How do our emotions drive our financial decisions?

Emma Maslin

by , Financial Coach and Founder

at The Money Whisperer

31 Jan 2020 /  

Jan 2020

2 shoes on the floor around arrows pointing in all different locations

Money is a powerfully emotive subject.

We tend to think of money as a very abstract concept; it’s an enabler which allows us to do, be and have what we need and want in life. However, ask someone how they ‘feel’ about money, and it uncovers a whole raft of emotional responses ranging from guilt, shame and overwhelm through to security and freedom.

The strength of these feelings can be powerful drivers when it comes to how we make decisions around what we do with our money, and whether emotion dominates over logic.

Where it all begins...

Studies have concluded that our money story is defined by the time that we are 7 years old.

The messages that we hear, see, observe and are taught about money growing up comes from a variety of sources including our family, friends, teachers and the media.

As we go through life, all the experiences we encounter play a key part in the development of automatic habits (reactions) and attitudes (feelings and thoughts) towards money. As adults, the majority of the beliefs we have about money aren’t actually our own; they have been learnt or taught through conditioning.

Each life lesson and experience creates a template which is stored in our subconscious brain, and on which we draw for reference in the future.

If you pay attention to how your inner voice talks to you about money you’ll uncover some of those templates which you have stored. ‘That’s such a waste of money’. ‘Money doesn’t grow on trees’. ‘Living within your means is the only way to live; debt is evil’. ‘There’s plenty more where that came from, all it requires is some creative thinking’. ‘Life is for living, who knows what is round the corner’.

How our inner voice - our subconscious - talks to us about money determines the choices we make, our subsequent actions and the ultimate result of those actions.

Our two minds

We have one brain but two minds; the conscious and subconscious minds.

The conscious mind is our rational, thinking, educated mind (it can learn by reading a book for example). It is creative and open to new things, and is responsible for the voluntary thought, awareness, self-control and planning.

The subconscious mind likes familiar things; it is our habitual mind (it learns by repetition). This part of our brain has massive computing power; it operates constantly. The subconscious is our emotional mind; it encourages us to get emotionally attached to our thoughts.

between 85 and 95% of the decisions we make on a daily basis are made without any conscious thought.

Depending on which study you read, between 85 and 95% of the decisions we make on a daily basis are made without any conscious thought. We operate for the majority of our day from our subconscious. You know when you drive the route to work even though it’s a Saturday and you are going somewhere entirely different; well, that’s this showing up!

So, if we know that our subconscious is running the show a lot of the time, and this is where the templates from all of our past experiences sit, it makes sense that our past experiences can have a meaningful impact on our present day choices.

The battle between logic and emotion

Ever since my husband and I bought our home 7 years ago, he has wanted to chip away at the mortgage by overpaying each month.

Every month when we review our finances, I would make the case for putting some extra money in to our investments or pensions, while he would suggest using the money to overpay our mortgage.

We were fortunate to purchase our home at a time of rock bottom interest rates which have held low. My argument to him was that with interest rates so low, we would do better to invest our money and generate a return which significantly exceeds the interest rate we paid on the mortgage.

Looking at the numbers

Investing in our stocks and shares ISAs over the same 7 year period has resulted in annualised returns which are materially higher than the 1.89% we were paying for our home loan. Whilst past performance isn’t a guarantee of future performance, I am comfortable that we can ride out any downturn and really grow our money in the longer term with this option.

Should I say, my logical brain is comfortable with my analysis of the opportunity!

Even better, if we put the surplus money in to our pensions, we would get a generous kicker in the form of tax relief added by the government. (And this is an even more attractive option to a higher rate or additional rate taxpayer).

My rational, logical and considered argument seemed a no brainer. However, he was not to be convinced.

Short term vs long term goals

I love a good spreadsheet, with a graph showing compound growth thrown in for good measure. But no amount of logical reasoning or analysis could distract him. My oft quoted ‘a house isn’t going to feed us when we are old, but our investments can’ raised a smile but he didn’t budge.

Having the stability of a home which we own outright was a strong emotional driver for him.

He argued he didn’t want money tied up for the longer term (which is advisable for stock market investing and a given for any money deposited in to a pension). He cited the certainty of interest rates versus the uncertainty of stock market gains/losses. Both valid points. He also pointed out that with interest rates at such low rates, this was exactly the right time to pay off the mortgage while it was cheap to do so. Another really valid argument.

So we’d compromise and do a bit of both. That is until recently...

Through my development and learning as a money coach, and specifically my recent training in neuro-linguistic programming, I have learnt so much more about this emotional relationship people have with money. It has enabled me to view my husband’s point of view in a different light.

He moved countries a lot when he was young with his father’s work, often packing up home after a couple of years and moving somewhere new. Hugely exciting and has given him a thirst for travel and adventure, but the experience has imprinted an emotional attachment to the meaning of a ‘family home’.

He just wants to own his own home for our family. Knowing that no-one is going to ask him to move away from it is hugely emotive.

With this insight, I knew that achieving this milestone would mean so much to him on a deeper level. And so it was that we changed up our short term goals and this summer we paid off our final mortgage payment.


Now, with this emotional requirement met, he is so engaged with our monthly discussions around investing and pensions; it’s like talking with a different person.

I have to admit that I feel somewhat different too. I am surprised by the strength of my own feelings around security and the future now that we have no mortgage. The impact on your mental health of having such a big financial commitment paid off is absolutely huge.

everyone’s money story, and the emotional attachment it holds, is different.

What is important here is that everyone’s money story, and the emotional attachment it holds, is different. Awareness of the drivers behind your own story, and that of those around you, can help you connect in a more meaningful way to your decisions.

We always have a choice to engage our logical brain but it takes work; our subconscious is primed to keep us safe so it likes to keep us in our comfort zone doing things the way we have always done them. Take some time to become aware of some of the habits or beliefs around money which are driving your behaviour. Awareness is the first step towards change.

Emma Maslin is a certified Financial Coach and Mentor, Financial Wellness Speaker and Founder of multi award-winning personal finance education website The Money Whisperer. A former Chartered Accountant, Emma believes financial health and wellbeing isn’t a luxury just for the wealthy; it’s a basic need for all of us.

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