Money Management for Humans


Most cars are less than 2 metres wide. The maximum width of a lorry is 2.55 metres. So why are most A-roads about 7.5 metres wide? Because none of us are perfect drivers. Imagine if all the roads we had to drive on were only 6 metres wide. There’d be a lot more collisions – but whose fault would that be – the driver who couldn’t drive in a straight line, or the road designer who didn’t allow for the fact that cars are driven by Humans?

That’s why my blog strapline is “making money management easy for fallible humans”. The way we handle our money needs to allow for the fact that we are human. We are not perfect, we are “fallible” – we can be relied on to make mistakes.

And that’s also why I recommend that you separate your bills and your spending into separate ‘jam jar” accounts (see link), because that’s a much more robust and fault-tolerant way of managing your money. Using only one bank account for everything is like trying to drive down a traffic lane that’s only a little bit wider than your car – you can do it, but you’ll have to concentrate hard the whole time.

Concentrating on a difficult task is an example of “slow” thinking – we can do it but we don’t like doing it for long. Mostly we rely on “fast” thinking – we decide what to do almost instantly without seemingly stopping to think at all – instead we rely on our experience, judgement and intuition. I explain more about fast and slow thinking here.

Fast thinking usually works pretty well but we do make misjudgements from time to time. The way we manage our money needs to take this into account. Yes we need to do “slow” thinking sometimes, such as when we’re updating our monthly budget, but we haven’t got the time or the energy to check our budget every time we spend money. So we need a “fault-tolerant” money management system that can operate with a minimum of “slow” thinking.

Bobby Moore Stamp

Even Bobby Moore made mistakes

Bobby Moore was arguably the best central defender of all time. He played over 500 first team games for West Ham, but in only a quarter of those games did he manage to stop the opposition from scoring. That didn’t make him a failure. Football is played at high speed, unexpected things happen. Bobby was much better than most at anticipating danger and timing his tackles. But he made mistakes every time he played. Because he was human, and making mistakes is normal for us humans.

So when the wheels come off your family finances, don’t be too quick to blame yourself or your partner. Financial “accidents” are typically a combination of human error and exceptional circumstances, and they will happen. Instead try to learn from the experience. Is there some way you can strengthen your money management system to lessen the likelihood of the same thing happening again:-

  • Should I be using cash or a prepayment card to stop myself overspending? (see link)
  • Should I put more money aside in a ‘Rainy Day Fund’? (see link)

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