Unlocking the Secrets to Financial Success: An Essential Personal Finance Lesson From a Business Professor
Money and lifestyle beliefs are intricately linked. But if we fail to be aware of our emotional spending reactions, our pocketbooks may pay for it. John Lopez, a senior professor of practice at the University of Houston’s C.T. Bauer College of Business and CFP, offers valuable insight into how to master a key lesson in personal finance.
Why Emotional Spending Is Destructive
We are constantly bombarded with marketing messages designed to get us to emotionally connect to their products. If we’re not careful, the consequences can be dire.
“If I don’t have an Apple computer, I’m a loser. If I’m not shopping at Starbucks, I’m a loser. If I’m not driving this particular car, I’m a loser,” explained Lopez. This leads to people going into debt, not having enough savings, and driving cars they can’t afford.
Accepting Personal Finance Advice Thoughtfully
Being aware that we’re always being marketed is one key, and Lopez notes that people need to think for themselves when it comes to personal finance tips. “Consider the source of the article” and get advice from people who don’t have a conflict of interest.
Being Mindful of Cash Flow and Being Aware of Impulses
By recognizing our emotional reactions when it comes to spending money, we can make better decisions. Ideally, this will help us align our financial decisions with our long-term goals.
Lopez recommends understanding our cash flow and asking ourselves, “Why do I want to buy this item?” Being conscious of our reasons when we go to spend is an essential part of managing our finances effectively.
A Vital Source of Stability: Emergency Savings
If the unexpected happens and you don’t have emergency savings, it can start a spiral of debt. Lopez suggests having a minimum $1,500 tucked away in an emergency savings account for students and three to six months of living expenses saved for working professionals.
Putting Emergency Savings Into Practice to Improve Your Finances and Shift Wealth
Having emergency savings can truly change your life. When you have liquid funds for unexpected expenses, it will help you to become wealthier in the long run. Take the time to analyze your spending habits and consider the source of your money advice. Doing so could help you reach your financial goals quicker than you thought possible.