Why Money Isn’t Logical:
How Emotional Decisions Keep Us Stressed About Retirement
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Money has been around for a long time. In fact, it dates back to around 600 BC, when King Alyattes of Lydia, in what is now Turkey, created the first official currency. While the concept of money has deep historical roots, the modern idea of financial decisions—saving and investing, particularly for retirement—is relatively new. By the end of 2018, there was $27 trillion stored away in U.S. retirement accounts. But, did you know that the entire idea of being entitled to retirement is only a few generations old?
Before World War II, most Americans worked until they physically couldn’t anymore. Retirement wasn’t a common expectation. Fast forward to today, and while many people save for retirement, a large portion of us feel stressed or frustrated because we’re not saving enough—or we’re unsure if we have saved enough to live comfortably. In fact, according to a recent survey, 55% of Americans are stressed about their retirement!
Why Do We Stress About Money?
The truth is, money isn’t as logical as we think it should be. Many of us approach it from an emotional point of view, without realizing it.
Let’s take an example. Imagine you got a speeding ticket for $639. That’s a huge hit to your finances, and you’re likely upset. But you decide to fight it in court, and miraculously, the fine is reduced to $200. How do you feel? Relieved, ecstatic even. In fact, you’re so happy that you might “treat” yourself to a nice meal or a shopping spree to celebrate.
But here’s the catch—you didn’t stop to think about the hidden costs involved. Maybe you had to take a day off work to go to court. You had to spend money on gas, parking fees, and possibly even lunch downtown. The truth is, you might have ended up spending even more money in the process, but emotionally, you feel like you won because the ticket cost was reduced.
This is a classic example of how emotions can override logic when it comes to money. The focus was on the “win” in court, not on the actual total cost of the situation. This is how many of us approach financial decisions. It’s not about the bottom line—it’s about how we feel at the moment.
If You Feel Stressed About Money, You're Not Alone
Have you ever felt like you’re just not good with money or that the topic is so stressful you’d rather not think about it at all? You’re not alone—and there might be some solid evidence to back this up.
Studies show that financial stress is one of the leading causes of anxiety for many people. In fact, financial stress is often deeply rooted in the way we’ve been taught to think about money from a young age. Society, marketers, and even our own families unintentionally condition us to connect money with emotions like fear, guilt, or pride. This creates a cycle where we avoid money matters because they’re stressful, which in turn makes them even more overwhelming when we finally face them.
The real kicker is that this emotional approach to money often prevents us from making the logical decisions needed to get ahead financially—especially when it comes to retirement.
The Impact of Emotional Spending on Retirement
This emotional approach to money often translates directly into how we manage (or don’t manage) our retirement savings. Marketers and society are well aware of how emotions play into financial decisions, and much of what we’ve been conditioned to believe feeds into this emotional cycle.
For example, when we feel stressed or overworked, many of us turn to “retail therapy” or other forms of instant gratification to feel better. These short-term rewards feel good in the moment, but they often derail long-term savings goals, like putting away money for retirement.
Similarly, when we do manage to save money, the satisfaction of seeing a growing account balance can lead to a sense of overconfidence. This might cause us to make risky investment decisions or stop saving consistently because we think we’re ahead of the game. But if an unexpected financial event happens, like a medical emergency or job loss, we’re suddenly behind again.
Shifting from Emotional to Logical Money Decisions
If you’ve ever felt like you just can’t seem to get ahead financially, or you’re constantly worried about whether you’ve saved enough for retirement, you’re not alone. The problem isn’t necessarily that you’re bad with money. It’s that society has trained many of us to think about money emotionally rather than logically.
Breaking out of this cycle requires a shift in mindset. Instead of thinking about money in terms of short-term wins or losses, start focusing on long-term planning and stability. Here are a few steps to get started:
1. Identify Emotional Triggers
Pay attention to when and why you make certain financial decisions. Do you tend to spend more when you’re stressed or tired? Are you influenced by external factors, like sales or promotions? Recognizing these emotional triggers is the first step to making more logical decisions.
2. Focus on the Long-Term
When it comes to retirement, it’s important to take a long-term view. Instead of worrying about short-term market fluctuations or temporary financial setbacks, keep your eyes on your ultimate goal: building a secure financial future.
3. Automate Savings
One of the easiest ways to remove emotion from saving is to automate it. Set up automatic transfers to your retirement account each month, so you don’t have to think about it. This helps ensure that you’re consistently contributing to your future, regardless of how you’re feeling in the moment.
4. Get Educated
Financial literacy is one of the best defenses against emotional decision-making. The more you understand how money works—particularly when it comes to saving and investing—the less likely you’ll be to make decisions based on fear, stress, or excitement.
Conclusion
At the end of the day, financial security, especially for retirement, isn’t built on short-term emotions or wins. It’s built on consistent, logical decisions and a long-term mindset. While it’s natural to feel frustrated or worried about your savings, recognize that you’re not alone in feeling this way. There’s even evidence that suggests many of us have been conditioned to feel stressed about money, regardless of our actual financial situation.
The key is to move away from emotional reactions and take control of your financial future with a more logical approach. In the next part of this series, we’ll dive deeper into how our emotional conditioning impacts other areas of our financial lives—and what you can do to break the cycle and create lasting financial peace.
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