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How to Be Kinder to Yourself When It Comes to Money

Are you under the strain of woeful finances? It’s time to get emotional — but not in the way you might think.

The purse strings are inextricably tied to the heartstrings. Just ask Warren Buffett, the legendary investor who believes that choosing whom to marry has profound effects on your future career and financial happiness.

Financial happiness is proving an elusive target for many, though. Federal Reserve Board research indicates that 40% of Americans are just $400 away from financial hardship. Needless to say, their retirement coffers look just as bleak. All this, despite years of mandated financial education aimed at high schoolers in some states.

If financial literacy alone can’t keep people from overspending or making poor money choices, what can? The truth is that the brain may need a little help from the heart (and not just in terms of choosing a spouse). In fact, men and women who build their emotional intelligence (EI) can gain tremendous control over the way they view and handle personal finances.

Stressing Out Instead of Saving Up

It’s easy to feel stressed about money, but all that anxiety has serious repercussions. As one study showed, Americans who made it through the Great Recession of 2008-2010 came out with significantly higher blood pressure and blood glucose levels. Researchers have also identified links between depression and critical financial insecurity.

Furthermore, some individuals living paycheck to paycheck exhibit counterintuitive behaviors. Plenty overspend or drastically underspend. Others can’t handle even thinking about money. Many give away cash, putting their finances at risk to help someone else in need.

Understandable responses? Of course. Yet none of those coping mechanisms allows the individual to honestly deal with his or her emotions. The only way to bring true resolution to money worries is with self-awareness, and that takes more than a modicum of EI.

The basic premise of EI is being able to name and acknowledge emotions through objective observation and calm evaluation. How does this have an effect on money? For one, people who have high EI scores may earn about $29,000 more per year. Additionally, individuals who master their emotions make fewer knee-jerk investing and spending decisions, seeking clarity instead of allowing a cloud of stress to obfuscate healthy financial choices.

Keri Danielski, Mint’s consumer finance expert, says that feelings are often at the core of any financial missteps. “Money is so often tied to emotion, and it’s important to take a long look at what drives your anxiety,” she explains. “By finding out what your emotional connection is to money, and understanding the way this affects your values and actions, you can then start to tackle the problem.”

Banking on Stronger EI

Could you use some money management finesse? Begin by improving your EI. Implement the following strategies to change the way you react to your financial concerns.

1. Let go of shame.

It’s tough to admit that you’ve made poor money choices. However, hiding them will only give them power and stop you from dealing with your problems. Remind yourself that you’re not the only person in your situation, and hitting rock bottom can be an opportunity to rise again. You may even want to talk to your trusted friends and family.

Who knows? You might see your embarrassment fade when your confidants share their own stories of financial mistakes. The easier it is for you to open up, the easier it will be for you to normalize, rather than catastrophize, your situation. Then you can move ahead.

2. Ditch the FOMO.

According to research from Credit Karma, Millennials are highly likely to give in to the fear of missing out, or FOMO, even to the detriment of their financial wellness. Almost four out of 10 Millennials have overspent just to keep up with their friends. Why? For 27% of them, declining social invitations was too uncomfortable, no matter if they were already in debt.

Whether you overindulge because you’re concerned about being snubbed or you just don’t want to miss the fun, you can’t continue to bust your budget and maintain a healthy stress level at the same time. You don’t have to become a hermit: Suggest low-cost alternatives for hanging out, or limit (rather than eliminating altogether) the events you attend with buddies. Chances are good you’re not the only one with a stretched bank account. Be confident in yourself. Don’t let your perspective — or budget — get skewed by an unhealthy desire for social validation.

3. Accept your humanity.

We love to imagine that what we do is controlled by our wits. Yet we all know that we often make choices based on emotions. From a wealth management perspective, human nature can be a barrier to putting together a portfolio that will actually perform. When stress rises, such as during a stock market correction, we may either retreat completely or take money risks without thinking. For that reason, behavioral wealth management firms like JOYN counsel their clients not simply on money but on what is making them fearful or tempting them to do a complete 180 with their investments.

The next time you’re faced with a tough financial decision, don’t make your move until you create a little breathing space. When you decide what to do, ask yourself whether you’re trying to justify behaviors that will only get you into deeper money trouble. If you’ve been practicing self-awareness, you’ll reply honestly and without judgment.

4. Visit a “money therapist.”

Financial therapists exist to take money talk to an emotional level. When the figures are bad, financial therapists or counselors help you deal with the anxiety of a dismal money situation. Then they work side-by-side with you to get you out of debt or manage your funds. They can also help you address a money disorder.

For instance, are your spending habits self-destructive? Do they get in the way of your becoming financially independent? Do you fight constantly with a partner about money, resenting every penny that leaves the bank? These can be indicators of problems best solved with the help of a financial and psychological expert (which you can find by browsing experts on the Financial Therapy Association Network site).

Stop letting money control your moods and responses. Accrue more EI instead, and give financial stressors their final notice.

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