4 Cognitive Effects of Financial Trouble

Financial trouble is something that is difficult to manage with a sense of confidence and reason. Unlike other problems that come and go, financial troubles are perceived more as time markers in personal financial history that go down on your permanent record.

One of the main problems with this ordeal is that it manifests itself into bigger issues that spiral out of control. Not only can financial disaster shake up emotions, it can affect other people.

The following emotions describe 4 common cognitive effects caused by financial disaster and how to cope with it:

1. Fear of the Uncertain Fear is one of the most common emotions that stems from financial trouble. Nobody likes to be uncertain about their financial future. When financial concerns for the near term escalate to the level of disturbing problems, tension may rise to its highest level. There's a big difference between an individual with money in the bank that provides a financial cushion versus someone who lives paycheck to paycheck. Fear can be even more intense if you lose your job, and you don't have medical insurance. The problem with fear getting too out of control is that it can affect your health. The Keys to Resolving Fear and Anxiety Include:

   • Always pay your minimums on time, which will keep creditors happy
   • Plan a monthly budget and stick to it
   • Raise additional cash through a part time job or revenue stream
   • Avoid credit cards

    




2. Falling Into Depression Sadness and depression can set in to create a state of withdrawal. Losing money and financial control can be a dream-shattering experience. Many times it means cutting costs so drastically that it creates other new problems to face. The depression can run deep if it involves unexpected bills, which commonly happens from the health care and insurance industries. Sometimes your car can break down and the repair bill can cut into something you had saved up for, leading to a feeling of being cheated. Failing to maintain a savings account can put you in a compromising position with money, when emergencies dictate spending. Sometimes, it means doing embarrassing things like asking parents or other family members for money. The Keys to Overcome Depression Include:

   • You Must Be Determined. In order to overcome depression, you must become a self-determined individual who stays positive, keeps expenses low, increases monthly payments, negotiates interest rates, and keeps track of your payoff date.
   • Aim for Paying off Sooner Than Expected. Set the bar higher than what is expected by making a goal to get out of debt sooner than the payoff date. The sooner you pay off debt, the better chance you have of getting back to spending money on the things you enjoy.
   • Allow Yourself to Have Fun. You can further reduce depression by allowing yourself to have fun once in a while. Even if it means borrowing money for a short term loan to go on a weekend vacation or see a concert, you do not deserve to be unhappy.
   Although you may think you are sinking in a mountain of debt, you need to live for something other than paying off bills.

    

3. Losing Temper Easily Anger is a cognitive effect that should be completely avoided. Anger is a dangerous emotion because it can snowball into violent behavior, which can get a person arrested. It's best to avoid anger at all costs, especially when a person gets upset about an investment that went wrong. It's possible to view some losses as necessary in order to make later gains. Instead of pointing fingers at who tipped you the wrong way, it's better to learn from the experience and move on. Accept that every financial opportunity comes with a certain amount of risk. When it comes to investing it's important to keep emotions out of the equation as much as possible. You need to create rules that you follow to help achieve self-discipline. Try not to overreact to the market, since it's more beneficial to craft a plan of action that tells you what to do in various scenarios.

4. A Sense of Denial A sense of denial is dangerous, because it ignores the problem while trying to justify actions that caused the problem. Many times denial means a self-protection technique to shield the topic from failure. Used as a defense mechanism, denial can be characterized as an excuse to justify debt. The Keys to Get Rid of Denial Include:

   • Do an Audit of Financial History. The way to keep denial from damaging your financial history is to do a complete audit of your finances and admit to yourself what really caused your financial fiasco.
   • Confront Debt Issues. Confronting debt is more effective than ignoring debt. Ask yourself ? was it really the overall economy, or was it a series of preventable bad decisions?
   • Learn from Mistakes. Try to learn from those decisions and don't fool yourself that ignoring bills is a solution to your financial problems.