The Psychology of Money: How Do Emotions Affect Financial Decisions?

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Written By Berry Mathew

Managing your money isn’t always easy, but have you ever thought about how your feelings affect your financial decisions? The two go hand in hand, and if you’re struggling to take control of your finances, these emotions can crop up and cause you to feel sad, anxious and stressed. In the current economic climate, more of us are finding it difficult to cope with the increasing cost of living, which as a result is causing more of us to feel down, which can be exacerbated if we’re faced with an additional expense. 

Thankfully, there are options to choose from like a payday loan that can help you deal with an emergency, but learning more about the feelings that can have an impact on our finances is advantageous. Read on to find out more about the psychology of money. 

The Importance of money management 

Knowing how to manage your money can have an impact on your overall financial health. For example, creating a budget, prioritising monthly payments, and saving cash each month means you’ll have an in-depth knowledge of your income and outgoings, meaning you can reach your money goals more easily. 

If you find it difficult to manage your finances, dealing with money can become stressful – you won’t know what’s coming in, how much is going out, and you won’t be able to save for your future. This can bring about various emotions that can have an impact on your decision-making. Here are a few of the emotions you may feel that can have an impact on your financial decisions. 

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It’s not surprising that many of us feel fearful about our financial situation, with the cost of living on the rise. Making ends meet is becoming harder, which can make many of us feel scared about how we’re going to cope. When you’re scared, you tend to make impulsive decisions. This could be taking out a loan you can’t afford or dipping into your savings for things you don’t need. Feeling fearful of your situation can cloud your judgement surrounding what’s best for your finances. 


It goes without saying that greed can impact financial decisions. There are a few ways in which this emotion can influence us, for example, if you’re investing your money, you might take unnecessary risks to make a quick profit. You could also say that greed influences those that spend money on sports betting or online games – which can be detrimental to their financial situation. Greed pushes you to make decisions without thinking in the hope that you may benefit from additional funds – but this can be problematic. 

Getting to know your finances in depth, creating a budget, and managing it as necessary means you can make financial decisions without feeling worried, or anxious. Money management allows you to feel confident when it comes to your finances, so you won’t need to worry about emotions clouding your judgement. 

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