There’s an intuitive link between mood and finances. For example, it’s pretty obvious that having limited resources can make you blue, but a recent study finds the inverse is also true, that being sad can lead to less money.
Researchers at the Harvard Kennedy School of Government and Columbia University conducted a study to see what kinds of financial decisions participants would make when exposed to depressive stimuli. After showing participants sad videos, the researchers observed they made financial decisions reflecting what’s called “present bias,” or in other words, they made choices that would have positive effects in the short term but cost in the long run.
In the report, published in Psychological Science, the researchers explain, “These experiments, combining methods from psychology and economics, revealed that the sadder person is not necessarily the wiser person when it comes to financial choices…Instead, compared with neutral emotion, sadness — and not just any negative emotion — made people more myopic, and therefore willing to forgo greater future gains in return for instant gratification.”
Sleep On It
Hold off until you’re of sound mind before making any serious financial decisions. Most likely, whatever it is – it can wait. If not, seek the advice of a professional for major decisions, family or friends if it’s minor. Overall the benefit of an outside opinion should help you see past the immediate benefits and toward the bigger picture.
Keep Checking in Check
In a previous story, we discussed ways to spend less that and some bear repeating when it comes to delaying gratification. For starters, budgeting apps Mint, MoneyWise and iWallet can help set financial goals and stick to them no matter your mood. They come equipped with alerts you can program to stop you from acting outside of your goals.
Next, carrying cash may be inconvenient — but that’s the point. Retail therapy is a crux and common spending mistake. To avoid it, Go to your bank’s ATM once a week and take out enough money for your weekly spending. It’ll make you think twice about each and every purchase, so you’ll limit splurging when you find yourself in a sudden funk. Ultimately, studies show we save up to 20% when adopting a cash diet.