#102: I can read your financial mind

29th August, 2022

Welcome to the Idiot Money newsletter. This week, becoming wiser with money by understanding that when everybody (including you!) is playing the same silly money game, it’s incredibly easy to be played in turn, including:

• Your personalised financial psychological profile.

• How to make it easy for financial salespeople to rip you off by making you feel really understood.

• How while you’re probably not lying to yourself about what you want, you’re almost certainly bullshitting yourself, which is far more dangerous.

Through the magic of the internet and its army of cookie monsters that skulk in the shadows of your online journeys, what you are about to read is a 12-point personalised psychological profile of your innermost personal-finance feelings.

1. Security is one of your major goals in life, and a key focus for your finances. You just want to know you’ll be okay. You want ‘peace of mind’.

2. Though you rarely voice it publicly, you have a great need for other people to like and admire you, and this plays a huge role in your money decisions – both how you make it and how you spend it. You’re not extravagant, but see it as a sign of self-respect to have a moderate amount of nice things to display.

3. There’s a darker side to this: you have a tendency to be critical of yourself. You frequently, but irregularly think that you’re not making as much out of your money as you could be. You’ve promised yourself you’ll ‘sort out the finances properly’ a few times, but if you’re honest, have never got fully on top of them.

4. While far from a financial expert, you’re quite good at looking like your finances are in control, at least. No one has ever suspected you worry about money. Though you do, occasionally. Life is long; there are a lot of ‘what ifs’!

5. You pride yourself as an independent thinker and do not accept others' statements without satisfactory proof. You’ve heard enough horror stories of financial scams to be wary of trusting anyone blindly. However, in the maddeningly complicated world of personal finance, gaining sufficient proof feels impossible. You would rather like just being told what to do by someone you believe you can trust.

6. You have a great deal of unused capacity which you have not turned to your advantage. This is partly about existing assets, but more about what you could do with future assets… just a little more money to provide the space and time to clear the decks, get a bit of traction, and so on.

7. You have goals. You are progressing towards some (perhaps more slowing than ideal, but such is life) but not others. Were you right them down, the majority would convert into ‘something to buy’, making money the apparent bottleneck for most of them. Some of your aspirations tend to be pretty unrealistic, but even they feel doable with a bit of luck, especially once the fires are out and you’ve got more time.

8. While you admit you have some personality weaknesses that may hold you back and make it harder to progress in some ways (in earning money, spending it more wisely, learning to invest it), you are generally capable of compensating for them. Living more wisely with money doesn’t feel impossible!

9. At times you have serious doubts as to whether you have made the right decision or done the right thing (career choice, big purchases, investment decisions). Regular reassurance that you’re doing fine tends to feel more valuable once received than you believed it would be before you received it.

10. As long as you can rely on a few core things, you prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations, such as budgeting ‘rules’ which strike you as either pointless or joyless or both. You understand that a craving for certainty is a widespread problem, but while you wouldn’t want total chaos, you’re relatively well-placed to adapt to inevitably changing circumstances.

11. You have found it unwise to be too frank in revealing your financial situation to others (regardless of whether you’re richer or poorer than they are).

12. You’re secretly a little jealous of those that seem to ‘get’ investing. You suspect that there’s a lot of money being made – a lot of money you could be making – if only you chanced across the right people or the right strategy.

Sound about right? How did I do?

You are not as special, nor as screwed up, as you believe you are

The astute among you (and probably some of the not-so-astute) will have recognised that what you’ve just read is a rip-off of the classic Forer cold-reading statements, bulked up by a few common client quotes.

As Scott Alexander explains in this post, ‘A lot of Forer statements are about the contrast between internal experience and outward behaviour.’ We feel unusually well ‘understood’ by pretty much anything of the form ‘you’re usually like this, but you’re also sometimes like that’, where ‘this’ and ‘that’ are often contrasted by our public and private selves.

They work in a cold-reading sense because people tend to view others in simple black-and-white terms, but themselves as complex individuals, full of colour, and contrast, and magnificent multitudes. So when these contrasts which we believe make us special are apparently recognised, we attribute the recognition to something approaching sorcery.

Forer statements are, in Scott’s words: ‘implicitly comparative – since there’s no objective measure for how disciplined you should be, “disciplined” implicitly means “more disciplined than other people”.’ This means you can ‘rephrase many of these statements as “Although everyone else is really X, you are Y pretending to be X”.’

Which suggests that everybody is pretending. And those secret inner anxieties you think only you experience, well guess what… you don’t… you just live in a world where you and everybody else has chosen not to talk about them.

Personal finance is perhaps the perfect platform for pulling off this trick. Because what else do people think about so intensely internally, but never speak about in clear and candid terms externally?

This also means money is particularly effective at constructing – through those that live with it – a world designed to make everybody unnecessarily screwed up. And all for want of choosing to live in a better one (look out for a big piece on that coming next week).

Don’t be tricked into thinking this is just a trick

In its usual context, this trick is an innocent parlour game.

In personal finance, it can be far more dangerous.

Because it stops being a trick, and starts being an invitation to fail to make the most of your money, or even to be ripped off.

The most costly mistakes are the ones we can’t see. Especially the ones we can’t precisely because we believe we’ve been mysteriously well understood.

The reassurance problem, aka the con-artist problem

In an advisory relationship, clients derive the most visceral value not from the transactional business of investment recommendations, but the comforting salve of reassurance. Whatever the advice, if they trust the person providing it ‘gets’ them, they’ll keep coming back for more.

The trouble is, when – as is so often the case with personal finance – you don’t really know what you want, because you ‘know’ the world of money and investments in at best a cursory, propositional, way, it’s borderline impossible to tell the difference between someone who really understands you, and someone who’s just good at faking it.

The scary and complicated world of personal finance, coupled with the inherent uncertainty of reality, creates desperation. You want to know you’ll be okay. You want peace of mind. There are 1,000 ways to give you both, and none of them need to actually work for more than a few minutes at a time.

You want to rely on someone you can trust. Yet when you don’t really know (in a practical-wisdom sense) what you’re paying for, you’ve no solid basis on which to trust anyone. So you go with the appearance of trustworthiness. And the people best at appearing trustworthy? That would be con-artists. Because they have no actual product to sell, not even a crappy one; the appearance of trustworthiness is all they’ve got, so they’ve got it good.