Manage Your Emotions And Your Money

We are emotional by nature.

To be objective about emotional situations is nearly impossible for we humans. We were not wired to be emotionless and the owner’s manual is a little thin on what to do about it.

The Future

Planning and investing both have a distinct future bias. Most of the time we think we make the connection to our future on purely objective factors. Time, rate of return, small allowance for adversity, optimistic ideas about income prospects, and inflation. That confluence of fuzzy ideas passing as objective reality leads us to poor choices. Pay attention as you go. There will be clues about your mistakes.

One of the mistakes

Joachim Klement writes daily on investing and economics. I found this one matched my thoughts on why people have difficulty with planning and therefore with investing.

The Virtuous Investor: Rule 6 “Ignore the judgement of others – the only thing that matters is you”

You can connect to the rest of the series from there and you can subscribe to receive more.

What others say affects you

The point in this piece is you are influenced by what others tell you. Especially so if they are forceful about it. That leads to problems for you in several ways:

  1. The others don’t know your situation in any detail so their advice is not necessarily relevant to you.
  2. They don’t know you in detail. I have told my children that it is okay to ask anyone for anything so long as you respect their ability to say no when that is the right answer for them. If you don’t know they will say no when they should, be cautious about asking.
  3. Many people do not consider how you respond to new information. We tend to give advice on the basis of what we know, not on what the other knows or needs.
  4. People frequently don’t know what they are talking about at all. We are easily persuaded by experts. Unconditional acceptance of experts is a failing tactic.
  5. Be careful of people who tell you the future. Be especially careful of those who make a living doing so. Mistrust prophets who profit.
  6. Money is a self-worth thing for many. Losses harm them psychologically
  7. Most people think they are able to deal with some risk. Many sophisticated investors found out differently in 2008-2009. Most people can handle a small loss of short duration. Not so many can cope with down 40%.
  8. Risk is two part. Risk of losing money and risk of losing your way.

We have trouble with future

We never consuder howcwecwill feel in the future.

“It is difficult to escape the focus of our own attention –difficult to consider what it is we may not be considering– and this is one of the reasons why we so often mispredict our emotional responses to future events.” Dan Gilbert

It is about mispredicting

The effects are well known. People who believe their predictions of the future spend less time looking for their mistakes and more time defending what they predicted. Eventually the situation reaches its breaking point and the pent up emotion takes over. That usually leads to more and even weaker actions. Chaos ensues.

Chaos would be okay if people could learn from it, but they seldom do. Chaos delivers harsh experience and few clues on what would be useful for the future. Chaos can occur both at times of loss and of times of unexpected gain.

Maybe the best investing and planning approach is to use how you feel about what is happening as the guide.

Good advice — “Sell until you sleep.”


I help business owners, and professionals understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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