Sometimes we feel something so strongly that it’s hard to imagine that what we’re feeling isn’t true. But, there’s trusting your gut, and then there’s trusting your emotions so thoroughly that, even when all evidence points to the contrary, you only believe those emotions. That is emotional reasoning and, if you don’t take steps to recognize it, it can negatively impact all aspects of your life, including your finances.
Here, we dive into more about what emotional reasoning is and how it relates to personal finance. Emotional reasoning can block you from achieving a lot of your financial goals, so we end with tips on how to become more objective and overcome any blocks put in place by emotional reasoning.
What is emotional reasoning?
If you make most of your decisions based on your feelings and ignore evidence that contradicts those feelings, you might be using emotional reasoning. Before you can fully understand how emotional reasoning relates to personal finance, let’s define the concept a little further. Emotional reasoning is a type of cognitive distortion.
Cognitive distortion is defined by the American Psychological Association as “faulty or inaccurate thinking, perception or belief.” Emotional reasoning is a type of faulty thinking where a person concludes that something must be true based on their emotional reaction to it. Even when there is evidence to the contrary, they rely on their emotions and ignore the facts.
It’s a type of negative thinking that can really interfere with so many aspects of your life. Emotional reasoning plays a role in emotions like anxiety, overwhelm, depression, and procrastination. The concept is best explained through examples.
Perhaps you feel that you aren’t intelligent, despite evidence to the contrary that you are, in fact, a very smart person (evidence such as success in school and strong evaluations at work from your boss).
You will ignore all of this evidence and decide that how you feel – that you are not intelligent – is the truth. That’s emotional reasoning, and it can be very detrimental to reaching your goals and living a fulfilling life.
How does emotional reasoning relate to personal finance?
So what does all of this have to do with your money? Money and emotions are highly intertwined. As you’ll see in the emotional reasoning examples below, emotions play a huge role in personal finance, from decision-making to self-esteem to confidence to spending guilt and more.
By understanding emotional reasoning, you can start to see how it might be blocking you from making the financial progress you want to make. Even better, once you understand how it shows up in your life, you can make changes and overcome it so you can move through whatever blocks it has put before you.
7 Emotional reasoning examples
The easiest way to understand emotional reasoning is through examples. Here are some common ways people use emotional reasoning to block them from financial success:
1. Being “bad” at money
You think that you don’t have the skills or the ability to understand money. You feel like you are just “bad” at managing your money.
Despite evidence to the contrary (e.g., that you’ve automated most of your finances), you convince yourself that you are bad at managing your money. Therefore, you make no effort to further understand your finances or take basic steps like putting a budget in place.
2. Feeling unqualified
You feel like an imposter at work, so you assume you must be bad at your job. Even though your boss praises you for your great work, you don’t believe her. Because your emotions override all of the facts and you believe those emotions, you don’t ask for a raise or look for a better job. Your emotional reasoning leaves you earning less than what you deserve.
3. Inability to reach financial goals
You don’t believe in yourself that you can reach a financial goal, such as getting out of debt. You assume that you won’t reach any goal you put in place, even though you’ve made and reached goals in the past. Because of this thinking, you don’t put in place a plan to become debt-free.
4. Guilt about overspending
You feel guilty about your spending habits, so you, therefore, decide that you have done something bad. You don’t look at the evidence (your budget), which might tell you that you didn’t really overspend as much as you thought. Instead of looking at any facts, you decide that you did something wrong and punish yourself for it because you feel guilty.
If you are new to personal finance or a specific area of it, you might feel overwhelmed about all there is to learn. Therefore, you decide that educating yourself about personal finance is impossible, so you don’t even try. Instead of taking a course or even reading a blog post or two, you freeze and decide it’s hopeless.
6. Fear of investing
You are afraid of investing, so you assume that investing is dangerous and you shouldn’t do it. Emotional reasoning causes you to follow your feelings – in this case, your fear – instead of the facts – that there are plenty of non-scary and non-risky ways to invest.
7. Doubt in your ability to live in abundance
You don’t believe that you can achieve financial abundance. Therefore, you do not open yourself up to the possibilities to make more money. You live in a state of lack, not because there is evidence that you can’t achieve financial abundance, but because you don’t believe you can.
How to become more objective and overcome your emotional reasoning blocks
Emotional reasoning is something that occurs in almost everyone. Some people are affected by it more than others, but it’s something most of us deal with. If it’s putting blocks in your way, it’s also something you can take steps to overcome.
If you think emotional reasoning might be blocking you from achieving some of your personal finance goals, try these steps out:
1. Identify your thoughts and feelings
First, identify what you are thinking and feeling. For example, let’s say you’ve decided that you are unqualified for your job. You’ve decided that you are an imposter. Once you’ve identified this, it’s time to dive further into it to determine if this is based on facts or your emotions.
2. Ask a trusted friend for advice
The second step is to begin to gather outside evidence. In our example, you could ask a friend or a colleague what they think about your abilities. Tell them what you are struggling with and ask for their opinion. An outsider’s view can help put things in perspective.
For example, they might point to some evidence that you would have missed. They could remind you about how they always come to you with questions on a certain topic because you are the most knowledgeable person at the company about it.
3. Always go back to the facts
One of the most important steps is to look at all of the facts. What facts support your position? In our example, what facts support your feeling that you are unqualified for your job? You’ll probably find more facts that oppose your feeling rather than support it.
You might come across all of the positive reviews you’ve received from clients or praise from junior colleagues about your mentoring abilities. Dig around to determine if what you are feeling is based on fact or emotion.
4. Reach out for professional help
While almost everyone will engage in emotional reasoning from time to time, not everyone can overcome it on their own. Sometimes you might need help identifying the areas where you are relying on your feelings rather than facts. When emotional reasoning starts to interfere with your life and finances, that’s when it might be time to seek the help of a trained clinical psychologist.
Emotional reasoning doesn’t have to block you from financial success
Emotional reasoning can interfere with achieving all that you’ve set out to accomplish, in the personal finance space and beyond. Luckily, you can learn to recognize when you are using your emotions as evidence of the truth, and ignoring the actual facts, and correct course.
Did you see yourself in any of the emotional reasoning examples above? Did they remind you of other ways you might engage in emotional reasoning? If so, hopefully, you’ve also seen that you are not alone and that there are ways to overcome using your emotions as evidence of the truth and work through your emotional reasoning blocks!
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