❝Where we have strong emotions, we're liable to fool ourselves.❞ -Carl Sagan
It's 2004, and there's a long line of people waiting at my teller window. I work part-time at the bank while in college studying economics and finance. I've always been good at math and enjoy it. In fact, it's this love of math that partly drives me to finance.
My courses have gotten quite advanced and demand a lot of my time, so I've had to reduce my hours at the bank. I only work a few hours per day, and often when I get here, it's during the late afternoon rush. That's what's going on today.
Even though a dozen people are waiting to be helped, I'm helping a particularly difficult customer. The customer wants his overdraft fees reimbursed. He tells me some story about how this is just a fluke that all of these checks came in simultaneously. He has his paycheck with him, and if the money was in his account yesterday, he would have had no overdraft fees.
Unfortunately, I've heard this song and dance before, many times. I have to tell him that there's nothing I can do for him. The rules are the rules, and if I let him off the hook, I have to let everybody off the hook. That creates the wrong incentives.
Two weeks later, I find myself in a similar situation to the one my customer was in, standing in line at my bank waiting to plead my case. Because I dropped my hours so much, my paycheck didn't cover all my outstanding purchases. So not only did I bounce some checks, I did so quite literally on payday. I'm in a position where I have to try to survive for two weeks with a negative balance.
In a matter of two weeks, I went from judging other people for mismanaging their finances to mismanaging my own finances. It's embarrassing and stressful, and I now realize that there's more to personal finance than just math. Our emotions play a significant role and our financial lives.
MONEY IS NOT SIMPLY A MATH PROBLEM
It's tempting to think that personal finance is about spreadsheets and calculators. When people think about personal finance, they often immediately think about either accounting or investing, which can be heavy in mathematics.
While it's true that information and strategies are necessary for a healthy financial life, information alone is not enough. Information is a part of exterior finance, which includes the math and the strategies we need to implement. Exterior finance is important but has to sit on a solid foundation of interior finance. Interior finance involves our relationship with money. It involves things outside the spreadsheet, such as motivation, beliefs, feelings, emotions, and Money Scripts.
Simply recognizing that there is an emotional component to financial decisions can help alleviate some of the stress of trying to find the perfect strategy.