E55: Are Your Money Decisions Being Compromised by Emotions

Nate: In this episode we will discuss the danger of letting your emotions dominate your decisions. And how you can learn to start with your head, not with your heart. And she’s Holly, and she helps people find financial freedom.

Holly: He’s Nate, he makes sense out of money. This is Dollars and Nonsense, if you follow the herd you will be slaughtered.

Nate: Today we’re gonna be talking about something that has connotations to your financial health, but it also has connotations to really anything you’re going to do in life. As a society, we tend to make decisions more with our emotions, or how certain things make us feel, than things that are well thought out and planned for. If you go back to a lot of the mistakes and bad decisions that you’ve made, the reason you made the bad decisions were because of how you felt. And that caused a reaction, and then maybe your mind kind of followed suit and rationalized it, but it all started with the emotions. A lot of bad decisions, both with money, and just generically in society all across the board are because we tend to only follow our emotions, rather than our heads. So Holly what are some things that we wanted to get across today as far as issues that glare at us in the face that we’re dealing with emotions rather than rationality?

Holly: Well I think one of the easiest ones is that often you see, whether it be someone in need, or you hear a story. Even me when I’m listening to clients talk and they just have this feeling of hopelessness. And they don’t just look at their own life, they look at the world around them. And they say, “Hey I saw this news story about, or I saw a homeless person that really wanted food. It just tugged at my heart strings, so I just gave them some money.” The motivation of giving them money ’cause you care, and concern isn’t what’s wrong. But oftentimes organizations, and people that work with even the homeless say the best thing you can do for them is to either give to the organization, or go buy them food or something like that that’s practical versus giving them money. Because you’re not helping them by just giving them money ’cause eventually that runs out. You’re not adding to their life, or giving them a skill, or doing something to really help them get out of their situation.

And I think, even with our kids we do that. They want that toy, or this, or that. Maybe you don’t have the money, I think it happens at Christmas times a lot of time is the biggest gift comes from Santa, and you spend money you don’t have to buy gifts for your kids because you want them to know how much you love and care about ’em, but you put yourself in a financial situation you can’t afford that you’re having to dig yourself out of.

Nate: Yeah. It feels good, that’s a great point. I know a lot of people who have gotten into debt over the years going on vacations and things, so they want to make their life better. The thought is good, make my life better for the kids, give ’em a great Christmas, whatever it is. And it feels good to give, but then the bills come due, and that’s when the mind has to catch up. And it’s like, “Oh man, now I gotta figure out a way to pay this back.” When the emotions dominate it can get you into trouble. And that’s kind of what you said too, when you’re talking with clients and they feel hopeless. If you have that emotional feeling of hopelessness because of bad decisions that you’ve made, and your meta-emotion is dominating you. That fear, that hopelessness. That can totally destroy any ounce of reconciliation you can make financially. Because all you feel is this pain, and so you don’t even want to take control of anything. You’re so far on the other end of the spectrum that you’re just like, “Whoa is me, I’m never gonna get out of this mess. I’ll never be able to be truly financially free.” So you don’t even try anymore.

That’s what can happen when emotions dominate us pretty easily is that we either get too comfortable with something, like maybe we’ve gotten our ears tickled with an investment decision. Someone promises us and it feels good, it feels so right. A slick salesman told us about it or something, and, “Man if I just put my money here everything would be okay.” I can write the wrongs maybe that I’ve experienced in the past. And so we make the decision with our heart. Maybe a buddy told us that we trust or something, and instead of our head … and not investigate it enough. That’s normally, on the financial side, something I’ve seen happen with a lot of our clients that have come to us from other places. They’ve made an investment decision that went south, mainly because it was more of a heart thing. And you can kind of tell the way they talked about it that was a heart thing.

And unfortunately when the things go south and there’s a heart thing. Then the heart turns to the other side and it feels terrible about it. If you had rationalized at the very beginning, and thought it through, you knew what the downside risk was, and you knew that was a possibility, and then it happened, you don’t feel like everything was ruined and the rug was slipped out from under you, and you just collapsed. If you get your heart out of a lot of your decisions, not every one of ’em, I mean God made us to have emotions and to feel, absolutely, but if we can start making decisions more with our head, as opposed to our heart I really do think that we’d be better off financially and as a society as a whole.

Holly: I mean money really doesn’t breathe, it doesn’t have life. It’s a piece of paper, or a coin, or this, or that. But so often we make the decisions of money with our heart, when if can’t live or breathe. And we’re making it with our heart instead of with our head and saying, “Hey, is this a good investment.” Or we are so … our eyes are so big and our heart is so, “Oh, I can maybe make so much money, or I could help so much,” and we don’t actually look at the downfalls of it.

I heard somebody tell me one time that when you wanna go buy something, and you really, really want that, however much it is, maybe let’s say it’s $10, then wait a day and see if you still want it, or even two days before you just go and buy it because, “Oh it made me feel good, I just have to have it.” I mean I think of how many things I’ve bought on impulse, and in hindsight I probably wouldn’t have bought it if I hadn’t bought it on impulse, or I thought, “Aw, I just really have to have that.” And actually start thinking about decisions of, “Do I need it?” Versus, “Do I want it,” and, “Can I afford it?” Like starting to ask those questions, what money do I have that I can afford, and have I spent my allotted amount.

I might like a really nice purse, but maybe I’ve already bought a purse that month, or I’ve spent what I allocated for pleasure spending that month, and then I just see something that I have to have, and I buy it just because I said, “We’ll have the money, it’s okay.” Or, “Well I’m gonna get the money.” That’s the other thing we do is we plan on money in the future that’s not necessarily guaranteed, thinking it’ll come in or we’ll have it. And then maybe that doesn’t fall through, maybe the deal falls through. Or maybe you get laid off from your job, but you were banking on money that you thought, “Oh, it’s gonna be in the bank. It’s gonna be deposited.” And then you realize, oh that didn’t happen, and now I don’t have the money.

Nate: Yeah I think one of the best institutions at getting people to really make decisions, and follow through on heart, is easily seen in the political world, in the political arena. Every time a politician wants to pass a certain bill, or wants to get something done he has to sell you on it. And to sell you on it he has to get your heart involved, rather than your head. They don’t talk very much about the numbers unless it’s the other side, when they’re bringing you an idea it’s always telling you stories. Many times you’ll see a politician, or a news group that’s trying to force you down a certain ideology, they’ll bring in an example, or a family that has fallen prey to desperate times, and it’s up to the government to save them. And if we don’t pass this law people like this family are going to be ruined, and they’ll never have a chance. They try to pull on your heart strings and have families say, “This was my situation,” and they tell their stories, and they try to sell with the story, and try to get the heart involved.

If they just talked about the numbers, or really get true to what we believe as a country. In other words, if you look at the conservatives, and more the liberal side of things, both sides are guilty of trying to just tell stories to prove their points. But regardless, you can easily see it there where emotions run high, decisions are almost always based on emotions, and they’re trying to get your emotions involved, and your heart involved. And it can be deceiving, it’s like the bible talks about your heart being deceiving, without thinking things through. Easily seen there, it can definitely be seen in marriages, Holly I don’t know about yours, but in marriages emotions can run high, and decisions can be based on those. And most of the time in me personally, when you’re just angry, and you’re letting your emotions drive you, that’s when you make the most mistakes.

Holly: We’re reacting with our heart, versus taking a step back and pausing and responding with our head and a rational thinking, and we don’t think about that. Even the other day, I’m laughing that you talked about politics, but we were discussing how lotteries came into being in different states, and various states. Well in the state of California when it came into being, it was this promotion of, the lottery is gonna make sure that schools always have money. Okay. That was the motivation in passing and having a state lottery was because this money would fund school education, and you’d never have to do anything basically for school education.

So the heart string was, “Hey pass this law, and make this a good thing,” so that basically schools, and kids, and education can move forward. And what’s not even 40, 50 years later we’re actually in a worse situation with our schools. And yet we still have the lottery, and everything that it promised, it’s those promises that tickle our ears, or seduce us to make, “Oh yeah we’ll never have to pay for education, it’ll be so great.” It’s those promises that don’t come through that motivate our decision, instead of us actually rationally looking at it.

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Nate: I see all these stupid posts on social media about trying to convince … Like one of them is how much teacher should get paid. And they’re always saying teachers are far underpaid. And I may agree with that, so don’t get me wrong there. The verbiage that they use is they start throwing all these numbers down, they say, “Well if you wanna pay teachers for what it’s worth, baby sitting all these kids, all this other stuff. They’d need to be getting paid $300,000 a year.” Or you’ll see this discussion of the NFL, who pays their guys millions of dollars a year. And then you compare that to the $40,000 a year that a soldier earns. Shouldn’t the people fighting for our country make more? It’s like yes we would all love if every soldier could be a millionaire for the sacrifice that they’re bringing. And we would all love for teachers to get paid a lot more than they do.

But if all we’re doing is making decisions based on our heart it’s gonna be dangerous because if you wanna pay teachers more the money doesn’t just come from anywhere, it has to be taken from other people. And since it’s a government employee they’d have to tax the entire state more, everyone in there needs to be taxed more in order to pay the teachers more. So everything comes at a cost. And what you’re able to provide for the world. If you don’t wanna get paid a teacher’s wage, then don’t become a teacher. You made that choice. And the soldier as well, he knew what he was going to get paid and he was willing to do it, and willing to sacrifice for his country even with that being said, though we’d love to have it.

In other words, we can’t just pay everybody whatever we want to ’cause it makes us feel good. We have to figure out a way to do it, and if you want to present us an idea that allows us to pay teachers more, and still not rob the rest of the state, or rob the other portions of it, then yeah we’d love to. But just saying it, and trying to get people all worked up into a riot, and a frenzy. And you know rioting about all these different things that we’re rioting over, maybe not teachers pay, but all these other things is crazy. And it’s amazing that our hearts have so much power over us.

Holly: When we make a decision with our heart, and then it doesn’t turn it out the way we wanted. Instead what happens is our heart becomes hardened, and we become angry, and frustrated, and mad. And we react in a way we shouldn’t be reacting. And because it didn’t go our way, or it didn’t make us feel the way we wanted to feel-.

Nate: I think you can tell if it was a heart or mind decision based on how you would react when it goes bad. If you react terribly, you know that that was not a decision you thought through very well. That was a heart decision.

Holly: Yeah. Or you’re so angry and you’re like, “I knew if I invested in that, it said this was gonna be my rate of return.” And yet you had people telling you, “Don’t do it, don’t do it,” or hey, wait, I mean-.

Nate: Or maybe you didn’t even talk to anybody, and that’s probably a bad idea.

Holly: Yeah. Maybe you just did it. You wrote the check, you didn’t even talk to your spouse or significant other. You just thought it was a good thing. So you just wrote the check, or put the money in, and then you say, “Oh, why did I do that?” It’s like I was talking to a client the other day, why do they put money into their 401k-.

Nate: They probably haven’t thought through that, have they Holly?

Holly: Well, no. And actually said, “I did it so I was saving something. And then I realized all of a sudden, I paid even extra money to have a person advise me on the 401k.” So they’re paying even additional fees just to have this great advice. And the individual said, “You know, now I’m at -1.75%.” So let’s just call it -2% on what you’re putting into your 401k. How much sense does it make to keep doing it?

Nate: I mean most people make decisions just based upon what everyone else is doing, or what they think feels good. And sometimes doing what everyone else is doing can feel good, like the 401k, it feels right because everyone else is doing it. You haven’t rationalized, you haven’t thought it through, you haven’t thought if it actually fits what you’re wanting to accomplish with your money throughout your life. But you just do it because everyone else is doing it, and that’s more of a heart decision. It’s more of a feeling decision like, “Hey if everyone’s doing it, it must be okay for me.” Without even really thinking it through. And that’s the most important thing, is coming up with what you believe in, thinking it through, having a plan, and then seeing what fits that. Versus just doing it ’cause it feels good, or ’cause everyone else is doing it.

Holly: It comes to stopping your heart from convincing your head to do it. Trying to take a step back, if we would all take a step back, ask ourselves, “Why am I honestly doing this?” Whether it be a 401k, or an investment. Why am I doing it? Is it something I love and I’m passionate about? Or is it something that everybody else is doing and I don’t want to be different? Is that why I’m doing it, or do I really believe in this. I mean Nate and I are always challenging you guys to go out, and to do your research, and to actually investigate and find that out. Just because somebody told you it’s the right thing to do doesn’t mean it is.

Nate: And by the way, for those of you listening, I know I have clients right now who are doing Infinite Banking, something that I do believe in, that I’ve investigated and researched quite a bit, who have not done nearly the research or the understanding … There’s so much material out there on our website, in this podcast, in books that have been written on this, that you can continue to grow in your understanding very easily. I just know that there’s people who made a decision to follow, even what I’ve said, based on emotions, not on facts. And those are the people who I’m concerned about. They may not actually know what they’re doing. They may have no clue. All we’re trying to say is, the biggest mistakes you’ll make in life are normally the ones that you haven’t thought through.

Whether it’s with money, or whether it’s with family, whether it’s with your political leans, the things that just feel good tend to be very deceiving. So if you follow what you’re feeling, especially with money, you’ll end up getting into bad investments. You’ll end up giving money to your kids that maybe you shouldn’t have, that maybe are kind of spoiling them, or not helping them grow very well. You’ll do decisions with money, with almost anything, but especially money based on what you feel. That can hurt you for quite some time.

Holly: I think of the simplicity of talking to a client two weeks ago, Nate. The client said to me, “I did this ’cause my brother told me to.” Okay. Really had no idea what he was really doing, and it took time to have to step back and say, “Wait, let’s go back and look at this.” The resources on the website, reading stuff, finding, and say, “Okay, let’s go back and figure out why you really did this.” Other than just because your brother told you to and it’s a good thing. I mean I agree 100% just like you, I firmly believe in Infinite Banking, I think it’s one of the only ways that you can have hope when there is the economy failing. I think it’s a security, I think you can leave a legacy. But like you Nate, I’m now 12 years into it, of having really done research, and looking and understanding it. Versus somebody that, “Oh my brother told me to do it.” Great thing your brother got you started, but in hindsight I wish that they had learned more, and had more understanding of it in coming in. And now we’re taking that step back and going through and asking those questions.

Nate: Yeah. And I’m at the point now Holly, I don’t know about you, that I pretty much don’t want to even talk to somebody about Infinite Banking, unless they’ve already done some research, some of the … taken our course, watched a webinar that we record, or read Ray’s book, or Nelson Nash‘s book. Because I want to know that they’re not just gonna take my word for it, or somebody else’s word for it because you’re gonna be so much more successful, no matter what you do, if you really get into it instead of just follow the herd as we talk about on this show, or do with what you feel.

If you just live your life by feeling, spending whatever you want to spend on whatever it is, never really having a plan, or a goal, or something to achieve. And every single time that someone talks to you about something you just go ahead and do it, whether it actually makes sense or not, that is a dangerous way to live. It’s scary to know that, even in my client base there’s people who probably don’t know very much about what their doing. Just ’cause … just like you said, ’cause someone else told ’em to do it. I would much rather someone have thought this through, covered their bases, and they’re like, “Yep, this is the strategy that I want to implement for myself.”

Holly: And that they really understand what they’re doing. I think part of our job is to help you along, and answer your questions. But, I just really want people to understand, and be challenged, that we’ve gotta stop making so many decisions in life, politics, on purchases, on what we’re doing, and why we’re doing it, with our heart. And really start looking with our head.

I mean my daughter … I have a daughter that is the most generous child I know. Will give probably the clothes off her back to somebody. And her sister wanted to buy stuff, and didn’t have any money, and the one daughter was like, “I’ll give it to you.” I’m like, “No you’re not helping her. She’s buying stuff she doesn’t have money for, you’re not helping her.” And my daughter was so upset that I wouldn’t let her give the other daughter money. And I’m trying to teach the principle of you don’t buy stuff with money you don’t have, and you can’t always rely on your sister to give you the money to be able to buy it either. That you actually have to either save, or earn, or figure it out. But you can’t just go through life buying stuff that you don’t have money to pay for, and hoping that somebody will come along and bail you out.

Nate: And that’s really where we’re at as a society as a whole. Buying stuff that we can’t pay for, and hoping that somehow the future’s gonna bail us out. That’s why we’re doing Infinite Banking. That’s why we’re trying to teach discipline, being in control, being the bank. Hopefully making a shift in the country, and society, and becoming more in control instead of out of control with money. Hopefully making a change in the future too, politically as well. But you know that we can get out of this mess that we’ve done. And that being said, we have probably run out of time here Holly. Any last words before we close it out?

Holly: I just wanna remind everybody, even if you believe your emotions are the one leading you, instead of just reacting and having your heart strings tugged, take a step back, pause, and really process what you’re hearing and understanding, and even what people are saying. Not just the story behind it, but actually the words, and the changes that wanna take place and go on, whether it be with an investment and it sounds too good to be true, or it be political decisions and you heard the story, and that’s what caught your eye, not actually the plans implemented, or the changes. We can always listen to advertisement and they tell us what we wanna hear, not necessarily what the truth is. So really investigate for yourselves what is truth. And what brings you peace of mind, not peace of heart.

Nate: See how you’re normally reacting when things go downhill, and that’ll probably tell you if things are being done with emotions, or with your head. Think it through, be confident in something. If you’ve thought it through with your mind and something happens, which you already knew could, that changes your reaction. And life can be a lot better actually when you’ve done things with your head.

That being said, this has been Dollars and Nonsense, if you follow the herd you will get slaughtered.

Holly: For free resources and transcripts please visit livingwealth.com/E55.