A better money mindset leads to better money behaviours leads to a better relationship with money leads to a better life
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This is a book about the philosophy and psychology of personal finance. Ultimately, it’s a book about behaviour change, or rather an ongoing participatory process of behaviour changing. If this book doesn’t change how you think about and act with money, it’s just another distraction; fuel for the false belief that being able to better describe and explain behaviour is the same as actually behaving better, in a sustained, transformative way.
‘Just as medicine confers no benefit if it does not drive away physical illness,’ said Epicurus, ‘so philosophy is useless if it does not drive away the suffering of the mind.’ Few things incite suffering of the mind more than money. No one thinks they have enough of the stuff, even those that have the most. No one knows what to do with the stuff they do have: what to spend it on; how much of it to save; when, where, and how to invest it… even those that spend, save, and invest with a confident, sometimes triumphant, air.
Money makes us believe it is the solution to the very problems it has caused. It causes a nightmare of insecurity, and sells us a dream of synthetic security to offset it. It promises freedom for those willing to sell themselves to it as slaves. It magnifies our mind’s suffering, but tells us not to worry, because there is a heaven of instant healing just over the horizon.
Maybe, I’ve heard, we don’t need to worry. Our dealings with money may be awkward, but we can dodge them with denunciation or delegation. Yet denunciation leads not to detachment, but to a surreptitious strengthening of attachment. And those to whom we would delegate are incentivised to change neither our beliefs nor our behaviours.
Most financial advice isn’t about providing convincing answers; it’s about providing persuasive reassurance. Why we’re spending or investing, and what we’re spending or investing on or in isn’t nearly as important as doing enough to stop the nagging feeling we need to do something. We pay advisers not to think up a suitable solution, but to avoid having to think of one ourselves.
However, this reassurance illusion doesn’t change unhelpful behaviours. It enables them. Buying a blindfold stops you seeing, not the things seen.
We are moving, slowly, into a new world. A world that admits that investors are humans, and that all personal finance is behavioural finance. That seeks to help people become better investors, not to cajole them into becoming better buyers of investments.
Describing systematically silly behaviours and ‘nudging’ people away from them does help people buy better investments. This is a good thing. But the point of nudges is that their prescriptions are followed without the follower noticing. Unhelpful tendencies are to be side-stepped, rather than explained, understood, engaged with, and consciously changed. This again is a good thing… in most circumstances. Not only because through the new actions, one may become a new person (rendering the old problems redundant), but also because most things aren’t worth the extra effort engaged choice demands. When it comes to increasing the efficiency of collecting taxes, or reducing the inefficiency of washing hotel towels, it is better to be blindly led along society’s preferred path.
Your relationship with money is different. Because blindly following society’s preferred path is precisely most people’s main money problem. And save perhaps for a few dozen people living in anarcho-syndicalist collectives in hippie communes, whether you want to or not you engage with money every damn day, even when – especially when – you’re deliberately trying not to. Mental suppression is subconscious superglue.
Our daily money engagements are central to determining who we are and the goodness or otherwise of our life. There is nothing more crucial to do consciously. Engaged, conscious choices come from the way we relate with the world. This is the job not of investment analytics, but of philosophy. A better life requires better behaviours, which requires better thinking, which requires better philosophy.
