Your emotional intelligence (EQ) plays a large role in your long term financial outcomes. Self-awareness and consciousness of how others manipulate a person’s self-image in order to get them to spend or form harmful money habits may greatly impact a person’s net worth and ability to whether financial rough patches. In assessing your EQ with respect to your financial health, you should consider your efficacy concerning financial matters, your tendency to try to buy the impossible and your coping behavior.
Efficacy
Efficacy concerns the belief that your actions will make a difference in any given area. It takes efficacy to make even the smallest changes in your banking and finance habits.
* In order to open a bank account, you have to believe that a few dollars in interest or not paying check cashing fees will make a difference in your financial situation. You also have to believe that a bank would welcome your business, not turning you away because of you skin color, clothes, address, profession or net worth.
* In order to invest or purchase a home, you have to believe that you are fully capable of doing these things, that you are able to make profitable choices and that the long term benefits of your actions will outweigh the short term efforts and sacrifices. In order to behave frugally, you have to believe that changes and sacrifices in your purchasing behavior will have significant long term benefits.
*In order to pay off your debts, you must believe that your actions will lead you to be debt free.
*Efficacy also plays a role in career decisions such as whether to ask for a raise, to apply for a better paying or more fulfilling job or to attempt an entrepreneurial venture.
Lack of efficacy can make it difficult to initiate the process of getting your finances organized, hindering even the most simple and obvious of personal finance strategies. Efficacy can suffer during bouts of depression, illness and stress. Internalized stereotypes about one’s gender, age, profession, net worth, sexual orientation and health status as well as substance abuse can also play a role. Those with a history of psychological abuse may also suffer from low levels of efficacy.
Buying the Impossible
Love. Friendship. Happiness. Inner Peace. These are all things that can not be bought. But it never stops people from trying. Consider the amount spent on Valentine’s Day. Consider the lengths adults will go to buy this year’s IT toy this Christmas. Consider the amount spent on day spas, yoga classes and self help books.
Love and self love doesn’t mean giving in and opening your check book. Expensive toys, vacations and dinners do little to further relationships with others and may not bolster long term satisfaction with one’s own lot. While parents may derive joy when they see their children’s delight over a new toy, their joy and their children’s delight are both fleeting.
Instead of trying to buy these un-buy-able things, the emotionally astute will look to bolster their own, their family’s and other’s overall well-being as the best long term, sustainable solution. They know that love, friendship, happiness and inner peace come, not as a function of the stuff in their lives, but through optimism, balanced diets, exercise, appropriate amounts of sleep, communication, enjoyable work and minimal exposure to advertising. While money can be used to create a safe, stable environment upon which to build these things, there are no products which will supply them directly.
Spending to Cope
Spending money can feel very good. Some people get a momentary jolt of dopamine when they hear the cha-ching of a cash register or when they sign for a credit card purchase. This may be the result of pairing shopping with past meaningful, happy experiences. Like Pavlina’s dogs, that little ringing sound can make us respond without the actual meaningful experience. That little cha-ching in your favorite shop, bar, restaurant and it may automatically make you feel good despite poor merchandise, service or an unpleasant environment.
Normally, this is not a problem. But consider what happens during times of extreme stress or grief. During these times, spending may be a way to avoid thinking about unfortunate topics. It may become a crutch; a solitary way of feeling happiness when the sky seems to be falling. When a person becomes dependent on spending to feel good, it can become addictive.
The mall is not your therapist’s office, nor is the bar or the expensive health club. Shoes, CDs and purses will not take away your stress or make you any saner. Expensive coffee and lunches out will not make your workplace any more tolerable in the long run.
During hard times, the best thing to do is define your problem or your source of stress, and then ask yourself whether you can reasonably expect to solve your problem outright. If you can, you should grit your teeth and do you best to solve the problem. If you have a problem that can’t be solved (such as an illness), you need to find constructive ways to deal with the emotional aspects of the problem. Your family and friends may be your best resource during these times.