Don’t Make Financial Decisions When You’re Feeling Down

By Libby Kane

NEW YORK (Learnvest) — Emotional spending is nothing new – we’re probably more likely to splurge on a shiny top or tempting snack when we’re feeling emotionally vulnerable.

But research shows that people who are feeling down also make other kinds of bad financial choices.

For instance, when given the choice between getting some money immediately or more money later, sad people are more likely to accept less money right away – which is the poorer choice. (And unfortunately, women are more stressed by bad news than men.)

Researchers presented the same offer to about 600 people, split into three groups who were put in neutral, sad or disgusted mindsets by viewing short video clips.

CNN Money reports:

“In one experiment, the median sad participant opted to take $37 immediately instead of waiting three months to receive $85, while neutral participants required a higher amount of $56 right away. Another experiment found that sad participants chose $65 today rather than $100 in three months, while neutral participants wanted $74 today.”
The disgusted mindset was established to see if any negative emotion would have the same effect as sadness – but their results more closely paralleled the neutral group.

To describe this effect – being unwilling to wait for higher rewards – the researchers came up with the phrase “myopic misery”: when sadness shortens your foresight to focus you on getting more now, no matter what comes later.

Sad or not, foresight is critical to maintaining financial health. For all of the immediate gratification supplied by Learnvest’s free, five-star app, it’s also important to look at your future needs, like how much you have saved for retirement and the state of your emergency fund. It’s the same, whether choosing money in a research study or stocking your 401(k): Would you rather have some now, or more later?