Money and emotions go hand in hand. Whether it’s an unexpected expense, a missed payment, or a job loss, financial stress can easily trigger intense feelings of fear, panic, and anxiety. In such situations, we may feel compelled to react quickly, making hasty decisions that seem logical in the moment but may have serious long-term consequences. Reacting fast might seem like the best move but in my experience, I have discovered it often backfires. Creating more stress and anxiety.

Responding thoughtfully reduces the chance of emotional decision-making and helps maintain self-control. In this post I explain the difference between responding versus reacting and how to shift from reactive to responsive financial behavior. Master this skill, and watch your money mindset and financial decisions improve.


What’s the difference between reacting and responding?

For me, reacting to a financial issue is impulsive and emotional. When I react, I’m not thinking logically or considering the consequences in the moment or long term. It’s like a knee-jerk reaction or a “fight or flight” response. I’m not crafting a plan, I’m just jumping into action haphazardly.

Responding is the opposite of reacting. When I respond, I take a beat to assess the situation and think before acting. My responses are calculated, rational, and take into account the long-term impacts of my choices. Responding feels more purposeful and intentional than reacting.

In financial matters, reactions can often lead to poor choices and increased stress.  I have watched many of my tax clients panic when the stock market suddenly dipped and withdrew some of their investment portfolio, locking in losses. In hindsight, staying the course would have been better.

In my young adult years, the fear of seeing overdue notices, late payment warnings from creditors was overwhelming. My initial reaction was to ignore the letters, out of sight out of mind, or lash out at the creditors. Which ultimately lead to more fees, more notices and damaged my credit rating during that time.

For example some of pitfalls I experienced from reacting to my financial woes have included:

  • Increased debt and financial loss – like cashing out investments.
  • Tanked credit score – my score plummeted from my credit card misuse and late payments creating issues later.
  • Heightened anxiety, guilt, and embarrassment – I’d feel ashamed and stressed about reactions and my financial situation
  • Short-term mindset – reacting focused me on immediate gratification, not long-term stability
  • Repeated mistakes – I continued to make the same financial mistakes because my reactions were so impulsive since it often felt like I was in survival mode and I couldn’t catch a break.
financial fundamentals jenn wolowich

Financial Fundamentals

Money You Should Ask Podcast – Episode 208

In this episode, wealth advocate and founder of Financial Fundamentals Jenn Wolowich, joins me to discuss the psychology of money. We explore the difficulty in distinguishing between the person & the money- self value and net value. Take a listen!

Responding, on the other hand, is a thoughtful and rational approach to difficult financial situations. Responding means taking the time to thoroughly think before making a financial decision. When responding, we take into consideration the long-term effects of each choice and weigh the pros and cons of different options.

Specifically, questions to ask include:

  • How will this decision impact my financial goals 1, 5, or 10 years from now?
  • What are the short-term benefits of this choice compared to the long-term costs?
  • What alternatives could also meet my needs but pose less financial risk?

This process of responding helps avoid impulsive purchases or risky investments that could cause greater debt and money stress over time. Instead, it allows one to focus on options aligned with values that move toward long-term financial health.

It also helps me maintain self-control. Responding requires discipline and patience, which strengthens one’s ability to control impulses. This supports ongoing wise financial behavior.

By taking time to respond empowers you to make the most informed choices possible within your unique circumstances.

Stop reacting and start responding

Here are the steps I take to cultivate financial responsiveness:

  1. Press pause. When facing a money decision, I take a few deep breaths. I acknowledge my anxious or excited feelings and emotions and make a conscious choice to not act on them.
  2. Assess mindfully. I try to understand what feelings arise and how they may cloud my judgement. Simply naming them starts to deflate their power.
  3. Consult others. I reach out to my financial advisor or a budget-savvy friend for an outside perspective. Their input helps me see things clearly.
  4. Decide deliberately. I thoroughly weigh the pros and cons of each option. And consider how my choice impacts my long-term values and financial goals.
  5. Commit fully. I create a detailed budget or savings plan. When tempted to splurge, I remember my goals and refer back to my plan.
  6. Keep learning. I read personal finance books and articles to continuously expand my money knowledge. This helps me respond wisely. We are all students of life. Embrace learning new things.
  7. Talk with others about their money habits and how they react in certain situations. There is safety in numbers and you may realize you are not alone in how you deal with your finances.
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Understanding the difference between reacting and responding is crucial to financial success and overall well-being. When we react impulsively, it can result in consequences that can negatively impact our short-term and long-term financial health. In contrast, responding thoughtfully and rationally to financial stress can help us gain perspective, consider options, and make better choices.

Developing the skill of responding requires time, mindfulness, and planning, but it is well worth the effort in the long run. By being able to respond in a deliberate way, and remain in control of negative emotions, anyone can feel more confident and comfortable facing stressful financial situations.