the right direction. Quickly e-mail a financial advisor you’ve been wanting to meet. That e-mail will put a dialogue into motion and you’re off to the races.

Another way to manage emotions—not eliminate them, but manage them—is to change your framework. Let’s go back to jealousy. We’re jealous because other people have what we want—big things like great careers and wonderful relationships, but also small ones like the ability to do a headstand in yoga class and great hair. It would be best if you could avoid these comparisons (research has shown that people who can steer clear are happiest). But that’s a tall order. So, instead, encourage yourself to compare down rather than up—with the Joneses on the left, who have the adorable but smaller house without the extra bay in the garage, not with the Joneses on the right, who have the palace with the moat. Do that, and you’ll feel happier.

Income, by the way, plays a huge role here. Where people feel they stand in their community affects them on a daily basis. If you plant yourself in a neighborhood of seven-figure earners while you’re in the sixes, life is going to be more stressful than it has to be, as Tracey, 30s, a lawyer and mom of two in New York, figured out. She recognizes there is a considerable amount of stress they put on themselves because they want to climb the ladder to that next step. Maybe, in hindsight, a starter home on a less affluent street would have been the way to go.

Step 3: Slow down.

Remember the difference between emotions, feelings, and moods is largely time based. And it’s the emotions that drive us to act. So once you become aware of the fact that your emotional brain is driving many if not most of your behaviors, then you can build in a little time between the emotion and the action. And the fact that the emotion will have subsided during that time will often result in not taking the action at all.

So, you’ve had the big fight, like I had with my husband, which leads to getting angry which leads to wanting to act out which leads to the computer, where you do a significant amount of damage on Net-a-Porter. Here’s my suggestion: Put all the stuff you want in your cart. But don’t buy it. Or, maybe the trigger/result was a different one—maybe the stock market fell 2,000 points in a day and you decided you want to bail. Figure out what steps you would need to take to make that happen. Then don’t. Whatever it is, sleep on it. Give yourself a good twenty-four hours—in shopping we call this a purchasing pause—for the emotions to subside. The stuff will still be in your cart in the morning. The stock market will still be open for business.

Essentially, you’re editing your own behavior. It’s easy when you’re excited—or angry or frustrated or otherwise overly emotional—about something to become overconfident in what you’re doing and miss the things that are not to your advantage. When you give yourself time to reflect, you get to a place where they don’t sound quite as good.

Step 4: Retake control.

What does nervous feel like? Pulse racing. Adrenaline pumping. Hunger evaporating. Palms a little sweaty.

What does excited feel like? Pulse racing. Adrenaline pumping. Hunger evaporating. Palms a little sweaty.

Yet one is significantly better than the other. And research conducted by Alison Wood Brooks at Harvard Business School has shown that you can choose which feeling to recognize. Telling yourself, “I’m not nervous (or anxious, if that’s how it manifests for you), I am excited,” may—with a little fake-it-till-you-make-it practice—be enough to actually make you excited, rather than nervous.

This advice flies in the face of what you’re typically told when you’re nervous or anxious, which is: Calm down. Calming down is hard because it’s the opposite of what you’re feeling. Transitioning to the happier-yet-similar emotion of excitement is much easier. And Brooks’s research showed that this change of mind gets you out of that space where you ruminate on all the possible bad outcomes and into one where you can focus on all the things that could go right. Participants in her studies who tried it performed better at public speaking, at karaoke, even on math tests.

Another form of changing your mind is to recognize that emotions can be used to impact our finances in a positive way. Money coach Christine Luken encourages her clients to do what she calls emotionally charged saving. The idea is to imagine, in the greatest—most emotional—detail possible what you’re saving for and how it’ll feel when you get it. How will it feel when you know, without a doubt, that your money will last as long as you will? How will it feel when you’ve paid off that mortgage? This works for short-term goals like big vacations, but it works particularly well for the longer-term ones that are so hard to reach because they’re so squishy.

Finally, you can change your mind by making moves to retake control where you feel shaky. Tracking your finances is one such move. For Katrina, 30s, a life coach from Minnesota, tracking gives her “a sense of empowerment” because she’s aware of what she has at any point in time. This system has bailed her out of more than one emotional jam. Among her assets, Katrina counts a town house in Atlanta that she rents out for income. When her most recent tenants were moving out, Katrina received a call from the property manager notifying her that the updates she was planning to make before leasing it out again were going to cost her triple the original estimate. At first, she was not just annoyed but agitated. Then she turned to her spreadsheet and she was able to figure out not just that she had the money, but where the money was going to come from. “I felt a sense of calm about it,” she says.

And even if tracking is not your cup of tea, making other moves that insinuate you’re in control of your money, your money is not in control of you, will temper your emotional swings. As behaviorist Sarah Newcomb’s research showed: “In every income class, the people that believe they’re in the driver’s seat financially were significantly happier. They’re having much more positive experiences, even if they’re making less than $25,000 per year.”