Marrying Logic with Emotion

That was the subject line of an email I found in my drafts this morning :) Pretty catchy right?

I like to rummage through my inbox every now and then when I have a fit of writer’s block, and that line stole my attention right away and got me to open up the rest of the email to see what words I had dropped… And, not shockingly, they weren’t even mine! (A funny bit of trivia for you: most articles that get picked up by the media on this blog are usually not posts I write, but rather those my guest posters do, haha… that probably says something about me ;))

These words came from fellow reader, Slinky, who had left a fantastic comment on my post back in October about whether or not it was smart of me to pay down my mortgage last year (the answer: Yes, at the time it did make sense, but if I could go back and change it I would).

Here was the rest of the draft:

It is illogical to work towards something that is meaningless while ignoring things that are important to you just because the math says one is “better” than the other. The best answer is to marry logic with emotion.

Take all that emotional stuff (hopes, dreams, goals, lifestyle) and use logic to make it happen. Every question of “Should I do X or Y?” boils down to this in the end. I should invest my money because that’s where I’d get the best return. But that’s not the most direct route to accomplishing my most important goals.

Right now, my number one goal is to get my husband into a new, self-employed career. To do that, we need to restore and establish his workshop and prepare for a reduction in income. That too goes against the “best” thing to do, but health and happiness dictate otherwise. So my number one priority right now is cash, cash and more cash, regardless of interest rates or investment returns or anything else. It’s not the “correct” answer, but it is the “right” one.

Most of you who’ve been here for a while know I lean way more emotionally than maybe I should. It’s not that I don’t respect the financial *facts* of the game, it’s just that I don’t want any chances of burning out and losing motivation whatsoever. When I get excited about something it’s all in or nothing, baby! And if the numbers aren’t doing it for me, chances are I won’t even start.

Take, for example, the whole debt debate. Is it REALLY better to pay down the debts with the highest interest rate over the smallest amounts first? To me, the only thing that matters is whatever will get you to actually DO IT. I.E. – Pay them off. If you get motivated by the amount saved in the long run and nothing else, then you’re probably best going that route. But if you’re like me and your first instinct is to vomit trying to knock away $30,000 vs. $2,000, then chances are you’ll have better luck completing the mission by starting w/ the smaller loan first. It may be mathematically dumb, but you’re not setting out to win any nerd awards anytime soon now are you?

The same goes with deciding on whether to pay off your mortgage early or invest it into the stock market instead (or any other places you desire). The numbers people will take investing all day every day, while the more emotional ones will probably go the mortgage-killing route as it offers more peace of mind and stability. Now is one way much better than the other? Yes, of course. The one that works best for YOU ;) (Lame answer, sorry, but it’s still true!)

And that’s really the takeaway here today: It’s great to research and read others’ opinions on all the ways to handle your money, but when it comes down to making a decision you gotta go with the one that offers you the best chance of *staying motivated*.

Everyone KNOWS what the “right” answers are out there (“save more than you spend,” “invest for retirement,” “don’t watch tv – it rots your brain!”) but taking action is a whole other ball game. If you pick a route that you want to quit from day 1, none of it really matters to begin with…

Happy last day of 2013 :)

[Photo cred: katerha]

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  1. Nick @ Step Away from the Mall December 31, 2013 at 8:07 AM

    I totally agree. We pushed way more money onto our house purchase than we could have or “math” told us we should. The rates on a 15 year fixed were under 3.5% and the long-term market returns were much higher. But we valued the stability of not owing on a huge mortgage than having “extra” in investments.

    1. J. Money December 31, 2013 at 1:31 PM

      Rock on brotha – way to stay true to what’s important to you!

  2. Brian December 31, 2013 at 8:29 AM

    Good advice.

    Happy New Year!

    Cheers to 2014!

  3. Brian @ Debt Discipline December 31, 2013 at 8:34 AM

    That’s why the call it personal finance isn’t it? :) Always do what’s best for you even if it doesn’t follow the general guidelines to a tee. Happy New Year!

    1. J. Money December 31, 2013 at 1:32 PM

      Hah – indeed!

  4. Dave @ The New York Budget December 31, 2013 at 8:37 AM

    I am definitely debt averse to a fault (or so many would say). The great thing about many people in personal finance is that they talk about using money as a means to reach the goals that make them happy. If happiness is the endgame, best not to lose sight of that along the way by doing the “correct” thing.

  5. Holly@ClubThrifty December 31, 2013 at 8:46 AM

    I don’t think that there’s always a “right” answer. Sometimes you just have to go with your gut. We’re mortgage prepayers even though the math doesn’t always add up. Why? Because we don’t want a mortgage. It’s as simple as that.

    1. J. Money December 31, 2013 at 1:33 PM

      Yup, and the beauty part about it all is that you can *change your mind* anytime you wish too! Nothing needs to be so set in stone like many believe.

  6. Aimee December 31, 2013 at 9:31 AM

    I am so terrible at this. I recently found land that I really wanted, then learned that you need like 50% down when buying land and thought of the $45k I’ve dumped on my student loans since 2009. While I needed to pay some off early so I could lower my payments and move out of my parents house I have prevented myself from having any real savings that I can actually touch. I’m glad to be nearly student loan free, but I did shoot myself in the foot in terms of other things I want. I decided other great pieces of land will come my way when I am done with my debt goal, and I am still putting all of my money on my last loan.

    1. J. Money December 31, 2013 at 1:37 PM

      That can def. suck sometimes, yes :( I often struggle with cash in the bank or less debt too. One route allows you to tap it anytime you wish, while the other sucks it up forever. Pros and cons to either of course, but you are right – there will always be other opportunities! And once you’re debt’s gone you’re home free with tons more cash :) Provided you don’t get into even more debt…

  7. Liz December 31, 2013 at 9:34 AM

    I am right with you, J. I am either a all or nothing type of person. However I am trying to learn how to fall somewhere in the middle of the extremes so that I have enough energy to do everything that needs to get done err paid: ) Have a great last day of the year!

    1. J. Money December 31, 2013 at 1:37 PM

      Being in the middle is probably the safest bet, but man that’s hard!

  8. Rebecca @ Stapler Confessions December 31, 2013 at 9:42 AM

    I’m on that bandwagon with you! At 2% and 3% interest, we should probably keep paying the minimum on our private student loans and slay the 5% federal loan, but the private loans are $12k and the federal loans are $75k each. It feels SO MUCH BETTER to slay a few private loans, and get rid of $300 in monthly payments, than it does to just reduce the balance of a federal loan and have zero change in our monthly payments.

    In addition to feeling better, it makes us more financially independent to have fewer monthly payments — so that’s my logic marrying my emotion. Heck, I hear opposites attract!

    1. J. Money December 31, 2013 at 1:40 PM

      Work it, sister ;) I’d shoot for the $12k too!

  9. Kali @ CommonSenseMillennial December 31, 2013 at 10:06 AM

    Brian took the words right out of my mouth – that’s why it’s personal finance! I like reading about everyone’s different methods, thoughts, and explanations. Even when I don’t always agree (I tend to go full Spock when it comes to finances.. nothing but numbers and logic, please), it’s still interesting to see things from a different perspective and to learn something new.

    Hope you have a really awesome last day of 2013, J – and a very Happy New Year!

    1. J. Money December 31, 2013 at 1:40 PM

      You too, friend! It’s going to be a good one!

  10. Done by Forty December 31, 2013 at 10:25 AM

    Great post, J Money. The authors of Nudge have similar approaches: the right system is the one that actually gets the desired results, not the optimal system that doesn’t actually get the behavioral results we’re after. Do what works. Tweak it, sure, try to optimize. But it’s a bottom line game we’re playing. Stick with what gets your results.

    1. J. Money December 31, 2013 at 1:41 PM

      You go it, brotha. Now going to google Nudge :)

  11. Joe December 31, 2013 at 11:09 AM

    Everyone has got to find their own way to get things done. Something might work for me, but not for you. You just have to try different things and see what sticks.
    When I joined the gym, the personal trainer kept trying to convince me to sign up with him and said I’m not doing all the optimal exercise, etc…
    I don’t really care though because the only thing that really matter is if I shows up 3x per week. I have a better chance of doing that if I just do my own program.

    1. J. Money December 31, 2013 at 1:43 PM

      How does that saying go? 80% of life is just showing up?

  12. Steve December 31, 2013 at 11:26 AM

    One of my degrees is in math so for me, there is no question that I should invest any and all extra money instead of paying down my mortgage which is at 3.5%. I believe my stocks are up about 40% this year so that worked out really well but even if they had been flat or even down, I am playing the percentages that over the long haul, I should be able to get a return on my stocks well above my mortgage rate.

    The logic for someone like me is so strong that I feel I have no choice. That being said, if I did have debt, which I do not, and had a 30K loan and a 2K loan and the 30K loan was at a higher interest rate, I may take the Dave Ramsey approach and pay off the 2K first to get a win, knowing it would be such a long haul going after the 30K first. Luckily, I do not have to make that decision.

    1. J. Money December 31, 2013 at 1:45 PM

      A great place to be in for sure :) And I couldn’t agree more with this: “so strong that I feel I have no choice.” It doesn’t even matter to me whether that’s numbers or emotions, just that you’re PICKING the one you feel strongest about. So rock on, brotha.

  13. Money Saving Dude December 31, 2013 at 12:53 PM

    Really nice post J!

    A great article to end the year. Happy New Year to you and your family!

  14. Stefanie @ The Broke and Beautiful Life December 31, 2013 at 4:29 PM

    Ah yes, the PERSONAL part of personal finance. I really love having access to so many different strategies, approaches, and points of view on the web and being able to chose what resonates with me.

  15. Broke Millennial December 31, 2013 at 4:55 PM

    I want to hear more about these nerd awards!

    There are obviously right and wrong ways to go about certain things, but when it comes to people eradicating debt hopefully they’re just doing it! Period.

    A guy I work with just started the process of setting up his 401(k) after two years of working with our company. He asked me for advice and instead of yelling at him for throwing away thousands of dollars over the last two years by not be involved I praised him for signing up. Yeah, it was a mistake (in my opinion) but perhaps he had reasons he couldn’t or didn’t want to be enrolled.

    1. J. Money January 2, 2014 at 10:34 AM

      Yup, or perhaps he just didn’t pay attention much before? Or *thought* he was enrolled when he wasn’t? That actually happened to me when I was a big idiot back in the day… My dad was on my back for years to enroll, and I guess I thought it was automatic or something so when I went to tell him how much was in there I about had a heart attack, haha… Lesson learned!

  16. Kirby @ TheSimpleMoneyBlog December 31, 2013 at 4:58 PM

    Great summary, J Money! I think you hit the nail on the head that there is seldom a one-size-fits-all solution for personal finance. The key is what you can do to stay motivated and make sure you can keep on track to accomplish your goals. Sure, there can be a mathematically better ways to pay down debt versus investing, but it ignores the very significant component that is behavioral finance. Find what works for you and your family, and if it’s not working, then try another method…there isn’t a shortage of opinions or ways to accomplish your goals!

  17. Micro December 31, 2013 at 5:51 PM

    Tapping into the emotional aspect is a huge component of all finances. Yeah, logically speaking, a debt snowball is a bad idea. You pay more interest over the long run. If you need it to stay motivated and pay off your debt, then the interest is well worth the price. You would pay more interest if you gave up half way through because you lost motivation.

  18. Slinky December 31, 2013 at 6:58 PM

    Ha! Glad you found me so inspiring, but I’m not sure you’re entirely grasping my point. You’re still too Logic VS Emotion. It should be Emotion + Logic. Take the eternal prepay vs invest question you referenced. Choosing to prepay a mortgage or invest isn’t about emotion vs logic at all. It’s about your big picture priorities, and those are all emotion. Is it better to have increased financial stability sooner and delay financial independence OR achieve financial independence sooner at the expense of some financial stability in the interim? Which is more important? Which is better? Logic can’t really answer this well, but I bet your gut can. After all, it’s really a risk tolerance question, which is an emotional measurement.

    Logic is really important for coming up with a plan and doing math and budgets and making decisions and so many important parts of finances. But emotions ALSO have their place in personal finance. Goals and priorities and morals and beliefs and everything like that is based off an emotional response. I want, I feel, I would rather, I hate, I love, etc. Read back and look for those kinds of statements: “we valued”, “we don’t want”, “I really wanted”, “it feels”, “I don’t really care”. It’s almost impossible to remove the emotions from personal finance, even though people often try.

    My point is that people need both logic AND emotion for the best end result. Now, in general, most people should probably use less emotion short term (should I buy this?) and more emotion long term (what’s the best thing to do with my extra money?). That last one is like asking someone else what you want to do with your life. People end up asking questions like these, because they are looking for a logical answer to a question that can’t be answered completely logically. When you run into these, stop. Try bringing both logic and emotion into play and look for the question behind the question.

    Starting to think I should stop leaving epically long comments and just write a guest post.

    1. J. Money January 2, 2014 at 10:36 AM

      Haha…. you know what’s funny? After I re-read this post one last time it *did* occur to me that I’m still choosing sides here – aka going the emotional route, instead of merging the two ;) But I like it too much to go back and spend another 30 mins editing, haha… Hopefully people got enough out of your quote to realize that anyways :)

  19. FrugalTeacher December 31, 2013 at 7:02 PM

    This is a dilemma I hope to decide on this year. As I said in my 2014 Goals blog post, I want to decide this year whether I go “all-in” on my student loans for the following year or I scale back so that I can do other things I want. It’s a tough call – ideally I want to kill the student loan debt ASAP. But if ASAP is going to be at least three years, then am I looking too far into the future and ignoring the present?

    1. J. Money January 2, 2014 at 10:40 AM

      Great question indeed! And honestly, who knows what you’re priorities are going to be over the next 3 years (or, even 3 months for that matter) so I always say go the route you’re excited about *right now* and then change it if your situation/emotions change.

      For example, I wanted to pay off my mortgage in like 8 years and was gung-ho for almost 2 years, and then I had a baby and my wife stopped working and my business income went down and then we moved away from that house so it’s a totally different story now. And thus so, we stopped trying to kill it off and moved our energy elsewhere.

      So, do what you think is the right path for *today*, and then evaluate as time goes on. There’s no rules saying you have to stick to your goal forever! We’re not robots :)

  20. downunder sugarglider December 31, 2013 at 9:46 PM

    nice post!
    Ha – Australian mortgage rates are higher at 6% and the stock market has been tanking. we have a very different story to the USA. but you got me thinking about allocation and budget!

    1. J. Money January 2, 2014 at 10:41 AM

      Good! That’s all I care about with these blog posts – to get people *thinking*. And then, hopefully *acting* :)

  21. Heather January 1, 2014 at 12:48 AM

    I completely agree! Different people are motivated by different things. Isn’t getting the goal accomplished the so-called “wrong” way better than not even starting at all?

  22. theFIREstarter January 2, 2014 at 2:22 AM

    I’m a numbers guy so will always follow the math, as that will ultimately be the thing that makes me happy anyway!

    The best thing about the discussion is the two choices are both smart. It’s not like some people are arguing that it’s best to finance a new car over paying off your mortgage, which would obviously be a ridiculous argument :)

    1. J. Money January 2, 2014 at 10:43 AM

      There’s a lot more people out there financing new cars than paying off their mortgages though! As scary as that is.

  23. Jon @ MoneySmartGuides January 2, 2014 at 9:09 PM

    Agree 100%. You can’t tell someone to invest instead of pay off debt because most will never invest that money. They’ll use it for something else. People need to remember that personal finance is PERSONAL. You have to do whatever allows you to sleep at night. If paying off that 0% debt allows you to sleep better, then you should do that. Yes, it’s important to understand you could do better by investing that money, but if that debt adds stress to your life, then just get rid of it and be happy with the choice you made because it was the right choice for you.

  24. Becky @ RunFunDone January 2, 2014 at 11:56 PM

    It’s funny because I’m with you on the mortgage vs investing thing…I know it makes more sense to invest, but I just hate having the mortgage, so I choose to overpay on it. But I’m very logical about the high-interest debts thing. I can’t stand it when people follow Dave Ramsey’s advice to pay the smallest debt first. It makes no sense! Huh. Maybe I need to get over it and let everyone do what they want. Yes, I guess that’s what I’ll do. Also, I’ve never had high interest debt, so perhaps that’s why it’s so easy for me to be logical about it! :)

    1. J. Money January 3, 2014 at 3:07 PM

      I think it’s the latter :) Then again I’ve never had high interest debt either and I seem to still like that snowball method… I guess what I’d do in that case if figure out a way to consolidate or just get it lower by calling persistently/etc until I win. But usually when people have super high interest it’s because of bad credit or other things going on in their lives :( So who knows… what’s important is that you and I are doing our best, right? :)