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sketch about two sides of personal finance, exterior finance and interior finance

❝If you want to hit me with logic, I don't want to chit-chat.❞ -Dean Martin

When most people think about personal finance or any subtopics related to finance, they often conjure up images of spreadsheets, equations, and complex terminology. And while it may be true that finance contains complex terminology and equations often tracked and analyzed in spreadsheets, it’s also true that many people overcomplicate matters. Nonetheless, whether people think of personal finance as complicated or simple, the default setting for most people when they think about personal finance is to think about what to do with it.

Yet, few people stop to think about their relationship with money. All of the financial knowledge in the world will be useless if we find ourselves unable or unwilling to do anything about it. Many people overspend or don't save enough, and it is not because they don’t have the knowledge.

Implementing financial knowledge is the often overlooked side of personal finance. It turns out that simply having information isn’t enough. There are two sides to the personal finance coin.


If you want to improve your financial health, then you will need information. We need to know how to handle money and what to do with it.

sketch of information being not enough

It’s just that information isn’t enough. Even if you have all the data and information, you need to think it’s important to implement, have reasons to implement it, want to do it, and have confidence in your ability to do it. Information is only part of what you need to improve your financial health.

sketch of information not being enough and other stuff being necessary

Information falls under the realm of exterior finance. Motivation falls under the realm of interior finance. Let’s talk about exterior finance first.

sketch of information is not enough


Exterior finance is the part of personal finance that applies to everybody. It’s outside of us and exists “out there.” Think of exterior finance as the nuts and bolts of how money works - or the mechanics of money.

As stated above, most people think about this when they think about money.

sketch about the mechanics of money

You’ve no doubt read articles about exterior finance. Exterior finance is about strategies and tactics, and so every time you see a listicle (clickbaity articles written as a list), it’s generally an exterior finance article. They have titles like “The Five Things to Do Before Tax Day,” “The 10 Things Most People Forget to Do,” or “Seven Things to Do Before You Run Out Of Time.”

sketch about exterior finance and listacles

Effectively, exterior finance is tactic- and strategy-based, which means it’s heavy on the equation side. It’s finding optimal solutions. This doesn’t mean there’s no personalization involved because the optimal solution will differ depending on individual people. It’s just that it’s on the numbers side and not so much on the human side.

sketch of time value of money

Money Scripts® are subconscious beliefs we have about money that we learn these we are growing up in our family systems. A Money Script can be anything, but they tend to fall into four categories. Learn what categories your Money Scripts fall into.


Interior finance, on the other hand, happens inside of you and is different for everyone. Interior finance lies underneath exterior finance. Exterior finance is important, of course. It just relies on having paid attention to interior finance.

Interior finance includes your personal values, financial purpose, sources of meaning, motivations, and Money Scripts. In essence, interior finance is about your relationship with your Money Story.

Some people have a friendly relationship with their Money Story.

sketch about what's your relationship with your money story?

Others feel like their Money Story is out of control, and they are always trying to catch it.

Others feel like their Money Story has control of them.

Improving your relationship with your Money Story is the first step to building a solid foundation upon which exterior finance can lie.


Exterior finance is important, and everybody knows that. Therefore, it’s common for people to address exterior finance while ignoring interior finance. By ignoring interior finance and focusing just on exterior finance, you may have trouble implementing and/or sticking with your new strategies.

sketch of exterior finance

If you ignore interior finance, then you may be trying to build exterior finance on a cracked foundation. This may be a situation where no matter how good the advice was, you’re in no position to implement it. You’re in no position to stop financially enabling your children. You’re in no position to start saving for your future. You’re in no position to handle stock market risk. You’re in no position to get your spending down.

The best advice in the world won’t help you if your foundation is cracked.

sketch of working on exterior finance with a cracked foundation

If you try building too much on top of a cracked foundation, the whole structure will come down. It’s possible that you can even make things worse.

If you overspend and try to cut your spending by depriving yourself, you may relapse and end up spending more. If you’re giving money you can't afford to your children who shouldn't need it, you might try offering an ultimatum. But, if you give them money despite the ultimatum, you've taught them that your words don’t matter. If you are nervous about the stock market but invest it anyways, you may panic sell after a significant dip.

sketch of trying to implement exterior finance without addressing the interior finance foundation

It’s important to address your relationship with money because it serves as the foundation for the financial strategies and tactics that you need to put in place. By addressing interior finance first, exterior finance becomes relatively easy.

sketch of interior finance being the foundation of exterior finance

Understanding that there are two sides to the personal finance coin can be eye-opening. It helps you understand that you have a relationship with your Money Story and that you can work on your relationship with it. Doing so can make the financial tactics and strategies easier to implement for yourself.

You get one life; live intentionally.


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Related Reading
References and Influences

Ariely, Dan & Jeff Kreisler: Dollars and Sense

Housel, Morgan: The Psychology of Money

Klontz, Brad, Rick Kahler & Ted Klontz: Facilitating Financial Health

Krueger, David & John David Mann: The Secret Language of Money

Newcomb, Sarah: Loaded

Note: Above is a list of references that I intentionally looked at while writing this post. It is not meant to be a definitive list of everything that influenced by thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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