How hot weather might prompt you to make worse financial decisions

The summer of 2023 has seen global temperature records shattered once more, as the effects of climate change continue to slowly heat up the planet. In the UK, heatwaves can be incredibly difficult to handle, as the country’s infrastructure quite simply isn’t designed for hot weather. 

Prolonged exposure to hot weather can have all kinds of consequences for the human body. If you don’t take steps to stay hydrated and cool, you might experience extreme dehydration or heatstroke. 

But hot weather doesn’t only affect you physically, as it can also affect your mind, behaviour, and the choices you make. Financially, this could lead to potentially harmful decisions relating to your savings, investments, and long-term financial plan. 

Read on to discover how extreme heat can affect your decision-making and steps you can take to safeguard your wealth.

Extreme heat can lead to cognitive dysfunction, such as confusion, memory loss, and elevated aggression

According to CBC extreme heat can impair your cognitive function and judgement. It can be even more dangerous for those suffering from mental health conditions. 

Research from Bangladesh suggests there is a noticeable link between climate-related stressors and symptoms of anxiety and depression. And, according to New Scientist, climate change is leading to a loss on average of 44 hours of sleep each year. 

The effects of sleep deprivation can lead to memory loss, lack of focus, and increased irritability. 

Climate change and increased temperatures might even affect your long-term planning. According to Greener Ideal, research has shown that human planning behaviours change in response to climate change with the majority of people making their daily decisions in part due to the current weather. 

Over the long term, this could lead to a significant deviation from your plan. 

Hot temperatures could lead you to make more impulsive choices with your money

Financial plans and smart investing strategies often rely on a high degree of calm, patience, and understanding. 

You are likely to focus on goals over periods of years or decades that may require you to navigate periods of short-term instability and avoid any emotionally charged decisions.

Human beings are susceptible to psychological biases at the best of times. Extreme weather is likely to increase the possibility that you could fall foul of one of these tendencies. 

For example, the bias known as “loss aversion” posits that people feel the pain of losses twice as much as the joy of gains. This can prompt investors to sell off their investments in periods of economic downturn out of fear of potential losses. 

Unfortunately, this removes the possibility of their investment rebounding in value, which is likely to be the case as markets typically bounce back over the long term. And, impulsive, emotional, knee-jerk decision-making is likely to be more common when exposed to extreme heat. 

Read more: 3 harmful investing biases that Pantone’s colour of the year can teach you about

Remember to look after your mind and body, and consider running your decisions by others first

Firstly, it’s important that you remember to take care of your mind and body. In extreme temperatures, you should look to:

  • Keep yourself hydrated and have access to water at all times
  • Wear a hat and suncream if outside
  • Open windows for fresh air or, if possible, cool off with a fan or air conditioning 
  • Take breaks throughout the day to focus on yourself.

When it comes to your money, two simple steps could benefit your decision-making. 

  1. Take a breather and slow down any important choices that aren’t burdened with a pressing timetable. If a day or a week passing is unlikely to negatively affect your choice, it might be worth taking the extra time to reflect, or even make your decision once cooler weather returns.
  2. Don’t be afraid to rely on others. If you’re worried your decision-making ability might be impaired by warmer weather, it could be worth running any choices by friends and family first. Additionally, seeking out professional advice regarding your money choices is likely to benefit you in the long run.

Come rain or sun, we’re here to help you – get in touch today

At Delaunay Wealth, we see ourselves as life coaches, as much as financial planners. We are here to guide you on your own financial journey. We are proud to say we’re a VouchedFor Top Rated firm, having regularly delivered exceptional service to our clients.

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If you are interested in receiving a second opinion on any looming financial decisions and receiving professional advice, you should email or call 0345 505 3500.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.