Emotional decisions can lead to overspending. If emotional overspending goes too far, it frequently leads to bankruptcy. Overspending can be especially common around the holidays when people desire to give gifts to their loved ones. Below are three common emotion-based decisions that can lead to bankruptcy.
The holidays frequently drag our minds into the arena of emotional gift giving. Parents frequently strive each year to give memorable gifts. This can lead to buying high dollar items for the kids or other loved ones.
With gifts, most people are usually satisfied with simple items. For various emotion-based reasons, parents will purchase items that they cannot afford. They buy them on credit and these purchased items can contribute to the need for bankruptcy. It also creates a cycle of “spoiling” the children which can lead to lifetime financial problems.
Adults desire “gifts” too. They desire to give a “gift” to themselves. Whether it’s a convertible, a fishing boat, or a long desired exotic vacation – adults sometimes emotionally splurge on themselves as well. They believe life will finally be much more enjoyable after their particular glory item is obtained. Usually, however, life just gets much worse, especially when the item was purchased irresponsibly on credit.
Sometimes our desires for certain items overrule our logical thinking. Some people will then purchase things on credit even when the payments are nearly impossible. These types of personal “gifts” are on of the greatest causes of bankruptcy. They are also one of the greatest emotional mistakes that a person can make with their finances.
Other times people will just try to purchase the type of items that they see at their neighbors’ house. Whether it is a house, a car, or some other sign of financial success, these types of purchases usually end up with financial failure. “Keeping us with the Joneses” many times lead to financial failure and even bankruptcy.
Some people that own nice homes and nice cars have purchased them paid-in-full. These are the financially responsible people who live out of the abundance of their assets and income. Financially irresponsible people instead of pursuing this type of lifestyle with credit. It is a shortcut in life that has disastrous consequences. These consequences are many times lead to bankruptcy.
Financial decisions based on emotional thinking are usually poor financial decisions. These emotional decisions cause people to work their entire life without accumulating any savings. They grant the desire for an emotional item immediately, but they also bring costly, ongoing consequences that can lead to bankruptcy.