The latest iPhone. A new pair of designer shoes. An extra coffee run. All of that spending can add up — and according to John Lopez, a senior professor of practice at the University of Houston’s C.T. Bauer College of Business and CFP, understanding your emotional reaction to money and to marketing — and its relationship with lifestyle — is an essential personal finance lesson.
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The financial advice that’s available “is pretty good,” Lopez told GOBankingRates. He noted that as far as people deciding whether or not to follow personal finance advice they read about, they should “consider the source of the article” and get advice from people who don’t have a conflict of interest.
Emotional Spending and Lifestyle Beliefs Can Be Dangerous
What’s destructive, Lopez said, is emotional spending. He explained that people are continuously subject to beliefs like “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.” And those beliefs can have serious consequences.
“So they go into debt, they don’t have savings, they’re living paycheck to paycheck, they have cars they can’t afford,” Lopez said.
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Marketers try to get people to have an emotional connection to products, he added. As far as avoiding marketing? “I don’t think you can,” he said, “whether you’re scrolling through something online or watching a TV show or are walking around,” marketing is ceaseless and being aware of it is vital.
But by recognizing their emotional reactions when spending, people can make better decisions, Lopez suggested.
He advised that people understand their cash flows and ask themselves why they want to buy items. “Being aware of the reason that you’re spending,” he added, is important.
Lopez explained that when unexpected situations arise, without “some kind of emergency savings,” people can “begin the spiral of getting into debt.” He said that students should have $1,500 tucked away in an account strictly for emergencies and that working professionals should have three to six months of living expenses saved. He stressed that: “If people have emergency savings, that will change lives.”
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This article originally appeared on GOBankingRates.com: I’m a Business Professor: One Essential Personal Finance Lesson Every Person Should Master
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