Mind Over Money is as much a book about psychology as it is a book about personal finance. This book takes the interesting step of assuming that you already know the most basic of personal finance tenets – spend less than you earn, regularly save towards future goals, and buy and hold solid investments for the long term – but often fail in practicing them.
Why do these failures happen? The author, Eric Tyson, largely attributes these failures to an inability to shake off poor behaviors when it comes to money management. I agree firmly with that assessment: I often know the correct choice to make, but the tricky part is actually making that correct choice consistently and strongly.
Directly addressing these psychological barriers is the focus of Mind Over Money. Instead of really sweating the details about how specifically to balance a budget or balance a portfolio, the book instead looks at the mental mistakes that cause us to damage all of that planning.
Is the advice inside worthwhile, or is this just mere rehashing of material that can be found in other books? Let’s find out.
Walking Through Mind Over Money
1. A Good, Long Look in the Money Mirror
Mind Over Money starts right off pointing out something fairly obvious to many: everyone has financial faults. We all make mistakes in some form with our money, every single one of us. I know I’ve made plenty of mistakes in my life. The chapter lists a whole pile of mistakes and I found that I’d committed the majority of them at some point in my life – and a few of them many, many times.
To pin things down a bit, Tyson suggests that you answer five questions about your life:
1. What personal experiences (good and bad) relating to money do you recall from your childhood?
2. What memories of your parents (or other guardians) do you have that relate to finances?
3. What efforts did your mom and dad make to teach you about money?
4. How important were financial considerations in what you chose to study and what jobs and career you sought out?
5. Thinking back to your childhood and young adult years, what significant events happened to you and your family that impacted how you felt about money?
Spend a few minutes thinking about each of those questions and what they say about how you spend money today. Although I’ve done such exercises before, I found such questions to be quite a revelation in terms of how I thought about money.
2. The Shopper: Shopping, Spending, and Debt Accumulation
Two-thirds of Americans carry some form of consumer debt (credit card balances, payment plans, etc.), and I was actually amazed that the number was so low until I considered that that percentage includes children and people with atrocious credit. Why is this the case? Pamela Danzinger’s book Why People Buy Things That They Don’t Need offers what I consider to be a brilliant quote on the topic: “The simple fact is that the contemporary American lives so far above subsistence, we have lost touch with the basic needs of life: food for nutrition, basic clothing, and shelter for warmth and protection.”
To me, the most profound question for self-analysis in this whole chapter is the question of whether shopping makes you feel guilty. If it ever does, you’re likely spending more than you should. Most of the advice for curtailing it is very basic and only takes up a page or two, but I strongly believe that identifying the problem and making a deep, fundamental commitment to change is the real solution here, not trivial things like cutting up your credit cards – those are merely symbolic.
3. The Workaholic: Fitting Life into Your Work
This chapter reminded me greatly of Your Money or Your Life, mostly because it focuses on that connection between your money and the time you spend making that money. I identified quite a bit with “Ken,” a person described in this chapter who worked very long hours to provide everything his family could want or need. The result? He felt distant from his family, creating a hole in his interior life in order to put some extra polish on the exterior one.
The real key here is to find time for the roles that you need to fill in your life. If you have children, you need to be a good parent for them, spending time with them and comforting them and teaching them. You don’t need to buy them tons of stuff or put them in tons of extra expensive activities. The same goes for all the major roles in our life: being a good spouse, being a volunteer, following our passions, tending to our spiritual side, and so on. These are the parts we need to fulfill – having a job that we work ourselves to the bone over so we can have plenty of cash is merely addressing wants.
4. Misaligned Investment Mind-Sets: The Herd Follower and Information Junkie
Here, Mind Over Money looks at psychological barriers for investors, most of which are very common and appear in most investing books: the herd mentality that entices people to sell when others are selling and buy when others are buying, and the information junkie that obsesses over portfolio data and burns thousands of hours ekeing out a single extra percent on the ol’ portfolio. What’s the solution? Just buy and hold in a low-cost index fund and don’t sweat it too much.
My favorite part here was a look at stock investing contests, offering a new light on something I had previously thought of as an educational endeavor. Actually, what they do is train you to trade stocks a lot to seek the big win, and some people will carry this behavior over to their own investments. That’s why brokerages will often sponsor such contests – it encourages people to be frequent traders, and brokerages will mop up the money from all the fees on those trades.
5. The Obsessive: Gambling and Other Addictive Behaviors
In some ways, this felt like an out of place chapter. It has a strange anti-gambling rant in the middle (two and a half pages worth) from Dr. James Dobson and provides discussion on a very wide array of addictions – food, gambling, drugs, smoking, alcoholism, and so on. It almost comes off like a pamphet from an Alcoholics Anonymous meeting with different parts rewritten to focus on different habits.
However, the reason for including it in this book makes sense when you step back. Almost every addiction is financially devastating to the addict and often to the people around him/her as well. The chapter does a good job of addressing many of the causes of addiction, provides some tools for identifying an addict, and points to many good resources for helping to cure an addiction.
6. The Supersaver: Hoarding and Cheating
Here, Mind Over Money looks at the interesting issue of a person who saves too much, to the detriment of their own life and their relationships with other people. This goes way beyond normal frugality – we’re looking at a person who doesn’t tip, checks their accounts balances multiple times per hour, and will gladly pass you the bill every time you dine together. In other words, they’re so tight that they become a social leper.
How can one break this habit? Tyson offers several tips, but most of them come back to the realization that the person is in fact doing just fine financially. The reason for this is that most people who are that tight are scared that their financial house is about to collapse even if they have millions in the bank, and their fear about self-preservation outweighs their good social sense. One bright tip is simply to ignore bad news or to put it in a historical context – compare a stock market downturn to 1929-1931, for example.
7. The Avoider: Money Avoidance and Disorganization
To a degree, I fell into this category not too long ago. I was afraid to tackle the filing of my financial documents and I was afraid to seriously look at investing, simply because I was disorganized and scared of actually taking that plunge. Why? Sometimes money just exceeds our comfort level, and anything that makes us uncomfortable becomes an easy thing to avoid.
The solution? It’s a solution that works well for any task you’re avoiding: set aside time specifically for that task and then just dig in. I often find that this is by far the best way to deal with any task that I really don’t want to face. I just schedule in a block of time to do it, and then it’s done, leaving me feeling a lot better about things.
8. Conflict, Negotiation, and Compromise: Relationships and Money
One major money problem that crops up is when one person in a committed relationship has a different view of a financial situation than the other person. Maybe one person is hiding credit card debt, or maybe one person is really uncomfortable about spending a lot on a new car, but they don’t talk about it for fear of upsetting the boat, even though it gnaws at them over time.
This section is basically a one-chapter compression of the advice given in Smart Couples Finish Rich – communicate, communicate, communicate. If something is troubling you, sit down and talk to your partner about it – your relationship is about trust and it deserves openness and mutual respect.
9. Raising Money-Smart Kids
The concluding chapter examines the complexities of parenthood, but compared to the in-depth thoughtfulness of other books on parenting and consumerism, this chapter falls rather short. If you’re a parent and are looking for information about raising your child with some financial sense, peek at The First National Bank of Dad and Make Your Kid A Millionaire if this topic interests you (basically, if you’re a parent, it should interest you to some degree).
Buy or Don’t Buy?
While the premise of Mind Over Money held a lot of promise, most of the material inside can be found in a variety of other personal finance and self-help books. I was surprised that it focused mostly on identifying the problems rather than treating them. Each issue had only a few pages about how to deal with it, tacked on the end of twenty or twenty-five pages describing it. Thus, this book is great for figuring out your problems, but rather light on solving them.
Even given that criticism, Mind Over Money is a very worthwhile read if you seem to have trouble doing the things you know you should be doing, but you don’t really understand why you keep making the mistakes. There are a lot of people in this category, and reading this book and looking for the parts that bring up a guilty twinge inside of you will do a lot to help you get on the right page, psychologically and financially.
On the other hand, if that description doesn’t sound like you, this book probably isn’t worth reading as it doesn’t offer any particularly deep insights beyond that.
Mind Over Money is the fiftieth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.