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Just Because It's Simple Doesn't Mean It's Easy


"Save more, spend less, and don't do anything stupid."

-Richard Wagner


I'm reading Kiplinger magazine and I'm fascinated. I wonder if I should subscribe to Money, Fortune, and Forbes, too. This personal fiance stuff is fascinating. I'm working a lot of hours at the family restaurant, but in my spare time I watch programs on cable that cover personal finance, like Suze Orman's show. This stuff just makes a lot of sense to me and I love how simple and straightforward it is. 

It's now a few years later and I'm working as a bank teller with a coworker and friend of mine. He tells me that his brother told him, "You aren't really living until you rack up at least $20,000 in credit card debt." We laugh. "What a moron," we think. Nobody should have that much credit card debt! That's so much money! Plus, it doesn't fit into any of the rules we've ever read or heard about in our personal finance educations. 

Now it's 2005 and I'm bummed that had to cut back on my hours toward the end my college career because I was making less but the bills stayed the same. I move to the Twin Cities (Minneapolis-St. Paul, MN) where I find a temp job helping people peddle subprime mortgages, but it only lasts a couple months. I find myself unemployed in an expensive city. 

By the time I find the job that starts my career I've taken inventory of my credit card bills. Somewhere along the lines I borrowed $25,000 over 10 credit cards with interest payments of over $5,000 per year. My mind flashes back to how I made fun of my friend's brother for having credit card debt and now I've gone and done it. 

It took some time, but I finally learned that this personal finance stuff isn't easy, even if it is simple.

simple is not the same as easy

Simple, but Not Easy

Simple and easy are not the same thing. Simple usually refers to concepts and rules. Are the rules simple or complex? Easy usually refers to performing. Is it easy to do or difficult? Mowing the grass is both simple and easy, because the concept of cutting the grass is straightforward and actually doing the mowing is not difficult. The game Rock, Paper, Scissors is easy, because it's not a difficult game to learn. However the game itself is rooted in game theory and predicting opponent behavior, so it's quite complicated. Everyone's favorite comparison, rocket science, is both complicated and difficult (i.e. not simple and not easy). 

The formula for me to follow if I want to lose weight is pretty simple; burn more calories than I eat. That's it. Is that easy to do? Well, how's it going for you?

Similarly, the rules of personal finance are quite simple. Live on less than you make, save for the future, insure against large risks, and have a plan in case bad stuff happens. Yet, so many of us don't follow the rules of personal finance. Something else must be going on. When we think about how simple it is, that is the logical part of our brains. It makes sense. It's rule-based. But, there's a second part. Once we know what to do we have to do it. Getting ourselves to actually do it is the biggest factor tripping us up. That's because the culprit is our emotions.

logic versus emotion

Simple = Logical


Simple usually refers to the concepts. The opposite of simple is complex. There are some in the personal finance world (salespeople) who make a living trying to convince you (read: speaking to your emotions) that finance is complex. It can be, but if it's done properly it doesn't have to be. In the world of money, simplicity beats complexity every time.  

trade off between simple and complex

The Financial Health Scale measures your financial health and relationship with money.

Not Easy = Emotional

Easy refers to how hard it is to actually do. Unfortunately personal finance is not easy. The opposite of easy is difficult. Managing our emotions and instincts is what makes this quite difficult. There are a lot of negative emotions attached to money, such as guilt, shame, envy, anxiety, anger, fear, and regret.

It's not always negative emotions, though. The fear of missing out (or FOMO to my hip friends) gets us to engage in behaviors that aren't in our long term best interest because we want a short term reward, which gives us a hit of dopamine (which is very addictive)

easy versus difficult trade off

Logic Versus Emotion

Human beings will do a lot to avoid these emotions, including sacrificing the long run for a less stressful short run. If everyone is jumping into some kind of investment (e.g. Bitcoin), we feel like we don't belong if we aren't participating. If nobody in our circle of friends or family follows a spending plan, we are going to feel like we stick out if we do. If taking long term risks is necessary to achieve long run success but we are petrified of losing money in the short run, we won't do it. 

None of this makes sense logically, but makes perfect sense if we can understand the emotional state of the person making the decisions. 

Emotion Wins

Logically we should do what is in our long term best interest. Since most of our decisions are made emotionally it often doesn't work out that way, though. All the financial knowledge in the world won't matter if you can't get yourself to do the right things.

emotion beats logic

Getting on the Same Page

If it sounds like your emotions control you and you have no choice, don't worry. We do have some options. The trick is to align our emotions and our logic. We can educate and train ourselves to learn to acknowledge when our emotions are taking over. We can put systems in place so that we know to follow our predetermined process that was set up when things were calm. We can utilize reminders and list reasons for having our plan in place. All these things help to intertwine our logic and emotion.

emotion and logic are intertwined

If we can learn to get in touch with our emotions, by first learning that it's okay to get in touch with our emotions, then we can learn to mange them.

Read Next:


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

Brad Klontz, Ted Klontz: Mind Over Money

Jane Bryant Quinn: Smart and Simple Financial Strategies for Busy People

Carl Richards: The Behavior Gap



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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