Logic and Emotion: Why Smart Money Management Isn’t Just About Math

Eighteen months ago, I read Switch: How to Change Things When Change Is Hard by Chip and Dan Heath. This book changed my life.

Switch by Chip and Dan HeathSwitch explores the difference between the life changes we eagerly embrace and those we struggle with our entire lives. The book radically altered the way I plan, budget, eat, sleep, and work. Thanks to Switch, whenever I want to change any habit in my life, I now think of elephants.

Let me explain.

The Elephant in the Room

Chip and Dan outline an easy-to-follow system to create lasting, long-term habit changes. To make their point, they use the metaphor of a rider sitting atop an elephant on a path through a jungle.

The rider represents our rational or logical mind. The large, powerful elephant represents our emotional mind. And the path through the jungle represents our environment and surroundings.

The authors say that we most often approach habit change by leveraging only our logical mind, the “rider”. We outline the exact tips, tactics, and strategies we need to systematically execute our plan.

We see early success with this method because, in the beginning, the rider has enough control and strength to force the elephant to go wherever we desire. But the longer the rider tries to overpower the elephant, the more quickly she tires and burns out.

Trying to change a habit with only your logical mind quickly leads to exhaustion. You cannot succeed with willpower alone. (Does this sound familiar?)

Riding an Elephant


The Heaths argue that we need to motivate the elephant. By motivating our emotional mind to change course, we don’t have to steer with as much force. This greatly increases the chances we can maintain momentum and achieve lasting results.

They also recommend shaping the path through the jungle to make the journey easier on both the rider and the elephant. This includes surrounding ourselves with positive, passionate people and removing any potential negative situations that weigh us down.

This simple metaphor has changed my life. As a result, I’m constantly exploring new ways to change my environment and motivate my emotional mind.

When it comes to personal finance, my wife Courtney and I apply this methodology to several areas. Let’s explore them.

Playing with Numbers

When Courtney and I first started our financial turnaround, we started the basics of tracking our spending, starting a budget, and creating a list of every debt we owe.

We laid everything out to the penny. We knew exactly how much interest we were adding to our debt each month. At one point, we could even tell you how much our average toilet paper spending changed on a month-to-month basis.

As you might guess, this level of accounting didn’t last for long. Neither of us is a CPA, and we didn’t have the willpower to continually force this type of accuracy. Even worse, one small error could lead to hours of effort as we tried to reconcile the missing pennies.

We decided to give rounding a try. We rounded all expenses and debts to nice whole numbers. We rounded down all income.

It was a simple change, but it had a profound effect on our process. Suddenly, tracking became fun. It was no longer a chore, but something we actually enjoyed! We could get a snapshot of how we were doing with quick mental math (as opposed to our complex spreadsheets).

The rounding had another positive side effect. By rounding our expenses up and income down, we built up a small buffer that grew throughout the month.

For example, if we budgeted $80 for our $76.50 electric bill each month, we’d have a little left over. Same result if we tracked our spending as $10 when lunch was only $7.98.

The extra dollars and cents accumulated more quickly than you might think! At the end of each month, we were left with a couple hundred dollars as a buffer.

Before we started rounding, if we budgeted incorrectly or had an extra expense pop up, we’d feel guilty. But this buffer allowed us to absorb a mistake or two and still be on target for our budget.

Most months we’d just leave any extra we had in our checking account and let it compound a little each month. We celebrated yet another small victory!

Defeating Debt

At some point in time, every person who digs his way out of debt has to decide what order he’s going to eliminate the debts in his life.

There are several popular methods to pay off debts, including:

  • Highest interest first. The logical or mathematical option is to pay off whichever debt has the highest interest rate. This ignores any emotional or psychological aspects, but results in the fastest theoretical path.
  • The debt snowball. Popularized by Dave Ramsey, this method suggests paying off your debts from smallest to largest. The idea is to find early success, celebrate the small wins, and build momentum.
  • The debt tsunami. This is the name Courtney and I created to label the own path we took. We prioritized our debts by how intense our emotions were about each debt.

Courtney and I started our financial turnaround with the debt snowball, but quickly realized that we cared much more deeply about some of our debts when compared to others.

For example, our debts to family members weighed heavily on us even though they carried no interest and no formal monthly payments.

We also felt much more empowered when we paid off gambling debts or credit cards that represented our most ridiculous spending choices. Making progress on these increased our pride and fueled our passion to the point where we felt unstoppable!

So we created a way to gauge our emotions on each debt and every few months would revisit our list. Each time we focused out energy on those debts we hated the most.

Rejecting Credit Cards
We rejected credit for cash

Courtney and I cut up and canceled our last credit card three years ago. Not a week goes by where I don’t talk to someone about this issue, so I’ve heard all the arguments in favor of credit cards:

  • “You’d have to be an idiot to pass up free money!”
  • “Well I guess that’s fine if you can’t handle a credit card properly.”
  • “You are damaging your credit score!”
  • “Have fun renting a car or booking flights…”

Some of these are valid downsides that come from living a life without credit cards. However, not all are true. For example, our credit score has gone up over the last three years. And I’ve rented several cars and booked multiple flights in several countries and currencies.

When it came to the valid downsides, Courtney and I weighed them against the benefits of eliminating credit cards altogether. For us, we were so passionate and focused on turning around our habits that we couldn’t imagine keeping credit cards in our lives. It didn’t feel right. We were emboldened every time we eliminated another one.

We also recognized a difference in our habits when we spent with debit cards over credit cards. With credit cards we thought, “Can we pay this off at the end of the month?” But with debit cards we asked ourselves, “Do we have the money in our account right now?”

This seems like a subtle shift, but it had a profound impact on our financial life. Overall, the pride and passion we felt for opting out of the credit card industry far overshadowed 1% cash back and a few airline miles.

Waiting to Invest

We also decided to focus on eliminating our debt before investing for college or retirement. This decision is a complex one for many people, but we wanted to keep our financial goals simple and focused.

By focusing our time, energy, and passion on eliminating debt, we were able to do so much faster than if we had tried to juggle multiple goals and priorities. We also believe that a debt-free lifestyle (and a debt-free business) will provide a flexible foundation for us to build a secure future.

Many people will point out if you have a low-interest debt (let’s say 2-4%) on a student loan or mortgage, you may be able to realistically achieve much better returns than that by investing for the future.

We understand how the math works, but for us it’s far more important to have the flexibility, momentum, and freedom that comes with a debt-free lifestyle.

We’re looking forward to having the mathematics of compound interest work for us in the future, but for now we’re leveraging the motivation of our emotional minds to maximize focus and passion as we finish off our debt.

The Best of Both Worlds

To create long-term, lasting habit change, Chip and Dan Heath taught me that we need both sides of our mind — logical and emotional — to work together.

In the personal finance world, it’s easy to focus on the next tip or tactic that you think will move you closer to your goals. But don’t forget the power that comes with motivating your emotional mind to come along for the ride.

The next time you go to change a habit, don’t forget about the elephant.

For discussion: In what areas of your finances do you choose emotion over logic? What tricks have you found to make your “rider” and “elephant” travel the same path?


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