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To Rationalize or Not? That is the Question.

In the last blog, we introduced the six psychological money traps people use to undermine financial and life success, the RAPIDS, which are: Rationalization, Avoidance, Projection of Blame, Idealization, Denial and Splitting.
We suggest you read or re-read the previous blog before reading more today. The following two paragraphs represent only a partial review from that blog.

It is human nature for everyone to use six RAPIDS psychological money traps at different times to protect ourselves from unpleasant or painful experiences with money. When our stress levels are low, we tend to use the money traps less often and to smaller degrees. With high stress, the reverse is true. So during periods of economic turmoil like today, most of us are riding in the RAPIDS more often than we would like.

We can benefit by learning to recognize the traps before they have much of an impact on our financial decisions and behavior. Since they begin as blind spots, this can be a challenging task. However, we can explore to see if our financial behavior represents a psychological money trap or not by:
• increasing our self-awareness,
• learning more about each trap,
• learning how to navigate each trap
Today’s trap is: R is for Rationalization

Rather than to admit a mistake or to feel the hurt of a financial loss, we devise a reason why it isn’t a mistake or doesn’t hurt. In Aesop’s fable, after the fox can’t reach the higher, sweeter grapes, he says they were probably sour anyway.

Coaching Client Example: Although the following example from our coaching practice is about how to navigate over-spending, the same Psychology of Money tools can be applied to any financial, career or life area where people use Rationalization to undermine their success.

This client was a fifty-five year old wealth manager who was a senior vice president of a bank. Ironically, like many people who have careers in helping others financially, she had a money issue herself. She had a strong tendency to engage in impulse buying of items she did not truly need. When she felt nervous, stressed out or deprived, her anxiety drove her to buy something impulsively that she didn’t really need or would rarely use (e.g. a piece of clothing, furniture, jewelry, etc.)
Prior to our meeting, she would not admit to herself or others she didn’t really need or use the items. She even had arguments with her husband about these purchases. She Rationalized by telling herself:
• how much she deserved them as a reward for her hard work at the bank,
• what a great price she paid for them,
• how much she would use them in the future, etc.
After we explored her potential use of Rationalization with a number of impulsive purchases, she realized she didn’t really use the items or like them as much as she had thought. She also admitted that within one or two days of the purchases, she usually began to feel guilt, shame or regret.

To Navigate R: Following her coaching appointment, the next time she felt tempted to buy something on impulse, she agreed to walk out of the store immediately. She also made a commitment to ask herself the following types of questions:
• What am I feeling?
• What are my reasons for wanting to buy the item right now?
• Are my reasons consistent with my financial goals and values?
• How much do I really think I’ll use or enjoy the item?
• When I am with someone I trust, will I seek his or her feedback about making the purchase?
• When I am alone, will I call someone with whom to discuss the purchase before I buy?
• If I could spend the same amount of money or less on anything else I would like, what would I buy instead?

The very next day, she walked into a jewelry store and wanted to buy a five-hundred dollar necklace. She immediately walked out of the store. She realized she felt deprived from over-working and anxious about the financial condition of the bank. She wanted to buy the item now because it would quell her anxious and deprived feelings. In psychology, we call this behavior self-medicating because its purpose was to help her to feel better like when taking a medication.

She knew if she bought the necklace, she would very likely feel bad afterward. Also, the purchase would probably provoke her husband since he had expressed financial concerns that morning. Both of these outcomes were contrary to her financial goals and values. She thought she would enjoy the item but also knew she had a number of beautiful necklaces.
Since she was alone, she called her best friend who recommended she talk to her husband before buying it. Her friend’s responses made it crystal clear that buying the necklace would have been engaging in Rationalization.

At this point, she was okay with not buying the necklace right away, but she still needed to do something to take the edge off of her feelings. She thought about what else she could buy herself that cost the same or less. As she walked past a movie theater, she recognized a film she wanted to see and felt a craving for popcorn. She walked into the theater and spent twelve dollars including the popcorn. She was curious how she would feel about not purchasing the necklace after the movie. She loved the movie (and the popcorn) and was surprised that her anxious and deprived feelings did not return. She felt proud that her exercise resulted in saving her over five-hundred dollars including tax. As a bonus, her husband appreciated so much the story of how she handled the necklace that he prepared a surprise candlelight dinner for them that night.
• We invite all of you to reflect to see if you can remember an experience where you may have used Rationalization to interfere with your financial or career success.
• How would you navigate it more successfully today?
• If you think your reactions or your story could be beneficial to others or to yourself, we would appreciate your comments to the blog.
Our next blog will be about Avoidance, the most frequently used of the six RAPIDS.

James W. Gottfurcht, Ph.D.

www.psychologyofmoney.com

Zoreh Gottfurcht

www.coachzoreh.com

 

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