There is a reason some rich people lose all their money and it isn’t what you think…
This reason underlies all human action and without understanding it, it would be impossible to combat it.
What am I talking about?
You might think “What? What does emotion have to do with money?”
It’s simple, every action you make is driven by your emotions, if you seek something it is because you felt like you needed it.
When we feel hungry, we look for food. When we feel thirsty, we look for water.
If we feel lonely, we look for our friends. Or a mate.
So why do we seek money? We feel like we need it.
Emotion isn’t bad on it’s own, in fact without emotion, you wouldn’t have the drive to better your life…
But it needs to be put in check, emotions of need can cause us to over-eat, over-drink, and relax too much.
This is called “depravity” or “over-indulgence.”
This isn’t limited to our health either, this stuff can affect our work and our wallets.
Workaholics are people who over-work themselves and cause all sorts of issues.
They do this because they see every second that they are not working as wasted time, but they don’t understand that when they work too much, they find themselves messing up a lot of just doing menial busy-work.
One thing to note is that the wealthiest people in the world are long-term investors, not day traders.
If you day trade, this means you are aggressive with your investments and you trade very often.
On paper, this can look like you are profiting thousands a month, but in reality, you are paying a fee every time you trade, and you are getting taxed when that money goes into your bank account, not to mention what you are losing with inflation.
And all this assumes you are actually profiting, and not making bad trades, but as we all know, winning streaks never last.
If you trade long term, you avoid the negative effects of taxes, bad trades, constant trading fees, and you’ll beat inflation.
But you won’t get the emotional high that traders do when they make a good trade.
Long term investors are emotionally unfazed by market dips and stock crashes, in fact, they welcome these things because the stocks they love are even cheaper to buy.
Aggressive day traders, exit all their positions as soon as the market hits a downturn and lose money when the economy goes bad.
They are terrified of low stock prices that don’t go back up quickly.
So understanding what we do about emotion and money what are some other ways emotion can destroy our wealth and what can we do about it?
People who inherit money or find ways to gain a lot of money through their business, tend to start ignoring small details when it comes to their finances.
They’ve achieved abundance and don’t believe in stuff like saving or looking at bank statements anymore because they have so much money.
That’s all well and good for them but this will be their downfall.
ALWAYS look at where your money is going, go over your bank transactions, credit card bills, and look for unauthorized transactions or fees. Don’t get sucked dry from a million little things.
Emotion can also cause you to be overly generous with the people you care about.
Maybe this comes from a feeling of insecurity or maybe you genuinely feel like you want to spoil them.
But the truth is, that it isn’t helpful for you or them.
The best way to rope in those emotions is to have a set of principles that you follow even when things get emotionally chaotic.
This is essentially what budgeting is. Rules for where your money goes and how it is spent.
For things in between like investing or being charitable, you can also develop sets of rules.
It may make you feel stingy when you start giving less often, but at least you won’t be struggling with your money.
Long term investors look over their investments with a fine-toothed comb and they won’t make a trade based only on price like a day trader would.
This ensures their money grows for a long time and keeps growing even though they aren’t spending all their waking hours making trades.
Like I said earlier, emotions are not bad things you need to eliminate from your life.
You just can’t let them destroy or wreak havoc on your financial success.
Personal rules that you run your finances by will work wonders on your net worth and it will seem like money just grows on its own after you remove emotional needs from your decision making.
And by the way, this isn’t to say start doing unethical practices because you are “unemotional.”
Don’t get emotions confused with morals.
I hope this article helps you understand more about why you make money decisions the way you do and you make a positive change for better finances.
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