Don’t Let Your Emotions Overrule Financial Sense

Rebuilding Home: Money Rule # 41

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Deborah Feldman, CFP^®
Wealth Advisor, Managing Director

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Do you know a person who has a history of making poor, impulsive financial decisions, based on nothing more than a wish and a hope? Someone who believes that everything will be okay? Fortunately, I don’t know many people who fit this description, but one of my relatives, Charlene, does. She asked me to meet Carol, her childhood friend who needed “a bit of help.” She didn’t want to expand on exactly on how I could help her, she just wanted me to meet Carol without any preconceived ideas. I must admit, I was curious – exactly what is “a bit of help?”  I would soon find out…

I met Carol one sunny Saturday afternoon at a local coffee shop. Charlene and I were already seated when she walked in. She was, as my grandmother used to say “dressed to the nines” sporting a white cashmere sweater, a white cashmere skirt, white leather boots and stunning gold and diamond jewelry. She was a vision of confidence, class, beauty and intelligence, all rolled into one person. I couldn’t imagine this lady needing “a bit of help” with anything! She sat next to Charlene in the booth and after a few pleasantries, she thanked me for meeting her on a weekend. She then proceeded to tell me that while she wasn’t worried about anything, her family and friends were very concerned about some of the decisions she had made, and she finally agreed to get an “outsider’s” opinion.

I felt like I was stepping into a hornet’s nest – it was obvious that Charlene as well as Carol’s family members were condemning her life choices and looking for me to support their collective opinion. It was just as obvious that Carol wasn’t going to be told what to do with her life, her money, or her children. I began the conversation by asking what her family was concerned about, and she told me her story. Her husband Steven had died suddenly about three years prior, while on a bicycle ride with a friend. While his death was a tremendous shock to her and her three teenaged children, she was determined to not let it negatively affect their lives.

To Carol, this meant that they should continue with the same lifestyle that they had while Steven was alive. She didn’t want to deprive her children or herself of anything. She told me that it wasn’t anyone’s business how she spent her money, and she resented her family for constantly reminding her that she couldn’t afford expensive vacations, timeshares, designer clothing for everyone, a new car for each child when they got their driver’s license, or expensive home improvements, etc. She loved her friends and family for caring, but she didn’t want them interfering or pitying her. She was okay, her children were okay and “that was that!”  At some point in the conversation Charlene brought up some loans that Carol had made to two acquaintances, who had stopped making monthly payments. Carol then shut down the conversation and after a few minutes, excused herself, and left.

Charlene apologized for putting me in such an awkward situation and provided more background on the family’s concerns – Carol received $1 million dollars in life insurance proceeds when Steven died and based on a conservative estimate, Carol had spent about $600,000 over the past 3 years, not including two $50,000 loans. Her family began to question her about how she was going to pay for upcoming college costs and Carol explained that each child would receive scholarship money that would cover the costs. I asked, “Are all of her children honor roll students or elite athletes?” Charlene shook her head and quietly replied “no.”

A few weeks had passed since the meeting with Carol, and Charlene and I had resigned ourselves to accept that this was one person who I wouldn’t be able to help. Until one day, when out of the blue, I recieved a voicemail message with a request for a meeting.

Carol and I met the following week, and she started the conversation by telling me that she was embarrassed at her behavior at the restaurant. After Steven died she discovered that if she treated herself and her children to extravagant gifts, the thrill of the purchase dulled the pain of the loss of her husband. The emotional spending fix had become addictive. The more she bought, the less pain she had to deal with. Her children began to question if she really missed their father because she seemed much happier without him. She said that she knew she was in trouble when she stopped looking at her bank statements because she didn’t want to see the account balance – if she didn’t see the balance, it was still $1,000,000!

Our meeting was a wake-up call. She thanked me for not voicing an opinion, for remaining neutral and she was ready to “fix things” going forward.  “Whatever it takes” became her motto and that day in September was the beginning of a 7-year plan. The first step was to find a grief counselor who helped guide her through the grieving process. Eventually, she was able to accept Steven’s death, which allowed her to heal and rebuild her sense of worth as a widow.  We then started establishing a reasonable spending pattern, monitoring her financial goals and devising a system to collect money from her two acquaintances, which gave her a tremendous amount of confidence.  What started out as “a bit of help” morphed into seven years of (sometimes very intense) conversations, which over time culminated into a wonderful friendship.

It is crucial to maintain a clear and rational mindset when making financial decisions. Allowing emotions to dictate your financial choices can lead to impulsive actions, unnecessary risks, and potential losses. By staying disciplined and adhering to a well-thought-out financial plan, you can safeguard your investments and work towards achieving long-term financial stability. Remember, a calm and calculated approach is the key to successful financial management.

Read more on Deb’s LinkedIn Page, here.