Buyers remorse is something that doesn’t exist in the real world, on in our minds.
And that’s the problem, according to behavioral scientists. We too often get bogged down in emotion when making decisions about our money, and that can get us into trouble on an emotional level down the road.
But emotion doesn’t run counter to reason when thinking about money. At least, that’s what behaviorial science tells us.
Quote: “Emotion, it’s almost too obvious to say, is very useful for helping you evaluate how important outcomes are. If you have a strong aversion to a certain outcome, you can make sure that is taken into account when making a decision. The obvious downside to emotions, however, is that they can lead people astray.”
What’s the downside? Emotional thinking can push us in the wrong direction at the last moment — think about chasing a hot stock pick or spending on the latest gadget we don’t need — by blinding us to our long-term goals.
But the good news is that by combining emotion and reason we can stick to the plan without changing preferences in the heat of the moment.
The lesson for personal finance: When it comes to money-related decision making the key is not taking things too strict. Having a rational plan in place can help you kno where you’re going and reach those goals. But by incorporating the emotional component you’ll also be able to make sure those decisions stick. We aren’t money-saving robots, but real human beings with wants, needs and desires. We need that motivation to continue working toward our retirement goals over years and decades.
