Money and Self-Control: The Battle Between Thoughts and Emotions

Spend now or save for tomorrow? Many financial decisions come down to this exact problem. How do we calculate these kind of trade-offs?

Spend now or save for tomorrow? Many financial decisions come down to this exact problem. If you buy the dress or the sunglasses now, you can’t use that money at the weekend to pay for the restaurant. How do we calculate these kind of trade-offs? Do we make any calculation at all? If not, then what factors influence our decisions?

There are two sets of answers to the question of how we decide whether to spend or save, hoard or splurge. In the first set of answers humans are seen as rational, logical creatures who make decisions about money by carefully weighing up the present against the future. People try to balance how useful it is to spend the money now, compared to how useful it will be to spend the money later.

And for the phrase ‘how useful’ you can substitute, say: ‘how happy it makes you/someone else’ or ‘the financial advantage you would gain’. It’s all about trade-offs in current emotional, financial or other states in the moment compared to how you imagine the future.

This view of people exercising the wisdom of Solomon is dying fast.This view of people exercising the wisdom of Solomon is dying fast. This is simply because it doesn’t fully explain how people actually behave. Nowadays amongst researchers there’s much less emphasis on people calculating usefulness – either in the moment or future usefulness – and more on how our self-control and emotions interact at the actual moment of decision-making (Camerer, Loewenstein & Prelec, 2005).

Reason versus emotion

New perspectives on how our self-control interacts with our spending see a battle between impulsive, emotional processes and far-sighted planning processes. One part of us is saying: “Buy it, you’ll feel real good!” and another part is saying: “No, we need that money to pay the rent!”

Findings from this type of research are only just starting to emerge, but here are some fascinating highlights on how our self-control works:

  • Increased cognitive load decreases self-control. This is something marketers are well-aware of: distracted people are more likely to spend money. Most shops are filled with shiny, complicated distractions – bright colours, music and ‘incredible offers’ – designed to confuse us and open our wallets.
  • Our supply of self-control is limited. Studies show that our self-control is actually sapped each time we use it (Baumeister & Vohs, 2003). It’s also sapped, predictably, by alcohol, lack of sleep and stress.

And how our self-control is affected by our emotions:

  • Sadness makes us want a change (any change). Sadness may well increase the chance we want to spend. One study found that those who are sad are more likely to want to sell at a lower price and buy at a higher price (Lerner, Small & Loewenstein, 2004).
  • Disgust makes us want to get rid of everything. When we’re disgusted we want to get rid of the things we have and don’t want to buy anything.
  • Anxiety makes us want to reduce uncertainty. Anxiety makes us prefer low-risk options (Raghunathan & Pham, 1999).

How to make better decisions with money

At this stage relatively little is known about how our monetary self-control and our emotions interact. Nevertheless there’s already some clear practical messages about how to make better decisions about money from these results:

  • Self-imposed limits. Research by Professor Dan Ariely (reported in his book Predicatably Irrational) suggests that self-imposed limits can help to increase self-control. Telling other people about these limits will tend to increase our adherence to them. Professor Ariely even suggests a special credit card which only lets you spend money on certain categories of goods (e.g. groceries) up to a certain pre-set limit, then it warns of overspending. Unsurprisingly credit card companies haven’t taken up the idea, good though it is.
  • Cooling-off periods. Take time to decide about a purchase, especially anything expensive. Not just a few minutes – more like a few hours or days. Many people already do this and it’s an extremely effective method of financial decision-making. Emotional states are likely to affect our self-control in all kinds of complicated ways. Sadness may make us more likely to spend, anxiety can make us avoid risks (perhaps risks we should take). Plus our emotions probably have many other effects which remain a mystery.
  • Monitor your self-control. The fact that self-control seems to run-down with use suggests we need to monitor its levels. Have you used a lot of self-control recently? Are you tired? Are you about to snap? Again, it might be better to wait until your self-control tank is refilled.

The emotional spender

So it’s another nail in the coffin for the rational view of humanity, that we think carefully and logically about the decisions we make with money. Of course we try to do that (sometimes), but we would do better to acknowledge the effect that strictly irrelevant thoughts and emotions can have on us.

However, given how little insight we often have into our own underlying cognitive processes, actually being conscious of our self-control and emotional response is likely to be tricky. In the end we have to fall back on rules of thumb like self-imposed limits and cooling-off periods otherwise our self-control is likely to go out the window.

[Image credit: The Queen of Subtle]


Baumeister, R. F. & Vohs, K. D. (2003). Willpower, Choice, and Self-control. In: G. F. Loewenstein, D. Read & R. F. Baumeister, (Eds). Time and Decision: Economic and Psychological Perspectives on Intertemporal Choice. New York: Russell Sage Foundation.

Camerer, C., Loewenstein, G., & Prelec, D. (2005). Neuroeconomics: How neuroscience can inform economics. Journal of Economic Literature, 43(1), 9-64.

Lerner, J. S., Small, D. A., & Loewenstein, G. (2004). Heart Strings and Purse Strings. Carryover Effects of Emotions on Economic Decisions. Psychological Science, 15(5), 337-341.

Raghunathan, R., & Pham, M. T. (1999). All negative moods are not equal: Motivational influences of anxiety and sadness on decision making. Organizational Behavior and Human Decision Processes, 79, 56-77.

Author: Jeremy Dean

Psychologist, Jeremy Dean, PhD is the founder and author of PsyBlog. He holds a doctorate in psychology from University College London and two other advanced degrees in psychology. He has been writing about scientific research on PsyBlog since 2004. He is also the author of the book "Making Habits, Breaking Habits" (Da Capo, 2013) and several ebooks.

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