Emotions Can Thwart Intentions

I’m having fun going to Microsoft Copilot for an AI-assist when I’m feeling curious. Recently I looked up the average rainfall in a country I’m considering traveling to and checked if a charitable organization was a registered non-profit.

But the AI-assist breaks down when it comes to trade-offs. Such as, should I retire early to spend time traveling while I’m healthy or work longer to have money in case I need it later? It might be good at complicated, but complex is outside its scope.

The difference between the two is something I got clear about when I read Margaret Heffernan’s Uncharted: How to Navigate the Future. She defines “complicated” as those things which follow rules and are predictable, and so they can be managed and controlled. In other words, you can plan for them.

It’s great to have routines for these things. It might be a bit of work to figure out how much of your paycheck to save toward a goal like retirement, but it’s efficient after that is done to have the amount automatically transferred from your bill-paying account when your paycheck hits it.

The “complex” on the other hand is unpredictable. Something small in the planning model can have a disproportionate impact on the outcome, and human judgement is needed to successfully navigate the uncharted course that defines the terrain of such decisions.

How does this apply to traditional financial planning? The realm of planning is to find options and figure out which has the maximum potential to help you meet your financial goals. Such as when to claim Social Security or pension, how to structure the sale of a business, determine the tax efficient savings plan or tax efficient withdrawal plan, choose a mortgage structure, and select insurance for health, life, disability and long-term care.

These might all appear to be technical financial subjects that though they have complicated rule structures (or forms to fill out), answers can be determined with an experienced financial professional knowledgeable about the rules, data, and facts.

This is where the image that appears above standing for the two sides of money comes in to help me show you how decisions such as these can be quite complicated. Why? Because we are emotional beings. And aligning your financial life with the dreams you want to protect involves more than a balanced look at the advantages and drawbacks of each option.

I once heard a great analogy about this. We all know that living a healthy lifestyle includes eating fruits and vegetables. The speaker at a conference asked us to picture a video gamer scooping noodles from his chest, because “You can’t eat salad while playing a video game.”

Warren Buffett says this about how emotions—coming sometimes from instincts urging us to follow the easy way—get in the way of good intentions: “Investing is simple but not easy.” In the same way, for the video gamer and the rest of us, living a healthy lifestyle is simple but not easy to follow when our emotional drive for comfort, relaxation or convenience enters in.

The remedy? Create a framework around decision-making that talks to both sides of your brain. Check in with your dreams, worries, relationships, values. One question I love: if you were going to spend money on something that would make you really happy, what would you buy? Twist that question in different directions: change jobs, see a dedicated savings account balance grow toward a goal, improve one room in your home? And then pay attention. What brings a smile, starts butterflies in your tummy or lifts a weight off your heart? There is where you’ve touched your emotions. This is what is going to give you the motivation to make the change. Then create the framework that drives the process to get you where you want to go.