Deal with your emotions and prosper

Does a big raise ever not feel good? And have you received a pay-cut and not feel bad?

It doesn’t matter what the original salary was and how much it’s changing. Though there are no references, getting more is almost always better and receiving less than what we are used to just plain sucks. Why does making N50,000 after a N5,000 raise feel better than making N90,000 after a 10 percent cut?

Human nature

Like it or not, our emotions play a huge role in our journey to financial freedom. There’s no way around it, just as staying dry is impossible if you want to swim. The good news is that like swimming, you can be happy and wet at the same time as long as you don’t drown yourself. Here’s how to apply that floating device to your finances, should you need it.

• Admit it exists

You’d think that by now, everyone already knows they are emotional. Not true. Just as most people believe that they are an “above average” driver (which by definition cannot be true), most people believe that they are better than others in controlling their emotions.

It’s never what you know that hurts you the most, and it’s not what you don’t know that hurts you the most either. What always turns out to be the most devastating is what you know to be true, but turns out to be totally false. Overconfidence always makes you pay. Admit that failure can happen, and prepare for it.

•  Have a plan

Though everybody knows of the importance in having a plan, the ones that have one are definitely the minority. Reasons include laziness of course, but I believe most people don’t plan because they don’t know how. Financial advisors are a great source to tap into, but how many of you actually went out of your way to speak with one regularly?

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Plans don’t stop at the big picture either, as even small financial steps could benefit a plan of their own. Do you budget? Have a plan to cut down and control your expenses. Do you trade stocks and bonds? How about making a plan on why you bought a security and the list of criteria that will make you sell? If you can’t come up with one, don’t trade. Perhaps investing for the long term is a better approach.

• Analyse the results

Nothing teaches you faster than living through the consequences of your actions. Reading helps, but it’s much more effective when you see the results for yourself. You can read about bear markets and what “not to do” a thousand times, but once you live through a week of the Dow dropping more than 1,000 points, you instantly understand what fear means to you.

• Keep practising

No one is perfect, and while some learn faster than others, everyone benefits by repetition. If you get burned touching the stove when it’s hot, you will eventually stop doing it no matter how insensitive you are.

Same with finances. Once you see that you are reacting in a way that is hurting your finances, you will slowly but surely stop doing what you are doing.

Believe It, see it, and keep trying to work around it. Do all that and you shall prosper with the rest of us.