The Psychology of Money, Practically: Nobody Told Me That Most of My Money Was Leaving in the Small Doors
A practical essay on the psychology of money, for NobodyToldMike.com
The specific thing nobody ever actually sat me down and told me about my own money, during any of the years when somebody probably should have, is that most of the damage was never going to come from the big door at the front of the house, which is the door I had been watching very carefully the entire time, but from the dozens of small doors at the back and the sides of the house, which I had not been watching at all, because nobody had ever thought to point out that there were doors there in the first place.
The front door is the one that every piece of mainstream financial content you have ever read is about. The front door is the mortgage you can afford, the car you can afford, the house you can afford, the loan you should not sign, the pyramid scheme you should not join, the vacation you should not finance across eighteen months of your credit card. Those are the famous doors, and the famous doors are the ones that get written about, because the mistakes that happen at them are big and photogenic and easy to turn into cautionary tales.
The small doors are the ones that nobody writes about, because the mistakes that happen at them are individually tiny, individually forgettable, and individually look like nothing worth writing about on any given day of your working life.
The problem is that there are hundreds of small doors in the house. The further problem is that none of them close by themselves.
What the small doors actually are
The particular small doors I have been slowly learning to notice in my own house, which are approximately the same small doors most people reading this are living with in whatever version of a house they happen to be living in, are the ones that look harmless because the amount of money going through any one of them on any given day is small enough that it feels rude to care about it.
The eleven dollar monthly charge for the thing you signed up for six years ago and have not opened in four of them. The four dollars and change for the coffee that is not actually a coffee because it has become a habit that happens to involve coffee. The seventeen dollars for the delivery fee that is three times the service fee that is twice the small-order surcharge on the thirty dollar meal you did not need to have delivered to the house. The nineteen dollar annual auto-renewal on the domain you registered the week you were going to start a business you did not end up starting. The hundred and twenty dollar annual renewal on the piece of software you used for one specific project in twenty twenty two.
None of those is the kind of transaction that anybody would describe as a money problem. All of them together, running quietly in the background of an otherwise responsible financial life, are the kind of thing that eats, over the course of a working decade, roughly as much money as most of us will contribute to a retirement account during the same period, which is a fact I did not want to be true about myself when I eventually sat down and worked it out, and which I now suspect is true about most of the people in my life who otherwise look like they have their finances together.
Nobody told me any of this, and the reason nobody told me, as far as I have been able to work out, is that it is not very interesting to tell somebody. It does not sell books. It does not fit into a thirty second video. It does not have a dramatic arc. The honest version of the story about where your money goes is a boring list of small boring numbers, which is also the version of the story that happens to be true.
What The Psychology of Money has to say about the small doors
The reason I have come to believe that The Psychology of Money is the correct frame for understanding why the small doors stay open across years of an otherwise responsible financial life, rather than any of the more popular frames the industry likes to offer, is that The Psychology of Money takes seriously, in a way that most financial education does not, the specific psychological reasons why ordinary intelligent adults ignore specific small amounts of money month after month, which turns out to be the actual mechanism underneath almost every ordinary spending problem I have ever been able to name honestly in myself or in anybody else.
Why the small doors stay open
The underlying reason the small doors stay open across years and sometimes decades of a person's working life, which I did not have the vocabulary for until I started reading seriously in behavioural economics about two years ago, is a specific psychological pattern that the researchers call mental accounting, and that I have written about in a slightly more literary register in the companion piece on my Substack this week.
The one-sentence version is that your mind quietly sorts your money into separate budgets that do not actually exist inside your bank account, and that the money in your mental "small, does not count" budget spends quite differently from the money in your mental "big, actually matters" budget, even though it is of course the same money, coming out of the same account, in the same direction, every single month.
The small doors live inside the first budget. The front door lives inside the second one. The reason you have been watching the front door and not the small doors is not that you are undisciplined or financially illiterate or any of the other things that financial writers like to accuse ordinary people of being. The reason is that your mind has quietly decided, without ever asking you, that the small doors do not count, and your mind has that permission because nobody has ever walked you through why that permission should be revoked.
The practical move, which is the one that actually works across months rather than for the three weeks that any given budgeting app will keep your attention, is not to install a new app or to swear off coffee or to make a Spartan monthly vow that you will not actually keep past the second week of the month, but to quietly move the small doors out of the "does not count" budget and into the "same as everything else" budget, which is a one-time cognitive move that costs nothing and that compounds across every subsequent transaction you make for the rest of your working life.
The three things I would tell myself at twenty two
If somebody had sat the twenty two year old version of me down in a quiet room and told him three true things about his money that nobody actually did tell him, which is roughly the premise of this entire channel and this entire site, these would be the three.
The first thing is that the small doors are where your money actually goes, that the famous mistakes are the ones that make the news precisely because they are rare, and that the ordinary mistakes nobody writes about are the ones that will matter more across the next forty years of your life than any single dramatic decision you are likely to make. Start a quiet, private, non-performative monthly ritual in which you look, for twenty minutes, at the actual list of actual small transactions from the previous month, and do not do anything with it other than look.
The second thing is that financial literacy, in the sense of knowing how compound interest works and what a tax advantaged account is, is a necessary condition for a decent financial life, but it is not even close to a sufficient one, because the mathematics of personal finance is approximately eighth-grade arithmetic that any thoughtful adult can learn in a weekend, and the psychology of personal finance is a lifelong practice that most adults never consciously begin. The leverage is in the psychology. The information is already free.
The third thing is that the single most useful thing you can do for your future financial self is not to learn a new technique, which is what the industry would like you to do, but to learn the specific names of the specific psychological patterns that are running underneath your spending in the specific moments where the spending is happening. Once a pattern has a name, the pattern becomes a little less reliable at working on you, which is not a dramatic transformation, which does not make for good marketing copy, but which compounds, slowly and quietly, across every subsequent year of your working life.
That is roughly the whole of what I would have wanted somebody to tell me, and that is roughly what this site exists to tell you across however many future posts it ends up running to.
Where this fits in the ecosystem
If you are new to the project, which some of you reading this probably are because the five places I have been writing have been pointing at each other more deliberately over the last few weeks, this piece is the practical operator's companion to the longer argument I have been making across the rest of the ecosystem.
The hub piece, where I lay out why I think any of this is worth doing in the first place, is Three Channels, One Question over on my own journal. The structured essay on the three specific cognitive patterns that the modern consumer economy was built on is The Three Biases That Explain Why You Overspend on Medium. The personal essay about the specific pattern I noticed in my own spending once I had the vocabulary for it is The Thing Nobody Told Me About How I Spend Money on Substack. The short-form thread version of the same argument, written for people who do most of their reading in the fifteen minute windows between other things, is the X thread I posted this week.
If you want the longer, slower, cinematic version of this material, where the ideas get dropped into specific historical moments rather than argued out in essay form, that is what the Chronicle Zero channel is quietly building toward, and if you want the daily practical companion to all of it, that is What NTM Told Us.
Thanks for reading. Next post on this site is on the specific psychological lever that most people have never heard a name for, and that is quietly responsible for an enormous amount of consumer debt in this country.
Mike Petry writes about the psychology of money, money psychology, the psychology of spending, and the modern financial philosophy that comes out of taking all three subjects seriously. More across the ecosystem: MikePetryJournal.com, Medium, Substack, X. Video: Chronicle Zero, NobodyToldMike, What NTM Told Us.
This article is practical reflection, not financial advice. Consult a licensed financial advisor before making investment decisions.