Lynda Moore says avoiding money mistakes isn’t about knowing more, it’s simply about giving ourselves the space to make better choices

Have you ever bought something and later wondered, “What on earth was I thinking?”

This is very top of mind for me right now, as I have just purchased a GPS tracker for Jett, and I’m now trying to return it, as it just isn’t doing what I wanted (or what I thought it would do).  When I was bemoaning my not great purchase with my girlfriends, they looked at me and laughed.  That wasn’t quite the reaction I was expecting.  Sympathy would have been nice.  “Lynda”, they said, ‘you’re the Money Mentalist, we didn’t think you did dumb things with money like rest of us”.  “I’m only human” I replied. We then had a good laugh about some of the not great money decisions we have all made.

Maybe like me, for you, it was an impulse purchase. Maybe it was agreeing to something financially that didn’t really make sense. Or maybe it was simply ignoring something we should have dealt with sooner.

Money mistakes happen to everyone at some point. If they haven’t, you’re in denial!

And interestingly, they’re usually not about the maths. Most of us know the basics, spend less than you earn, save where you can, avoid unnecessary debt.

The real challenge is that money decisions are rarely just logical. They often come with emotions attached, stress, excitement, pressure, even a bit of ego. When that happens, our clear thinking can quietly slip out the door. I got a bit too excited about this particular GPS tracker that counted Jett’s steps, and how long he sleeps (it’s a lot!) that I didn’t do enough research to make sure it had the functions I was really looking for.

Suddenly 1 + 1 doesn’t quite equal 2 anymore.

The good news is there are some simple habits that can help reduce the chances of making those decisions we later regret.

Here are five that make a real difference.

1. Avoid big money decisions when emotions are high

This one seems obvious, but it catches people out all the time.

When we’re upset, excited, angry or stressed, our focus tends to narrow. We react to the moment instead of thinking about the bigger picture.

The same thing happens when we try to reason with someone who’s highly emotional, logic rarely wins the argument. A bit of understanding and time to cool down usually works far better.

The same applies to our own decisions. We need time to change our emotional state from activated, to calm, that way our rational brain can join the decision making process.

2. Don’t decide when you’re tired or stressed

When we’re tired or under pressure, we simply don’t think as clearly.

I remember my mum saying never go to bed angry because you might say something you regret. Money decisions can be a bit like that too.

When we’re exhausted or stressed, we’re far more likely to make a decision that seems fine in the moment… but feels less sensible the next day.

This leads very nicely onto the next one.

3. Sleep on it

Sometimes the best strategy is simply to pause.

Step away. Leave the decision until tomorrow.

A good decision will still be a good one in the morning. A bad decision, on the other hand, might suddenly feel a lot less appealing.

If you go online shopping late in the evening, leave everything in the cart, and check it in the morning.  You may well find that you take most, if not all of it back out.

Time can be a surprisingly good filter.

4. Have a plan

Knowing what you’re working towards makes a huge difference.

If you have a clear picture of what you want your money to achieve — paying off debt, building savings, creating security — it becomes much easier to keep day-to-day decisions in perspective.

It doesn’t mean you’ll never slip up. We all do. But a plan makes it easier to get back on track.

5. Focus on what you can control

This was the theme of last week’s article, so feel free to backtrack for more on this one. There are plenty of financial things we can’t control, interest rates, the economy, government decisions.

But there are also plenty of things we can control: how we spend, how we save, and the choices we make day to day.

Focusing on those things tends to be far more productive (and far less stressful).

When money and emotions collide

Most of the time we like to think we make sensible financial decisions.

But occasionally emotions get the better of us.

Maybe we buy something because it makes us feel better in the moment. Maybe we convince ourselves we “deserve it”. Or sometimes we simply act too quickly without thinking things through. 

It can even make people vulnerable to scams.

I’ve lost count of the number of emails claiming there’s a fortune waiting for me in some overseas bank account if I just send a few details.

It sounds ridiculous, but sadly people do get caught out.

One client of mine became involved in a scam like this and started sending thousands of dollars overseas. His wife tried everything she could to stop it, but by the time the truth came out he had lost his business, his marriage and his home. It was heartbreaking.

Money mistakes can have very real consequences.

A simple takeaway

The goal isn’t to remove emotion from money completely, that’s almost impossible.

Instead, the trick is giving yourself a small pause before making important decisions.

A breath. A night’s sleep. A quick check against your bigger plan.

Those small pauses can make a big difference.

Because most of the time, avoiding money mistakes isn’t about knowing more, it’s simply about giving ourselves the space to make better choices.

I’m taking my own advice and going back to the drawing board on Jett’s tracker, we don’t need it right now, so I have plenty of time to do more thorough research and get it right next time.

What money mistakes have you made and what have learned from them?  I’ve love to hear your stories in the comments

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*Lynda Moore is a Money Mentalist coach and New Zealand’s only certified New Money Story® mentor. Lynda helps you understand why you do the things you do with your money, when we all know we should spend less than we earn. You can contact her here.