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The Best Interest » Personal Finance Shortcuts: Re-train Your Money Brain

Personal Finance Shortcuts: Re-train Your Money Brain

Winning the lottery. Marrying rich. Robbing a bank. Most “short cuts” to wealth have long-term consequences. So quit buying scratch-offs and gold-digging. There are legitimate personal finance shortcuts that can simplify your financial life. Let’s discuss.

Short cuts make long delays.


For starters, I know this news can be disappointing. You won’t find magic pills here today, nor one-stop solutions. These aren’t wormholes to transport you through money-spacetime to retirement.

Wormhole GIFs | Tenor
A personal finance wormhole – not real!

Instead, today’s personal finance shortcuts should be considered as heuristics. What’s a heuristic? It’s a useful tactic, habit, or timesaver.

The street numbering of New York City is a great example of a heuristic. If you find yourself at 2nd Avenue and 22nd Street, you know you’re east (2nd Avenue) and south (22nd Street). How? Because the avenue numbers increase from east to west, and the street numbers from south to north. That’s a simple heuristic.

Today’s personal finance shortcuts aim to change your thought processes about money. If you can change your brain, you can change your life.

Your “Paycheck Number”

Savings goals are important. Various experts will suggest saving 15%, 20%, 30%, or higher percentages of your paycheck. Now, percentages aren’t terrible. But if you aren’t math-minded, then percentages aren’t ideal. Instead, it’s much easier to work with simple fractions.

16.6% of an apple is an abstract idea. It’s much easier to visualize one apple out of six total.

That’s why your paycheck number uses simple fractions to describe your savings rate. Let’s look at an example.

I get paid every two weeks. I could make a hypothetical savings goal of using two paychecks to live for three pay cycles. In other words, I’m using four weeks of work to pay for six weeks of living.

How much money am I saving? One out of every three paychecks. My paycheck number, therefore, is 1/3.

It’s a short-hand heuristic for calculating your savings rate. Sure, you could just say, “I save 33% of my income.” But isn’t more fun to say, “I don’t even touch every third paycheck. It’s pure profit!”

I get 26 paycheck per year. If I’m saving every third check, then I’m saving 8.6 paychecks per year. That goes straight to the bottom line, like pure profit. Savings math becomes pretty easy.

The “Paycheck Number” and the “Two-Income Trap”

Another parallel to the Paycheck Number comes from Elizabeth Warren’s book “The Two-Income Trap.” Yes, that Elizabeth Warren. Before being elected U.S. Senator, Elizabeth Warren was a Harvard professor specializing in bankruptcy law.

In her bankruptcy experience, Warren listened to hundreds of stories of personal bankruptcy. One common theme kept appearing: lifestyles expand in lockstep with salaries. Couples and families would find ways of spending every dollar they earned. New raises meant new toys, bigger houses, longer trips.

Nobody cared about slack. There was no room for error.

And so, Warren found, these people fell into deep trouble if one member of a couple lost their job. Their lifestyle was stretching two people’s salaries. If one of those salaries disappeared, bankruptcy was often the only way out.

This is the two-income trap. People believe two incomes gives them flexibility to spend as they please. In reality, those people overestimate that flexibility and ensnare themselves in debt traps.

Warren believes that couples should strive to live off only one of their two paychecks and save the other. In other words, their combined Paycheck Number should be 1/2.

What Does Shelob Think?

I think about Frodo in the spider’s lair in The Return of the King. Walking into a giant webbed cave is the equivalent of knowingly exposing yourself to bad debt. Having a sharp Elvish sword to cut the webs is the equivalent of having a job to pay down that debt. And having a giant spider steal your sword is like losing your job.

10 Scariest CGI Movie Monsters – Page 5

You really don’t want that spider to steal your sword. But you can’t always predict the actions of a giant spider. And unlike Frodo, you probably won’t have a hobbit friend to protect you from the spider’s clutches.

shelob | Tumblr
It might only be CGI, but yikes!

What’s the solution? Don’t fall into the trap in the first place! Avoid the clutches of debt! And avoid 15-foot spiders. Jeepers.

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Shortcut Your Brain

The beauty of using heuristics as personal finance shortcuts is that it offloads effort from your busy, busy brain. We know that our brains aren’t always logical. A good personal finance shortcut is one that circumvents your built-in biases.

Personal Finance Shortcut #2: Automate

Wake up. Roll out of bed. Drag a comb across your head.

How much of your morning routine is automated? I know mine is. It’s a little scary that I know I always greet the dog, feed the dog, start the coffee, crack the eggs, and only then is the dog ready to head outside for her morning business. The order never changes. It’s like clockwork.

A dog camouflaging itself in the tall grass. If you can’t see it, look towards the middle 60% of the photo.

I don’t have to think about it each morning. I save that brain space for more important tasks (like writing to you).

My personal finance works much the same way. I pay my bills automatically and invest in my 401(k) automatically. I send money to my HSA, my Roth IRA, and my taxable brokerage account automatically. My brokerage (Fidelity) grabs the money from my paycheck and my bank account. I explain the details in my “how I invest” breakdown.

I’ve decided that I like coffee and toast and eggs, so I make them automatically every day. Similarly, I’ve decided that I have a specific saving and investing plan. Once I made that saving and investing decision, the easiest way for me to implement that plan was to automate it.

Don’t let your brain get in the way of good behavior. Once you’ve decided on a good course of action, automate as much of it as you can.

Personal Finance Shortcut #3: Know Your Impulses

This isn’t just letting items sit in your Amazon cart for a few days before you buy them. The idea of temet nosce—or “know thyself”—applies all across the personal finance spectrum.

Temet Nosce Know Thyself The Matrix Movie Wood Wall | Etsy
Even Neo in The Matrix had to learn about his true self.

Learn where your bad impulses lie. Are you a sucker for cute shoes? For techie gadgets? For dining out rather than grocery shopping? Wherever your financial vices, focus your attention there. If you forget to save money, then automate it. If you forget to budget or track your spending, then put your budget somewhere where you can’t possibly ignore it (e.g. put your budgeting app on your phone home screen, or on a screen unto itself).

Personal Finance Shortcut #4: Goals Need To Be SMART

“Save more money” is a good goal, but not a great goal. What is it missing?

You might have heard of SMART goals before. The “M” in that acronym stands for “measurable.” The idea “save more money” is missing a hard, measurable number. And the other letters are useful too—specific, attainable, relevant, and time-bound. Why do I want to save? When do I want to save by?

A SMART savings goal might read, “I want to save $10,000 for my (eventual) next car by the end of 2021.” It meets all the SMART criteria.

A goal without numbers is too nebulous, and therefore too easy to “slip.” Should I feel accomplished after saving $100? After $1000? After $1 million? It all depends on what I’m saving for.

My most recent real-life savings goal involved fully funding my emergency fund. I wanted to get to a point where I had six months’ worth of living expenses sitting in my bank account. I pushed to get there before 2020 started, but I ended up needing a couple more months. Oh well. I got there eventually. Goal accomplished.

Personal Finance Shortcut #5: Motivate Yourself With a Friend

Going alone can be tough. There’s a reason why diets and exercise plans often involve “accountability partners,”—another person whose role is to help you meet your goal. Your accountability partner helps you by—guess what?!—holding you accountable for your actions!

Involving another person, it turns out, is a simple shortcut to more successful outcomes.

The power of an accountability partner - Blogs - Build The Fire
About to grab hold? Or just letting go?!

You can apply the same idea to personal finance. Share your goals with another person. Compare budgets. Challenge each other to boost your savings rates.

When you slip and fall, your accountability partner is there to help you back on the right path. Or to criticize your for purchasing an $800 T-Rex costume. Either way, the point of an accountability partner is to help you reach your goals.

Personal Finance Shortcut #6: Don’t Be Fooled, Recognize Randomness

I love the topic of randomness. When I think of Jeff Bezos, I think of randomness. The stock market? Random walks. I even wrote a full article about Monte Carlo simulations—one of humans’ best efforts to make sense of random occurrences.

I’m convinced that recognizing randomness is a valuable trait for humans to possess.


Well, take that fireball that just streaked across the sky. Is that a warning sign from the sky god? Or was it just a space rock that randomly crossed paths with our space rock? For millennia, most people thought it was the former.

You missed your alarm. You got rear-ended on the highway. And then an anonymous co-worker ate your lunch. Does karma have it out for you? Or did you happen to lose three crappy coin flips in a row?

Our monkey brains yearn for meaning. Why, why, why?! If you can’t accept that randomness just happens, then you’re likely to seek meaning where none exists.

“Technical” Analysis

Randomness applies to meteors and bad-luck days, and it also applies to economics. There’s an entire branch of asset trading built upon the (demonstrably false) idea that there are non-random price patterns in asset prices. If you recognize these patterns, they claim, then you can make lots of money.

technical analysis
More lines = more smart, right?

The patterns have names like the pennant, the falling wedge, and the cup & handle. You’re right—they do sound like tarot cards.

How and Why Tarot Works (and why you should try it!) - TarotLuv | Tarot,  Tarot decks, Tarot learning
Not the Page of Pentacles!!!!

Randomness in Your Life

Ok. Why should you care about this stuff? Two reasons.

First, because randomness happens and all you can do is try to prepare. Your car will break-down the same week a tree branch cracks through your roof. Your kid will need braces right after you replace the fridge. Pandemics happen! All you can do is give yourself as much slack as you can muster.

Second, understanding randomness in personal finance is good for your mental health. Did stocks do poorly this week? That’s ok—they’ve always involved random walks up and down. Did your neighbor win the lottery? There’s nothing you can do about that—it’s just random. Don’t drive yourself crazy looking for meaning where none is to be found.

Ignoring randomness is a personal finance shortcut. It just takes time and effort to train your brain.

The Shortcut Home

Personal finance shortcuts aren’t necessary for success, but they make life easier. It’s not magic. There isn’t a cure-all. But there are tried-and-true habits that will save your time, lower your stress, and keep more money in your pockets.

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2 thoughts on “Personal Finance Shortcuts: Re-train Your Money Brain”

  1. Another great article. The concept of heuristics is something everyone should know in investing and paying down debt. Too few automate their retirement savings and pay them selves first. I liked your Tolkien quote.

    1. Hey Dividend, thanks for being an all-star reader! Yeah, it was Tolkien who first wrote:

      “Why can’t this Ring just automatically melt itself down?”

      Automation! Important in Middle Earth, important today.

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