Sad? Step Away From That Balance Sheet
The end of year may be a time for reflection and evaluation, but if bad winter weather, the omnipresent holiday stress, or anything else has got you down, then perhaps this isn't the best time to make serious financial decisions about your business.
That's the message from a new study out of Harvard, Columbia, and the University of California-Riverside, which tested how feelings of sadness affect people's ability to make sensible financial decisions. And while retail therapy may be a traditional cure for those who are down in the dumps, the team of professors found the opposite to be true--money decisions and sadness just don't mix well.
To see how sadness affects our financial decision-making, the researchers asked some study participants to watch a tearjerker of a movie in which a boy watches his father and mentor die then tested whether the subjects would like a smaller sum of money now or a larger amount in a three months time. Compared to those who watched an emotionally neutral clip of a nature film, the melancholy participants "accepted 13% to 34% less money immediately to avoid waiting three months for payment."
The researchers concluded that feeling blue created "myopic misery," a state in which bummed out people focus excessively on the present and not the future.
"The idea is that when you're sad, you want to accelerate consumption--it's all about getting money sooner," one of the study's co-authors, Ye Li, explained to CNNMoney.
So what does that mean for you and your business? If there are tough financial decisions to be made, especially those that cause you stress or sadness, make sure you make them after your bad mood has lifted.
"Our results suggest that [sad] individuals might exacerbate their financial hardship by making intemporal choices that favor immediate consumption more than is wise," concludes the research.
So next time you're feeling grumpy, put down your credit card, stash that letter from your accountant out of view, and instead opt for one of these scientifically endorsed bad-mood busters.