Nothing wrong with being emotional about money

2013-04-07 10:00

While completing an online questionnaire about emotions and money, I was not surprised to find that I am very emotional when it comes to money decisions.

Most of us are.

For example, one question asked whether I would use my bonus to pay for a life-saving operation for my dog. Of course, I would. I love my dog.

Almost prophetically, a few days earlier I had taken my very ill dog to the vet and was told she had to have a serious operation. I did not hesitate.

The truth is I would have taken out a personal loan to pay for the operation because it is an emotional decision and there is no reasoning with emotion.

Other questions included whether I would help out my normally responsible son whose car had broken down, or buy a nice lunch for a broke friend.

I answered yes to both.

How is it possible to be a sensible financial journalist with strict money management rules and zero tolerance for debt, yet be completely emotional about money?

While there is no contradiction here, there is nothing wrong with being emotional about money. What is the point of money if we cannot use it to help others?

The answer is not to be less emotional, but to be aware of our emotional responses and to be prepared for the financial consequences.

When faced with the major bill from the vet, I closed my eyes and gave thanks that not only had I taken out pet insurance, but that I had built up my emergency funds and was able to absorb the double whammy of vet bills and a car accident in one month.

Bills that would normally max out my credit card are nothing but a small blimp which I can slowly repay back into my emergency fund, rather than paying exorbitant interest rates and having the bank banging on the door.

That emergency fund did not appear overnight. It took several years to build up to the recommended three months of expenses. In fact, the last hurdle was only reached a couple of months ago when I renewed my motivation after editing the Total Money Makeover.

I made sacrifices, cut back and made sure my emergency fund was fully operational. Now I will need to focus on building it back, but the motivation is there, knowing that it allows me to remain as emotional and irrational as I choose to be.

Here’s how to start an emergency fund:

» Even if you are focused on paying off your debts, make sure you are building up an emergency fund so that an unexpected event doesn’t put you further into debt;

» Start small – your first step is to have R1?000 in an easily accessible, no-fee account and build it up until you have R10?000 as a buffer; and

» Once you’ve settled your debts, you can start on the larger goal of having at least three months of living expenses put aside.

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