The impact of stress on your financial decisions

When you are facing a financial decision, big or small, how do you determine the right course of action?

Decisions about money are often abstract, require us to imagine our future, and can be typically driven by emotions.

Perhaps you have the support of a financial adviser or you like to spend hours conducting your own research. Either way the decision is ultimately in your hands.

It’s easy to get caught up in the details of financial decisions and that can send our stress levels skyrocketing. When we are stressed it makes us more irrational.

Making any kind of decision is easier when you feel relaxed and clear. So if you’re feeling under the pump here are three ways to make good financial decisions in difficult times.

Remember your why

When we are stressed the fight or flight response kicks in. That has the effect of narrowing our focus. It becomes harder to see other possibilities and we can get stuck in the mire of the small details.

To zoom out again practice focussing on your big picture and considering how the decision lines up with your values.

Whether you’re buying something big or small take a moment to ask yourself does this reflect my values as a person and will it help me get to my end goal?

Forgive yourself

Is the pressure coming from a fear that you’ve been down this road before and it ended badly? Part of moving forward and making better financial decisions is to forgive yourself for the times when a choice hasn’t worked out the way you hoped.

If you keep beating yourself up for a ‘bad’ financial decision you can end up feeling paralysed and unable to make another decision.

Ask yourself what you learned from the previous decision and focus on what you did well. Maybe you got good advice but at the last minute decided to listen to a hot investment tip from a friend. Did you do some great research but falter when it came to negotiating?

Then consider what is different this time around. Do you have a better understanding of the situation? Have you sought advice? Have you learned more about the investments or financial decisions you are considering? Or improved your negotiating skills?

Check your stress levels

If you’re on the verge of making a financial decision check your stress levels. Ask yourself whether you feel calm or anxious. Are your thoughts racing or clear? Is someone else’s anxieties influencing how you feel?

If you’re not in the right mindset and emotional state to make a financial decision, give yourself some breathing space.

Do something that makes you feel calm – take some deep breaths, go for a walk, sit somewhere natural – and come back to the decision when you’re ready.

Notice when you tend to feel calmer. Is it when you first wake up or towards the end of the day when you feel a sense of accomplishment?

Choosing the right moment to make a decision will help keep stress from impacting your choices.