Financial Decisions: When Common Sense is Not Common

I still wonder why common sense is so named. I feel a native sense or something similar is more like it. In my experience, common sense is not common especially when it comes to money. The challenge lies in the way we make financial decisions, especially when it comes to spending. We spend with our emotions and justify with our minds. We decide we want something, and that finds reasons to justify why we do.

Your current mobile phone may be working just fine but the moment a newer version hits the shops, you are ready and armed with reasons why your current phone will no longer serve you. It is all a mind game. Logic flies out of the window.

When I look at the dumb financial decisions I have made over the years, I wonder what makes common sense common. It may be logical, but by no means common. It is logical that you have by keeping, not giving away but we routinely give all money away to shop owners or whoever has what we desire. We are even told to save when items go on sale. Very few stop to think that you cannot save by spending, no matter how much the price of the item is reduced.

The moment you reach for your cash, credit, or debit card, you are not saving, you are spending. It should be logical to even a 5-year-old, but when we are in the heat of battle, with our emotions screaming “Go for it!”, in our minds, we are saving while the shop owners smile all the way to the bank with the real deal (our cash) while we clutch our doodads and head home feeling cool.

Often times we pull logic-defying stunts. We go pull out money from our investment to spend! We go to where our money was working hard for us, ask it to stop work,ing and fire them on the spot!

“You are fired! You no longer work for me. Goodbye!”

We eliminate an asset to acquire a liability rather than the other way round. Years down the line, we shake our heads in pure wonder where all our money went, and what happened to our employees. It would have been hilarious if it was not so sad. I still fall into this trap.

As humans, we have emotions and will always do. The challenge is taking charge of our emotions rather than our emotions dominating us. The challenge is in occupying the driver’s seat rather than lounging in the passenger’s seat. We have challenges with delayed gratification when our emotions get the better of us. We know quite well we could not afford this item, and did not really plan to buy it, but we negotiate with ourselves, persuade ourselves, and tell ourselves how to juggle our finances to make room for this big-ticket impulse buy.

Where there is a will, there is a way. We are ready to raid our savings, suspend our financial/savings goals, raid our investments, max out our credit card, anything to help us have this must-buy. In the heat of emotions, common sense takes flight only to come back days later when we wonder what got into us, what were we thinking – buyers’ remorse.

Self-control is very crucial in the attainment of any goal, be it financial, relationship, spiritual, physical, or emotional – you name it. When you remain in control, you can determine outcomes. When you are in control, you can steer the ship in the direction you desire. Self-control comes with increased maturity. This is the reason personal development is important and is a key component in the quest for the fulfillment of any goal. If you cannot control your emotions, you cannot control your spending or take common-sense financial decisions. You will buy (act) first and think later. You will make illogical decisions – like taking your money from an income position (assets, investments, etc) and moving it into an expense position – buying something that does not generate income.

Common sense is supposed to be common, but when we allow our emotions to get the better of us, it begins to seem like rocket science.