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In theory, personal money management is simple: spend less than you earn and invest the rest in a few well-diversified funds. Keep this up consistently for about 30 years, and you can spend the rest of your life living comfortably on the proceeds.

In practice, things aren’t so straightforward.

In this column, I hope to bring awareness to the myriad ways that psychology and emotion affect our financial decisions for good or ill. We’ll explore psychological factors that contribute to many aspects of financial management from goal setting to estate planning.

Here’s a preview of some of the topics we’ll navigate together.

Spend Less Than You Earn?

For many, earning enough to support regular savings requires an initial investment of several years and tens of thousands of dollars to increase their earning power. If this can be managed at all, it sets the timeline back considerably. Still, it’s often worth the detour, since without skilled labour, people are vulnerable to poverty traps and financial chaos, making long-term investment nothing more than a pipe dream.

Once people start earning, lifestyle creep (fed by expectations of family, friends, culture, and desire) creates new challenges. Some fall into debt traps that set them back years if not decades. Others may not understand the importance of investing early and thus wait too long to begin accumulating assets. Some become sandwiched between the needs of their children and the needs of financially vulnerable parents, leaving little for personal savings. All these things eat away at one’s ability to build wealth.

Investing Isn’t Simple, Because We’re Not

Those who manage to save and invest can still fall prey to all kinds of mistakes owing to unconscious biases, lack of knowledge, overconfidence, and faulty rules of thumb. And, with thousands of investment products to choose from, they may get stuck in analysis paralysis because of what Christine Benz aptly calls the ”financial complexity complex.”

Then, after decades of saving and investment, many of those who reach financial freedom find it difficult to enjoy the fruits of their labour. It can be hard to shift from the mindset of disciplined saving to one of comfort, plenty, and freedom to spend, and the resulting anxiety eats away at one’s quality of life.

End-of-Life and Generational Matters

Those fortunate few who manage to cultivate intergenerational wealth must then confront the challenges of family dynamics and clashes of culture in the process of family governance and estate planning.

Even if someone manages to avoid all these pitfalls, they will be faced with the reality of cognitive decline, deteriorating health, and a waning ability to manage their own affairs as they approach the end of life, limiting or even eliminating one’s sense of financial autonomy.

And this is if you make the journey alone! If you share finances with others, there is the potential for conflicting priorities and values, challenges in communication, and mismatched timelines at every step along the way.

Clearly, personal financial management involves much more than numeracy and financial acumen.

Introducing ‘Human Capital’

Every major financial event is also a major psychological event, sometimes involving or affecting others. Career moves, marriage, divorce, parenting, education, home ownership, starting or selling a business, receiving an inheritance, and so on, all have deep emotional and psychological importance in our lives, making it extremely difficult — I would even argue inadvisable — to remove emotion from our mental calculus.

Add to this the fact that we are all human and have human limitations. Most of us will face some sort of psychological challenge to saving and investing. Short-term thinking, emotional spending, financial caretaking of able others, gambling, and financial avoidance are just a few of the ways that we can get in our own way. Yet, if we dare admit to these realities, we are often faced with shame rather than support or helpful advice. I aim to change that.

Who I’m Writing for and Why

If you are a purely logical decision-maker who has no difficulty saving, investing, and building wealth, I congratulate you. You do not need this column. But if you are not a perfect money manager, if you struggle to save or invest, if you need to curb your emotional spending or finally have that hard money talk with your spouse, you are in the right place.

Overspenders? I see you. Hoarders and penny-pinchers? I hear you. Worried wealthy? You are welcome here. Our goal is not to remove our humanity from the process of financial decision-making, but to explore and understand the nonmonetary aspects of these decisions so that we can make choices that truly support us in the pursuit of prosperity and well-being.

As we take this journey together, I hope to hear from you about topics that interest you. What aspects of financial decision-making do you want to learn more about? What areas of financial psychology can I explore for you? I welcome your suggestions and questions. I can be reached at [email protected]