Often we make financial decisions that feel right in the heart, yet somewhat shaky in the head. It’s like those times when you’re confident in the wisdom long-term investing , but the endless gloom of global economic news makes your resolve waver. Or perhaps there’s a purchase that sparks joy at the checkout, only to turn into a nagging regret.

So, how do we – as wonderfully flawed and complex beings – make a reasonable choice in the way we manage our money? This conversation is about solving that very human dilemma.

In this episode, we sit down with Evan Lucas, author of " Mind Over Money ". He brings a wealth of insights as a behavioural economist, media commentator, and financial educator. Evan's work sheds light on a reality of finance and investing: your behaviour towards money is unique and always changing.

We explore concepts like delayed returns and “girl maths”, and how these fit into the bigger picture of making reasonable versus rational decisions. And let's not shy away from the elephant in the room – the rising cost of living. How do we make reasonable, not just rational, decisions in times of financial strain?

It's not every day that you get to hear an economist discuss money matters in a way that resonates with the daily grind. This episode might just find the key to dealing with those budget blues and investment anxieties.

Personal finance is about what’s reasonable for you

There's no one “right” way to handle finances.

Evan Lucas believes that while we like to think of financial decisions as purely logical, they're far from it. What seems like an irrational choice could actually be the most reasonable for you.

Our journey with money is as individual as our fingerprints. We each have unique stages, priorities, environments, and experiences that shape our choices. What works for a single person in their twenties might not align with a family's needs or someone later in life.

Take Ana's example. She spoke about a trip to Werribee Zoo with her kids. Financially, it might have seemed like a loss. For a single person, it might not make sense on their spreadsheet.

But the core memories created with her children add a different kind of value to her life and her kids’. The stronger bonds formed from that trip make perfect sense to many parents.

This is the essence of “reasonable” decisions – choices that resonate with us personally, beyond mere numbers and returns.

Tash brings home another point to this. In an age where online resources are abundant, the danger lies in taking generic advice as gospel. The truth is the same people who give advice are just like you. They're playing a different game and wondering what’s “reasonable” too.

And, sometimes, when we ask others for advice, we make the mistake of comparing our finances to theirs. A young person who listened to our podcast felt worried about having only $100,000 invested at 28. While that’s a tremendous achievement, they feared they were falling behind.

But Evan reassured them there's no universal timeline for financial success. Nobody’s rushing you. There’s no universal benchmark either for what can be called a good amount of investment.

Yet, the process of building wealth tends to be the same for everyone. Invest what you can, get rich slowly (a.k.a. stay patient) and use money for what it is: a tool for living life on your own terms. Oftentimes, what you learn and experience may actually be worth more than the money you have.

How to feel less financially stressed and stick to investing during tough times

Over 1.2 million Australians had never experienced a rate rise until last year. And now it’s a whole generation scrambling to understand the new rules of budgeting and saving.

Wearing his economics hat, Evan reassures us that interest rates can rise quickly, but also fall fast.

Remember the COVID era? Interest rates nosedived to 0.1% almost overnight. But, what goes down can also rise, as we've seen in the recent 14 months of consecutive hikes. Lucas thinks this trend might level off soon, which could bring relief in 2024. Talks of rate cuts are on the way.

Until then, what can you do in the face of these challenges?

1. You’re not alone struggling under rising cost of living

For many under 50, the current cost of living crisis is a first. Remember the late '80s and early '90s? That's the last time we saw something similar.

Today, making reasonable choices in this kind of economy often feels like trying to hit a moving target. Suddenly, things feel out of our control, and that can be unsettling. And in a crisis, tough choices may be necessary, such as cutting unreasonable expenses or working more.

2. Look beyond the now

It's easy to get lost in the daily fluctuations of the market and interest rates. But here's the thing: when you zoom out, as Ana suggests, these moments are just blips in a larger journey. It's tough to see the end when you're in the midst of it, but history teaches us that these phases do pass.

3. Negotiate your payments

When getting a mortgage, Lucas suggests thinking of your principal payment as an investment in your home. It's a mindset shift that turns a routine payment into a step towards owning more of your asset.

Reducing your interest payments can be as simple as paying fortnightly or using offset accounts (yes, despite some naysayers, they canwork!). This approach helps you not just save money but claim more ownership of your home.

4. Bonds provide diversification and ballast an investment portfolio

Let's talk about bonds . They might not be the talk of the town, but they're far from obsolete. In general, adding some types of bonds could hedge your portfolio against rising interest rates and wild swings in the share market.

You can rely on bonds’ yields and trade them for potential capital gains. And yes, you can invest in them, either through ETFs or direct market access via brokers.

5. Embrace delayed returns in investing

Why do we find it hard to plan for the future? Lucas makes an important point about human nature. We tend to seek instant satisfaction instead of thinking long-term.

However, building wealth is all about delayed gratification. It’s just like what Morgan Housel said in his book “The Psychology of Money”: wealth is simply the combination of saving, patience, and weathering (or actively avoiding) financial surprises long enough to let compounding interest do its thing.

The true benefits of reasonable decisions that you make today, especially in investing, are seen over a long period. It’s how Warren Buffet got rich. It wasn’t through some clever strategy – he kept investing for three quarters of a century.

“Girl maths” TikTok trend is a case of personal finance being about how you behave

“Girl maths” is a tongue-in-cheek TikTok term that’s been tossed around in conversations recently. We’re not fond of the sexist undertones, but it’s supposed to be a fun and silly way of justifying impulsive spending. And, apparently, men and women do this all the time.

A favourite saying goes: "If I don’t spend today, I have double the budget for tomorrow". Another common rationale sounds something like: “I’m only paying $1.37 a day if I keep my $1,500 iPhone for three years.” But did you really save if you didn't need to spend in the first place?

Before we dismiss it entirely, Evan says “girl maths” can be both a boon and bane to our finances. In relationships, if your partner finds great deals on essential items, that’s a reasonable and big win. Using "girl maths" to justify splurging on the latest tech because you saw it trending the other day? Not so much.

Now, it’s not only the Gen Z shoppers guilty of this attitude towards spending. There’s also the “I deserve this” mindset among the Millennial folks. Of course, it’s not wrong to enjoy your earnings. You are free to buy that phone in Boxing Day sales, as long as you hold yourself accountable for how it affects your money goals.

This brings us to a crucial point: balance. Can you chase your dreams and maintain a sane lifestyle? Sure, but it goes back to making reasonable priorities and sometimes, tough choices. You can't have your cake and eat it too – at least not all at once. It's about finding that sweet spot where hard work meets reasonable money choices.

How to not lose all your money in the share market

Losing your assets is a scary thing for investors, like what happened in Japan in the 1990s. Can we predict where the share market will be in the future based on global economic trends?

While it's natural to fear a global economic meltdown, it's an extremely unlikely scenario. Evan adds that focusing on extreme possibilities can distract from practical financial planning. It's more productive to concentrate on achievable goals and mitigating realistic risks.

Evan's advice? Create a diversified portfolio .

Diversification is more than just a buzzword in investing. It's a lifeline of a robust and resilient investment portfolio. He emphasises that, in a globalised world, your portfolio should not be limited to one nation, economy, industry, or asset class. To protect yourself from a big loss like Japan, spread your investments across many areas.

Now, what if the worst happens and your investments plummet? For the average investor’s peace of mind, history offers a comforting reminder. Humans have been able to turn potential disasters into chances to grow and transform. Crises have come and gone, yet economies and societies have not only survived but often emerged stronger. Even with the climate crisis, for example, there is hope in positive action and the economic value of climate solutions.

The chances of all share markets crashing at once and life stopping for everyone are extremely low. Even so, investors should be smart with their money and avoid getting into too much debt or making risky investments.

How our relationship with money has evolved over time

Before we wrap this up, we share stories about how our relationship with money can and should grow with us.

Ana’s journey from merely saving to growing her wealth

Ana's story is a timeless tale of how learning can change your financial situation. In her early twenties, it was all about living frugally – surviving on a noodles diet and saving every penny for travel.

Yet, as Ana matured, she realised that saving alone wasn't enough to get ahead. The FIRE movement (Financial Independence, Retire Early) helped her change her focus. Now she's investing for the long term to actually build wealth.

Moving to Australia marked a turning point, as her income doubled, and her priorities evolved. Now, Ana focuses on nurturing special moments for her family and securing her own future.

Tash’s path to financial freedom

Tash's story mirrors Ana's in many ways. As a teenager, she began with an obsession for saving every dollar. However, as she dove deeper into the world of work and wealth, her perspective took a turn. She realised that making money was only part of the equation – making it work for her was the key.

Now, with a significant investment portfolio, Tash can now afford to be selective with her work and investments.

Evan's perspective on success beyond money

As Evan reflects on Tash’s and Ana’s stories, he comes to an important realisation during the conversation.

It’s a skill to know when you've reached a point where making more money doesn't necessarily equate to a better life. Ultimately, financial success may actually look like finding peace in what we do and how we use our money beyond making more.

Looking ahead

As we learned from this conversation, our journey with money is as much about understanding ourselves as it is about understanding the markets . Every investment choice, every penny saved, speaks volumes about our hopes, fears, and dreams.

This episode, like many before it, is more than just a moment of insight. It's a step on a longer, richer journey towards personal finance that resonates with you. For those just dipping their toes into the world of investing, our first 10 episodes can give you a solid foundation.

And because the journey is sweeter when shared, why not bring your friends along? Share this episode and let's grow our community investing for the long-term. Join the conversation on our Instagram page , Facebook group , or the Pearler Exchange .

Dive into the full episode for more insights, and here’s to making more reasonable choices.

Happy investing!

Tash & Ana