Money Management

Money Is More A Matter Of Psychology Than It Is Of Mathematics

Let’s not mince our words: money and personal finances are more of a state of mind and psychology problem than a math problem. Solving your problems with money and having thriving personal finances will involve working on you more than on your finances.

I’ve been on sabbatical for many months. After several years of subway-work-sleep and a job that I liked less and less, I decided to quit everything and start my own business.

It was a subject that inevitably generated a lot of discussion with those around me: my close friends, family, acquaintances, and office colleagues.

The reactions were quite varied. A vague fear of the unknown predominated. Which I can understand.

But the most common reaction was:

Are you going on sabbatical? Any luck?

Kind of like being randomly drawn from a lottery that I didn’t sign up for and won that sabbatical.

What I was explaining was:

Uh, no, it’s not luck. Rather, it’s something I’m entitled to after 3 years of working for the same company. Since I want to live something else, I’m going for it. I stay on the payroll but I don’t have to come to work anymore and I don’t get paid.

Then the question came up:

You won’t get paid?!… How are you going to do it?!…

Well, actually, yes, I don’t get paid. Hence the importance of thinking about this project and preparing it properly.

Because I didn’t go on sabbatical with my hands in my pockets: I took the time to create the financial resources necessary to live without any income for a minimum of 2 years.

Regularly, I was given the following thought:

Hats off! Me, I could never put so much money aside …

Indeed, the sinews of the war was there: putting money aside.

The most interesting thing was to see which people gave me such an answer…

  • a former office mate of my girlfriend’s whom she had nicknamed “compulsive buying.” I’ll let you guess why 🙂 In addition to regularly making compulsive purchases, she regularly went shopping because she always needed something;
  • an old playmate from Magic the Gathering, a card game. If you’re not careful, this game is a real money pit. My playmate wasn’t paying attention. And he was, moreover, an avid collector. Cards from this deck, action figures, DVDs, …
  • one of my girlfriend’s friends had a collection of handbags and shoes so she couldn’t wear them all. And she kept buying them.
  • an old buddy of mine was a raiders of games, in all shapes and forms. When online games came along, her free time disappeared. And with it a large chunk of her finances.
  • I myself, at one time, used to slam a lot of money at Magic the Gathering to get some interesting cards. Cards that I finally never played 🙂

Most of these people were pretty smart and relatively sensible.

However, as soon as the subject was money and their personal finances, they didn’t behave rationally anymore. They spent far beyond their needs. Sometimes even beyond their means.

In fact, they could easily afford to set aside the same amount of money for my sabbatical as I did. They could have used them in a much different way than I did. But the fact is, they could have saved as much money as I did.

The worst part is that they were complaining that they didn’t have the budget for certain projects. With discipline and commitment, they could have had that budget.

The problem was not financial but behavioural and psychological.

Personal finances are more of a state of mind and psychology problem than a math problem.

The psychology of money

You will be able to read a lot of advice about money, saving and investing, and personal finance in general.

These tips are sound and technically correct.

But if you forget the psychological aspect, you won’t get very far.

Most of the inability of the 4 people I’m talking about above to put money aside comes from psychological springs and needs that they satisfy through numerous and poorly controlled expenditures.


  • you don’t think about how you use the money on a daily basis.
  • you don’t think about the reasons for some of your expenses
  • you do not have a project or an objective behind your financial approach

… then you run the risk of complicating your task, or even failing before you actually start.

Let’s take an easy example to illustrate the importance of psychology: advertisements.

Most advertisements don’t play on a concrete and practical level, with functional or utilitarian arguments. Ads play on the emotional and psychological level, by flattering our ego or playing on the social aspect. Because this influences us and our consumption habits, even if we think otherwise.

Do you think that companies would spend so much on advertising if there was not a return on investment?

Another, more positive example of the importance of psychology: the case of paying off several debts.

Paying off the largest debts seems logical because they are the ones that cost you the most. You might as well pay them off as quickly as possible.

However, paying off the smaller debts is surely smarter and will have a greater psychological impact. Because it allows you to win a first victory, generate a first financial surplus (or reduce the deficit) and set a positive momentum in motion.

This blog is not a psychology blog. And I don’t have any traditional training in the field.

But I would talk about it regularly because it is an important aspect of managing one’s finances.

I repeat myself: money is more of a psychology problem than a math problem. Don’t forget that.

Take back control of your brain…

It is not possible to completely eliminate the emotional and psychological aspects of money management.

We are humans, not robots or machines. And it’s important to know how to have fun and how to relax.

However, I think it is important to control and reduce the negative emotional aspects of our financial decisions.

Here are some tips from me.

Reduce your exposure to advertising

If you don’t want to believe me, don’t believe me. But you’re obviously influenced by advertising. Or, at least, by certain types of commercials.

The best thing to do is to avoid advertising as much as you can:

  • watch less television, or watch it without watching the commercials;
  • or don’t read any more magazine ads;
  • use an ad blocker for your browser;

Avoid temptation

I think if I touch up too many Magic cards, I’ll just dive back in. My solution? I’m staying away from it.

Instead of playing on your discipline, you should stay away from temptation. Or put up barriers between you and them.

If you’re tempted in the malls, don’t go. If you often succumb to temptation in restaurants, don’t go out and invite people to eat at your home instead.


If you’re having trouble making smart financial choices and forcing yourself to make them, automate.

Automate the transfers that place money for you in your Livret A account, a passbook account, life insurance, … By using these automatic transfers, you will no longer be able to sabotage yourself through any psychological or emotional bias.

Be aware of your expenses

When you are tempted by a purchase, take a break.

Take 30 seconds to ask yourself if you really need what you’re about to buy. If it’s a large purchase, you can force yourself to wait 30 days. If you still need it after that, then buy it. Otherwise you will have saved money.

Keep track of all your expenses: write them down in a notebook immediately after purchase. This is the best way to keep track of all the expenses you make, as well as the amounts and psychological springs involved.

From there, you can then start to reduce your expenses.


If you have problems with money, the answers to your problems will not come from a better understanding of compound interest, life insurance or the stock market. Nor will they come from a newfound understanding of the need to spend less than you earn.

Chances are you’re already convinced of this. And that reflects the importance of psychological resilience.

To solve your problems with money, forget about these concepts or mathematics and instead learn to control your mind.

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