"The problem is we can only perceive the world through one set of eyes."
My car doesn't start again. It's the winter of 2003 in Fargo, and my car just won't turn over. This is unfortunate because I need to get to work. If I don't work, I don't get paid. If I don't get paid, I can't fix my car. But I can't fix my car without money. I'm caught in a vicious cycle. I need a reliable vehicle, but I don't know how to afford that. I don't know how other people afford their cars.
The farthest I've been from home recently is Minneapolis, a mere four hours away. I don't get to take many vacations. My friends seem to take vacations all the time, including fancy trips to resorts in Mexico, the Bahamas, and Jamaica. I don't know how they afford their trips.
My apartment is nice, but it's really old, and it's not in the greatest neighborhood. The fact that it's old and in a poor neighborhood is the only reason I can technically afford it, but I'm stretched pretty thin. Friends of mine live in new apartments in better parts of town. These apartments have heated underground garages, nice decks, and onsite gyms. I don’t know how they afford rent.
It turns out, most of those people couldn't afford it. Not only were they not saving any of their income, but they were using credit cards and other debt to fund their lifestyle.
It wasn't just me struggling financially. But it was just me who understood my own financial stress.
Personal Finance Has Two Parts
Most people think that personal finance, budgeting, saving, and investing are simply math problems. It’s easy to believe that the solution to these problems involves spreadsheets and calculators.
Indeed, exterior finance is about spreadsheets, calculators, and mathematics. Exterior finance is the mechanics of money, or the strategies and tactics that we use when it comes to our finances.
The issue, though, is that there's also interior finance that most people overlook. Interior finance is about you. Interior finance is about your history, your values, your worldview, and your experience. The solutions to interior finance problems are deeply personal. The solution that works for you may not work for your neighbor and vice versa.
Thus, viewing the world of personal finance as a math problem leads to frustration and financial stress. We see other people who seem to have their act together, but we don't. We think there must be something wrong with us because we don't understand the math.
That's why we have to stop thinking about personal finance as a math problem and understand it for what it is; a psychology problem.
Money Is Not Natural
We are not wired for money. Nearly every financial strategy that's good for us in the long run, does not come naturally to us. Saving is simply not something that our ancestors did. The people that saved their assets for the future wound up with their assets spoiling or getting stolen. The people that hoarded their stuff were kicked out of the tribe for being selfish. In other words, the people who acted in a way that would be financially prudent today did not survive to become our ancestors. There is no equivalent of money and nature. It's simply not natural. Money skills can be learned, but it takes time, and it takes practice.
Good exterior finance is simple, but it's not easy because it goes against our brains’ hardwiring.
We Do Not Talk About Money
Sarah Newcomb recommends that if we want to end a conversation immediately, simply ask the other person how much they make, how much their house cost, how much they spend on vacations, or what their net worth is. Nothing seems to shut down a conversation faster than talking about money.