Money, Emotion and the Monetary Blueprint

Divorce conversations are not necessarily focused; negotiations often derail, especially when it comes to the finances. One or both divorcing parties may have handled the family finances, and the parties may be financially savvy, but divorcing people's thought processes do not always appear logical or reasonable. Often, even though a considerable amount of time is spent educating them, their choices can be more emotional than knowledge-based. Fear and anger can create unhealthy money scripts and distort financial perceptions. This confusion can lead to self-promotion, competitiveness, a sense of entitlement, suppression, avoidance and/or disconnection. (It is worth mentioning: These dynamics may appear while crafting a prenuptial or postnuptial agreement, as well.)

The Emotion Aspect

Most of us would like to think that our financial decisions are based on rational considerations of cost versus benefit, need versus desire. However, our hearts may control as much as (if not more than) our minds. Even smart, well-educated people can make bad money decisions, and not just when they are in the throes of the divorce process. Look at the Bernie Madoff scandal. Investors became greedy and oblivious, ignoring the fraudulent facts and signs simply because they wanted to believe in miracles and belong to an elite, privileged group. Their emotions allowed them to get caught up in one of the grandest Ponzi schemes of all times.

On a day-to-day basis, people are not cognizant of the interrelationship of money and emotions. But, realistically, money is emotional. After all, isn't the concept of financial security a “feeling”? Some people feel financially secure with very little available cash, while others think they need more money even when they already have millions in the bank. Financial security often has a lot less to do with how much a person has and a lot more to do with how that person feels.

Emotion is part of almost every human decision, but the extent of the emotion depends upon the nature of the financial transaction. So for example, there is little emotion in a small transaction, such as buying a pack of gum, but a lot of emotional intensity when buying a house.

During divorce, two individuals are making what could be some of the largest financial decisions of their life, so it is no wonder emotions play such a large part and can interrupt, slow down or stall the process.

Ivy H Menchel is a Certified Financial Planner' practitioner and a Certified Divorce Financial Analyst'. In addition to running a financial planning practice, Ms. Menchel is the President of Family Wealth Planning Partners. Currently, she is on the Board of Directors of the Association of Divorce Financial Planners.