Personal finance might seem like it’s all about numbers. But in reality, it’s more connected to psychology than we often admit. Most of your financial outcomes are based on your behavior. Many people get this wrong, so where do we commonly see this? And how can you improve your mindset? Let’s dive into it:

Treat Investments Like “Bills”

A common argument against investing is that you're trading your present for your future. But that’s actually a more positive spin than what we usually hear, like “I’m not living my best life” or the humor-laden “YOLO.” I get it—many of us want to live in the moment as if there’s no tomorrow. But, of course, tomorrow does come, and soon today becomes yesterday. This mindset can be detrimental. So, what’s the best approach?

→ Treat it like a bill you pay without question

Don’t see investing as a burdensome gift to your future self. Instead, treat it like one of your regular bills. Just as you willingly pay your mortgage or subscriptions, view your investments in the same light. The key difference? You actually can potentially get something in return—options for your future.

Now, that’s a pretty cool bill to pay!

A New Approach to Volatility

Long-term investing is deeply intertwined with mindset. It’s easy to visualize, but hard to execute. Why? Because volatility is stomach-churning. Staying vigilant during tough periods is difficult when you’re in the moment. As I often say during downturns, “People with 10-year plans react with 10-minute mindsets.” So how do you handle it?

→ Nothing ventured, nothing gained

Morgan Housel, author of The Psychology of Money, famously stated, “Volatility is the price of admission.” In other words, if you want long-term rewards, you’ll have to withstand the volatility it entails. That is part of the risk after all. In the short term, volatility is uncomfortable. In the long term, it’s part of the process. Embrace it!

The Reality of Compounding Interest

I love sharing the magic of compounding interest. You pick a time frame, choose a hypothetical return, and watch the numbers grow. It’s fun to project! But here’s the truth: compounding is rarely a linear path. The entire history of the stock market shows that. Like many things in life, if you expect a straight line, you’re setting yourself up for disappointment. So how do we approach this?

→ Set the right expectations for compounding interest

It’s important to understand what “average returns” truly mean. If an investment has "averaged" X% per year, that doesn’t mean it will hit X% EVERY year. That would be an over-promise! Instead, returns are averaged over time, mostly mixing low years and high years. So while it's great to see what an averaged return looks like, we have to set the right expectation what that looks like over time.

History Doesn’t Repeat, But It Rhymes

Go on Google, turn on the TV, or scroll through social media. What do you often see? Bad news. In today’s digital age, negative news drives clicks and views. I’ve learned this firsthand from creating content for social media. They push it because... well it works. Unfortunately, while bad news benefits the posters, it’s the readers who suffer. Emotions drive those clicks, and emotional decisions after reading them often follow, leading to poor financial choices. So, what’s the best strategy?

→ Ignore the "noise"

This doesn’t mean you should tune out completely from what's going on in the world, but don’t immediately abandon long-term plans based on short-term headlines. Down markets are a natural part of the cycle. Letting a headline dictate your strategy can lead to hasty decisions. Your choices should be grounded in your goals, risk tolerance, and overall financial picture. Factor in the news, but don’t let it be the main driver of your decisions. Investments are never guaranteed, but it's important to distinguish noise from facts with historical data to prove it. Stick to the plan with the expecations of road bumps in between.

Optimism Over Pessimism

Pessimism isn’t always bad—there are valid reasons to be cautious, even in the financial world. But as a long-term strategy? It’s not ideal. Bill Gates captured this sentiment perfectly: “More people and businesses try to solve problems than fudge success or get into trouble. The odds tilt ever so slightly toward long-term progress amid frequent setbacks.” The lesson?

→ Optimism is a great strategy

In other words, humans are wired to solve problems when things go wrong. This has been proven throughout history. Not every company will succeed as planned, but economies as a whole have remained historically resilient over time. The right kind of optimism is crucial for staying committed to your long-term goals.

The road ahead may be rough at times, but optimism fosters long-term commitment.

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