When an emotional decision overrules

We say it often to clients. “This is a financial decision and you need to separate emotion from the process.”

It might be the selection of an investment property that matches all of the criteria set by the strategy, or it could be the avoidance of a home purchase due to a fundamental issue that will have an ongoing negative impact. It’s often the caution I apply when someone suggests that they want to buy a holiday house for personal use, or an apartment to provide capital growth while their university-age children inhabit. I’ve also been known to advise clients who want the lock-and-leave lifestyle to avoid high-rise apartment blocks with pools and lifts due to the higher costs of ownership associated with these Owners Corporation controlled buildings.

But when is it OK to make an emotional decision that isn’t based on financial out-performance? 

I’m shown all the time that the power of emotion can lead to a great sense of happiness and fulfillment. 

A great night with friends at their new abode on Friday night reminded me that my “avoid high rise and high OC fees” mantra was not necessarily good advice for this family who had boldly made an exciting city-move work beautifully. They’d transitioned from an inner-ring suburb and a cute period house to a fabulously spacious three bedroom apartment in an older block overlooking the eastern side of our beautiful city. Sure, they’d had to cull some belongings and carefully measure up the living area to make sure their furnishings and art all fit nicely, but what they’ve achieved by staring down anyone who wondered how apartment life for a family of four would go is nothing short of impressive. His office is a two minute walk around the corner, the pool is a much-enjoyed part of their lifestyle, the train station is over the street and underground, and they are spoiled for choice with any cuisine they can imagine in their block. But what intrigued me (with a pinch of house-envy along the way) was the incredible feeling we shared while sitting around a family dining table with gourmet pizza overlooking a buzz of lights, buildings, other high rise inhabitants and the gentle hum of the city on a Friday night. 

Our friends love their new life. In fact they described the feeling of walking in their front door as that same one you get when you stay at a fabulous hotel.

I remember a few years ago a dear past client asked me what I thought of her idea to buy a holiday house in Kilcunda. I voiced concern, told her all of my reasons why holiday houses aren’t sensible financial moves, and ultimately suggested that if she was going to do it, to make sure she ran any houses past me before signing the contract. That she did, and their excitement was palpable that day. Winding the clock forward a few years and I love hearing from her and seeing her wonderful pictures on the coast with her husband, children and grandchildren all enjoying this wonderful weekend dream they’ve created for everyone.

At the time I told her I had concerns about the financial viability of her idea, yet it’s one of the happiest decisions they’ve made.

My words of caution about holiday homes came back to me two years ago when my husband had an idea I called crazy. He wanted to not only buy a holiday home property, but it was an undeveloped block with no plans, no permits and no house to stay at. I couldn’t work out why he’d want to commit to something that was a four hour round trip away, needed constant grass mowing, fencing, blackberry bush upkeep and would ultimately require funding a construction…(not to mention the complete absence of tax deductions to offset the costs). He just looked excited and dreamy about the idea. His dream is to build an eco-cottage himself and enjoy the tranquility of a friendly, off the trail town with nothing more than a caravan park, tea rooms cafe and a local club offering steak and deep fried food. I decided that as nonsensical the idea was, as Sheryl Crow croons… “if it makes you happy…” He’s enjoying his drive time, the feeling of community when he works on the block with the help of locals, and I am actually enjoying contributing to the eco-lodge ideas.

And who’s to say that taking me off the grid without phone reception is a bad idea? Sometimes we all need a break.

The most touching and most important lesson for me about financial decisions not out-weighing emotional happiness was within the first couple of years of my Buyers Agent career. I had a beautiful couple I’d worked with on the acquisition of their first investment property and like many other couples who go through this high-stakes adventure, they had many questions, a little bit of apprehension and lots of excitement. They were well-supported with a great financial planner, accountant, mortgage broker and myself on the task, but the financial implication of what they wanted to achieve raised questions from the finance professionals. 

They are a same-sex couple and unfortunately until very recently they didn’t have the rights of same-sex marriage recognised properly. The benefit of having the property in the name of the highest income earner meant that their tax advantages were optimised. However it also meant that one person wasn’t on the title and from an estate planning point of view it caused upset about what could happen in the unfortunate event of a death. Not only that, but they wanted to do this together.  

They wanted to see their names alongside each others on a contract. It was important.

They bought tears to my eyes in an accountant meeting when they said this simple sentence. The accountant was clear about the ‘cost’ of the decision in terms of the dollars they’d be giving up in the form of tax deductability and asked them if they were both ok with this. It was a unanimous nod of the head. 

They got to buy their property together, possibly one of the first legally recognised together things they did.

Last year’s marriage law passing was a very special day for Australia and I thought about that precious day in the accountant’s office with emotion running deep. 

Emotion often does get in the way of sound financial decisions, but when the happiness that results is intangible and important, it can be one of the best decisions we can make. We only get one life and I often remind myself that my financial opinion won’t always trump a special decision.