By Marc C. Shaffer
One question real estate agents often pose to sellers is, “How emotionally attached are you to this house?” The reason they ask is because when emotions are at play during negotiations, they can cast a shadow over a good deal and hurt the seller in the end.
Perhaps your children grew up in the home and you’re saying goodbye to the memories, not just the structure.
Perhaps you inherited a home from a grandparent, so you value it more than other properties.
Although it may not be easy, a house is an asset that could have the ability to set you up for your next move or investment, so taking away the emotion (as much as you can) could mean being ready to accept a different offer than one you might accept with emotions in the way.
The same concept can be applied to the way you treat money and make financial decisions.
Have you ever treated a certain “pot” of money differently based on where it came from? Emotions could be controlling your financial decisions more than you realize.
For example, I had a friend who recently sold a boat and considered the profit to be fun money that he wanted to use on a new toy, such as a motorcycle or ATV. I asked him why that money, specifically, was going toward the new item and could tell that he viewed that money differently than the income he earned at his job. He had sold something fun and was going to earmark those funds for a new, fun item.
This wouldn’t be an issue, except he had other debts that could have been lowered by the use of those funds.
Because he saw this as fun money, the thought of using it for another purpose just didn’t fit his expectations. He didn’t want to put it toward paying off student debt or his mortgage. In his mind, those payments should be covered by his salary, even if it meant making monthly payments far into the future instead of tackling a big chunk of debt in the present.
You may not think you would have the same thoughts, but consider these questions:
- What would you do with $1,000 if you received it as a bonus?
- What would you do with that same $1,000 if you won it in a game?
- How about if you were given the money as a gift?
Chances are that if you were given or gifted the same amount of money you earn in a month, you wouldn’t direct it to the same places you budget your income. There would be a different feeling, a different allure to the unexpected money – it would stir up a different emotion.
How can you combat that emotion?
One way to help you remove emotion from these situations is to have someone around who isn’t emotionally invested. This could mean working with a real estate professional during real estate transactions or a financial advisor for financial related matters. An objective third-party can take into account your goals and needs, and help you look at the situation from other perspectives other than just emotional ones.
Are you letting your emotions control your money?