Finance is Emotional
I have recently been reading a book about how to communicate more effectively in every aspect of our lives, and found that one of his points in regards to communications really hits home for our personal financial situations.
The author makes the point that our decision making processes are fundamentally emotional, and that it is not until after we have made a decision based upon our emotions do we actually start to find facts to support our decision. He emphasized that, in order to make a sale, the salesman must first pass the emotional gates in our minds and establish trust, and then once the emotional test has been passed, the deal is as good as done.
I thought about his premise. Could all our decisions really be emotional, not factual? After some thought, I figured that he was right. If cars, for instance, were purchased solely on the basis of fact and logic, then very few large trucks would ever be sold, and very few sports cars would ever be sold. Why? Because these vehicles look their best when viewed emotionally and not logically. Logically, for example, you could drive a Corvette, but go no faster than the rusted out VW Bug that’s blocking the lane. Logically, a spacious SUV could tow a trailer almost as well as the huge truck. Logically, these vehicles cost more to buy, drive, and insure, and yet they continue to be sold in large numbers. Why? Because they have great emotional appeal. Sports cars look great and sound great, and can be a lot of fun when you mash the gas pedal. The truck looks tough and rugged and powerful (an image that rubs off on the driver!). These are emotional arguments for these vehicles.
Once the vehicle has been purchased, then come the logical arguments. A family member is moving, and suddenly the huge truck looks like very logical and wise purchase. The Corvette rushes down the freeway at 120 mph, getting you to your destination in less time. These factual supports for the emotional decision come after-the-fact. The truth is that while the truck is useful sometimes, how often do you haul tons of dirt around or tow a 50 ft trailer? How often do you need to drive 120 mph, and how often could you even make it through traffic at that speed?
This post is not anti-truck/sports car. The point is that, whether we like it or not, our emotions play a critical role in our purchasing decisions. If we all made decisions based purely on fact, then the only people who bought large trucks would be those people who need to use the power and size and utility of a truck on a regular basis, and everybody else would drive small hybrids and rent a truck on the occasions when it would be needed. From a purely factual standpoint, it would be cheaper for the large majority of people.
This introduces what I will conceptually call “Buyership”. Does buyership sound like a made-up word to you? It should because it is. I made it up. Coined it myself. Salesmanship embodies the techniques for prompting a sale. Buyership is just the opposite of salesmanship. It is dedicated to recognizing when we are under the influence of salesmanship, and for finding escape from that influence so that we can make sound financial decisions. We will develop the principles of buyership in future posts. For now, just remember to be careful of your emotions when considering a major purchase. With each decision, try to set your emotions aside for just a few minutes and give serious consideration to the facts. Make sure you give the facts a chance to speak for themselves. They may not change your emotional decision. And that’s fine. But make sure you have at least considered the facts before you commit, because if you don’t then you are not in full control of your finances. Your emotions are. And sometimes our emotions can get carried away, and before we know it, our finances have suffered. Enter your decisions by giving consideration to both your emotions and the facts so that you can retain control of yourself and your spending.
Posted on 9 Feb 2009