The Power of Emotions in Financial Decision-Making

10 months ago

There's something Morgan Housel said about people making financial decisions when they are seated around their loved ones having dinner. Those decisions are taken based on their experiences and have nothing to do with numbers or any form of data analysis. And I have seen almost all of his examples play out in the lives of characters I see in different movies.
financial decisions.png
Source
For instance, the urge to make more money, be comfortable, and take certain financial decisions for Wura Adeleke, in the movie, Wura was based on the fact that she came from poverty and she knew what suffering and going to bed hungry felt like.

She never wanted to go back to the place of wants, needs, and uncomfortable circumstances. Not for herself nor her children. So every financial decision that she took was made based on these emotions. And she did take drastic decisions that may have required taking the lives of other people just to keep her foot at the door of money, wealth, and be a successful businesswoman.

I may not support some of the measures she took but reading how people make financial decisions from Morgan and learning not to judge or think of anyone as a crazy person has helped me make peace with Wura's way of gaining and sustaining wealth.

But I am grateful for the gift of Theresa Mendoza in the movie, Queen of the South because whatever narrative Wura brought to the table, Theresa had them completely reworked for me. So I could see it's possible to make money and try as much as to keep your hands clean while at it. Theresa only took a life if they killed any of her loved ones but Wura killed anyone who stood in the way of her keeping our Gold Mine.

Theresa made sure that the very reason she joined the cartel business wasn't eroded when she started earning her seat at the table. She remembered she did all of those dealings so she could take care of her loved ones and not from a place of trying to overthrow anyone and be the Queen. She was a queen with standards and principles.

Without digressing too much, a part of this movie made me remember what Morgan Housel said about financial discussions that are made at the dinner table and I wanted to share. Morgan Said;

To understand why investors sell out at the bottom of the bear market you don't need to study the math of future returns; you need to think about the agony of looking at your family and wondering if your investments are imperiling their future. The Psychology of Money

Theresa Mendoza had a godson called Tony and because of his parent's work, he always had his bag packed in case they had to run away. His birth certificate and a few vital records and his personal belongings were kept in the bag for emergencies. But on this day when he finally moved in with his godmother after the death of his parents and a series of running around, hiding from the cartel, and trying to survive death, he unpacked.

Theresa was fighting an enemy then. That morning, she walked into Tony's room to inform him to get ready because they had to leave and found that for the first time in his entire life, he unpacked. It was at this point that she decided she had to find a way to resolve her business misunderstanding in a way that they did not have to be on the run.

She decided to give Judge Cecil Lafayette the $3 million he asked for and she made a move for our some of her assets to be liquidated. Her financial advisor had told her she will be at a big loss if she liquidated at that moment because the market was taking a hit. But Theresa was willing to take the loss for as long as her godson got to have more peaceful nights where he did not have to worry about running away from the people trying to kill him since he was a kid.

This scene made so much sense because I might not have truly understood Morgan Housel when he left those words in the introductory part of his book but watching the events in Theresa's life unfold I allow myself to digest the lesson and to do it well.

So it's true that some of us make financial decisions based on our emotions and not necessarily because of what the spreadsheet is saying. And the rest of us have no excuse to judge anyone's financial decisions because we experience life differently. After all, what might feel like a silly and stupid move to you might be the one move that allows the next person to sleep better at night.

Your pursuit of financial freedom requires more bullets now than cannonballs

Building confidence and the value of your creativity through a relentless discipline to build wealth

The magic wand of wealth building is self-control

Earning an ROI on luck is possible

Winning the game of wealth building using empirical evidence

A legitimate form of discipline needed to build wealth

Why financial pessimist tend to have more audience than optimist

When people buy the top they are mostly chasing performance

Everything has a price including your desire to reach financial independence

Plan for emergencies for they are an inevitable part of our existence

Striking a balance in your investment portfolio reduces future regrets

Invest in something cared about, and there can't be a loss