Budgets, buckets, and home equity according to Thaler

Welp, I’ve officially gone down the rabbit hole that is behavioural economics. Because I’m consumed by this ‘How do people money?’ question.

How do people feel about, think about, and spend their money?

I’m reading Thaler’s Misbehaving thanks to some great Twitter recommendations and I just got through section two on Mental Accounting, which was all kinds of up my street. Acquisition versus transaction utility, sunk costs and payment depreciation… you know, the good stuff.

But oddly enough it was a paragraph on home equity in Chapter 8: Buckets and Budgets that’s stuck with me the most.

He talks about how home equity lines of credit came to be a thing (that’s HELOC for short) and how they completely changed the way Americans do money.

(Yes, I’m fully aware this is old news to most people but you have to remember that I’m a snowflake millennial who’s just coming around to the idea that a) the world existed before 1990 and b) said world might be worth learning about.)

So here’s the deal on HELOCs in the US according to Thaler…

– Until the 1980s home equity was sacred. Like your retirement accounts. You didn’t touch those buckets. That was money for future you, not present day you.

– This meant that in the early 80s people over 60 had very little mortgage debt. Paying off your mortgage—as quick as possible—was what you did.

– Then came Regan. Good ol’ Ronald and his tax reforms. Before 1986 all interest paid (on auto loans, credit cards, etc.) was tax deductible. After 1986 only mortgage interest was tax deductible.

– Hmmm. So now that mortgage interest was the only kind of interest that’s deductible, there was an economic incentive for banks to create something that lets you borrow money in a tax-deductible way. Because people love a deduction, right? Enter the HELOC.

– Want a new car? Finance it using a HELOC, not an auto loan, because you’ll get the deduction. Have credit card debt? Take equity out of your house to pay it off. And so on…

– On top of this interest rates kept getting lower and mortgage brokers became a thing, which encouraged more and more people to refinance.

What did all of this do?

“The change eroded the social norm that home equity was sacrosanct.” 

Home equity was no longer the ‘safe’ mental account it once was. It was no longer a bucket for future you, like your retirement accounts, that you didn’t touch. It was for spending and spending today.

“During the housing boom in the early 2000s, homeowners spent the gain they had accrued on paper in home equity as readily as they would a lottery windfall.”

And then he says this...

“The fall in stock prices did not impact spending as much as the fall in home prices.”

Since people still had retirement accounts as this bucket you didn’t touch, stocks taking a dip in your 401(k) didn’t change how much you were going to spend on furniture that year. Your 401(k) was still mentally filled under ‘money for future you’.

But your home? That was now a bucket of money for present you. And when people could no longer take money out of their homes to finance new cars because house values had fallen so much and/or they were underwater on their mortgage, well, you know what happened. Things went downhill fast.

Enter the 2008 financial crisis.

Here’s what’s so interesting about this to me…

How do we go from, “Here’s a sacred thing we don’t touch” to, “Burn it to the ground.” 

How do these shifts happen?

What’s going on with culture, with education, with how ideas spread… What’s all the stuff circling around a change in behaviour that facilitates it? What’s the narrative around it?

The marketing bit. Because marketing isn’t just advertising, it’s the story we tell others and ourselves.

How did we change the story?

That’s what’s super interesting. That’s what we’ve got to dig into. When we look back and when we look around at what’s happening today…

What’s the story being sold to us and what’s the story we’re selling to ourselves?

Because if there’s one thing we can count on in this world, it’s that history repeats itself.


Oh look, a house. Because home equity. Points for originality, yes? Taken near Yarmouth, Nova Scotia. 

P.S. Read this NY Times article from 2008 on bank advertising leading up to the crash. Ya. History definitely repeats itself.

How do we get people to care about their money?

Here’s the thing…

All this wonderfully educational how-to content doesn’t mean much if people don’t care to look for it in the first place.

As an industry—a community—we’re great at engaging with each other. But how do we engage with people who aren’t already in the conversation?

For the people who don’t already care about money, what’s the catalyst?

What experiences or events lead someone to think… Money. That’s a thing I’m going to look into.

What conversations circle around and trigger one about money? Maybe it’s wanting to start a business. Or leave a job. Or leave a relationship. Maybe it’s a health scare. Maybe it’s wanting to do something—or change something about their life—and realizing money is the thing that will help them get there.

Nobody cares about budgets. They care about putting their kids in soccer camp. They care about being able to go on tour with their band.

The headline, “How to build a budget” isn’t going to sell anyone unless they’re already enrolled in the conversation. “I took a sabbatical from work to do a cross-country tour with my band,” however, might do it.

Money is just a means to an end. It’s not the end itself. So what are the ends people care about? The people you seek to serve, what goals do they have? Where are they now and where do they want to go?

Take them there. Not with money as the focus, but as a means to their end. Not what you think they should want for themselves, what they want for themselves.

Maybe the money conversation is triggered by change in people’s lives—it’s tied to a breaking or inflection point. If so, we can meet them at the crossroads. 

And show them how to get where they want to go.

No one’s entering this world through a door marked, “Budgets, right this way!” They’re entering through “I’m starting a business” or “I want to leave my job.”

What other doors can you open?


Please enjoy this most wonderful sign outside of a gas station-meets-convenience-store-meets-diner near the Bay of Fundy in Nova Scotia. That was a top notch road trip, indeed.

Personal finance stories I’d love to read

How to spend money.

How to make money.

How to save money.

How to invest money.

Personal finance content tends to be heavy on the how-to guides. And I get it. Cause it’s not like we were taught this stuff in school.

But isn’t money about so much… more?

Which got me to thinking, what other topics would I like to see addressed in personal finance?

Well, here’s a few ideas…

– Interviews with immigrants that focus on cultural differences in mindset and expectations around money. A conversation that would show what each culture takes for granted, how values differ and where those values and expectations come from in the first place. Family? The media? Where are these standards coming from and who are we trying to impress?

– Stories from residents or immigrants who are supporting family back home. How does that affect their relationships, the way they look at job security, and they way they plan for the future?

– Stories from interracial couples that experience cultural differences around how they look at and handle their money. How does this play out when you’re joining two families? And if one partner immigrates to the other’s country… what did their relationship with money look like through that process? Do they look at money differently now than before they immigrated?

– Stories from couples who come from totally different socioeconomic backgrounds. What was dating like? What changed with marriage, kids, in-laws? What fears and insecurities come up and how do they deal with them? What’s it like to marry into a wealthy family, a poor family?

– The power of scarcity versus abundance mindset when it comes to money. How people who grew up with a scarcity mindset were able to cultivate one of abundance. How that applies to more than money. How that plays out in family structures.

– The impact of self-development on your finances. Stories about how someone purposely worked to improve other areas of their life—health, fitness, career, relationships—and it affected their values and thus how they were spending or looking at their money.

– Stories about what it’s like for parents with kids living at home, or parents with adult dependents.

– Interviews with parents who are giving their kids money early instead of waiting until they die to pass on an inheritance.

– How someone having their parents help them buy a house affected their relationship with them. Did it add pressure or expectations? What’s the emotional side of accepting help that people might not think about?

– How people with trust funds think about money. How having a trust fund or knowing they can expect a large sum of money at some point affects the risks they’re willing to take, their careers, and how they plan for the future.

– How cognitive behavioral therapy (or any kind of therapy) changed someone’s relationship with money.

– How trauma affected someones relationship with money. So not just talking about emotional spending but the root cause of that emotional spending.

– How someone with autism or bipolar disorder or schizophrenia handles their money.

– Okay, anything on mental health and money. Because I think that’s a seriously under-discussed topic in finance.

Basically, I’d like to see content that doesn’t center around takeaways and actionables. I’d like to see more stories.

Stories that let you see the world through someone else’s eyes. Stories that make you aware of and challenge your biases. Stories that make you think about someone other than yourself.

Stories that give you perspective.

What about you, what would you like to see more of?


I was going to say that this photo has nothing to do with the post, but, I guess fences and personal finance content have enough in common. Taken at Regent Park in Toronto.

The privilege of financial literacy

I remember being in the checkout line at the grocery store eyeing that rack of candy beside the conveyer belt. I wanted a Caramilk bar. I pointed to it and looked up at my mum, “Can I have one?”

“Sure. You have money.”

I had started getting an allowance. I opened my velcro wallet (~nostalgia~) and glanced at the cashier. I knew I could give these quarters to her and get the chocolate bar, or I could take them home and put them in my piggy bank.

I knew I couldn’t do both. And if I got the Caramilk now, that meant I wouldn’t be able to get one when we were back here in a few days. Tradeoffs. I had to make a choice.

Oh, that’s how it works.

I was five.

I remember sitting cross-legged on my bedroom floor with the contents of my piggy bank spilled out in front of me. I was pushing all the pennies together in one pile, all the dimes together in another, quarters…

I counted and stacked everything neatly. I opened my spiral notebook and wrote down how much I had. It was more than last week.

My mum walked in and asked,  “What are you saving for?”

I was six. 

I remember sliding a tin heavy with change across the counter to the teller. My mum had taken me to open my first bank account.

I knew what was going to happen next. She was going to give me a card. My very own bank card for my very own bank account.

“There’s fifty-four dollars and seventy-three cents in there,” I told her proudly, “I counted.”

I was seven. 

My mum never told me what to do with money, she taught me how to think about it.

I don’t remember her commenting on the stuff I bought. She never told me that something was a waste or that I should have saved my money instead. The point wasn’t what I was spending my money on, the point was that is was my money. 

She wanted me to see, for myself, how little decisions add up.

I learned about ownership, accountability, tradeoffs, and choice. And I learned when the stakes we low, real low.

I was five and my biggest financial concern was chocolate now or later. I wasn’t eighteen holding a credit card I’d signed up for during frosh week to get a free t-shirt, debating which car to finance.

She taught me how to ask better questions and how to figure out what I valued so that when the stakes were raised and banks were waving credit at me I’d be able to make my own best choice.

“You have to answer to yourself when you get older,” she said, “That’s life.”

I’m fortunate to experience many kinds of financial privilege, but it’s the privilege of financial literacy that’s given me the greatest leg up in life.

When I think about financial privilege this is what I keep circling back to…

It’s one thing to be given money—an allowance, an education, a house, a car, a job, a business—and it’s another to be taught how to make your own choices. Having your education paid for doesn’t mean much if you don’t know how to put money behind what you value. These financial privileges are kind of like building blocks and without that underpinning foundation of financial literacy… What do we have?

Financial literacy is about so much more than understanding compound interest and the time value of money. It’s about ownership and accountability. It’s about tradeoffs and choice. It’s about problem-solving.

Looking around at how we’re defining and teaching financial literacy, at the programs and resources that are available, that’s the biggest gap I see.

We’re still hung up on this idea that financial education boils down to numbers. We’re still empowering rules, not people.

We need to be teaching people how to think about money, not what to do with it.


This is a loaded and deeply personal topic. It touches on so many things that are impossible to tease out from each other—is the privilege of financial literacy separate from other kinds of financial privilege? How does poverty fit into this conversation?—and we all have our own definitions of these terms. This is my opinion, from my soapbox, and yours might be totally different. That’s OK. In fact, I’d love to hear it.

Finally, for your viewing pleasure, my bank book from 2000. Bank book! Don’t you miss those?! I couldn’t find my first one from when I opened the account but you better believe I have it around here somewhere because if there’s one thing I am not… it’s a minimalist. 

financial literacy privilege kate smalley 1

financial literacy privilege kate smalley 2

P.S. Mum, if you ever find yourself on my corner of the internet reading this, thank you.

When did we decide being “good at money” meant not spending it?

Here’s a question…

When did we decide being “good at money” meant not spending it?

When did that become the goal. The badge of honour. The sign you’ve made it. Congratulations, you’ve arrived at your destination, please exit to your left, the end.

I can’t seem to get far into a personal finance blog without reading the words, “I’m going to lose my personal finance card this, but…” or, “bad personal finance expert, but…” because they’d just spent money on something they—or perhaps more accurately they worry others—deem expensive.

They ate out when they could have eaten at home. They got the pricier hotel room. They bought a new purse. A fancy one, with a label and everything.

Sometimes it’s said as a joke. But often it reflects a sincere guilt that frankly, I find concerning.

Where did this narrative come from? Why is that our conditioned response? Why is the personal finance community feeding this culture of judgment we’re trying so hard to get away from?

If there’s one thing personal finance doesn’t need, it’s more shame.

Being good at money doesn’t mean you don’t spend it.

And not spending it doesn’t make you good at money.

Frugality isn’t some virtuous badge. It can just as easily be a crutch, a vice, a way to hide. A box to tick without actually tackling the underlying habits, emotions, and fears that drive you.

Being good at money has very little to do with tangible indicators like budgets and account balances. It’s a mindset. An internal process. And it’s constant.

There’s no endpoint. No definitive, Aha! Look everyone, I’ve made it.

People don’t like that. Because it can’t be measured. It can’t be boiled down to visible, laddered achievements. It’s not fun to talk about. It doesn’t fit neatly in a box.

It’s a lot like being happy. You’re the only one who knows if you are.

Though we try our damnest—with happiness, money, and anything else in life worth pursuing—there’s no external yard stick we can point to and know we’ve made it. No formula, metric, or app can tell you where you are on that journey. You and you alone have the answer.

Which is why self-awareness is so important. Why it’s important to teach people to cultivate that, not just teach them hard and fast rules like “keep your spending under x percent of your income”. To do that we need to look far beyond the boundaries of what we think personal finance is.

We need to empower people, not rules.

We need to teach people how to think, not what to do.

We need to teach people what questions to ask, not what answers to look for.

Ya. It’s uncomfortable.

It means you can’t just throw a template over it and bam *dusts hands together* you’re sorted. Disagree? That’s fair. But with all the readily available resources and budgets and frameworks… why isn’t everyone getting this stuff? Why isn’t everyone saving and investing and feeling good about their money? If the content’s all there, why aren’t people implementing it?

Obviously, it’s not that simple. There’s more to it.

So even if we don’t have answers, can we acknowledge there’s room in this industry for better questions and start asking them?

We need to lean into this discomfort. Because ignoring it isn’t serving anyone.


Oh look, a winding muddy path to a beach which could be delightful or entirely disappointing and we won’t know until we’re there. Fitting, yes? Taken at the Scarborough Bluffs in, well, Scarborough, this summer. 

Nobody cares about budgets

Welcome to my Saturday morning stream of consciousness.  Excited? You should be.

Why don’t more people care about their money? Specifically millennials. With so many personal finance blogs and books and other content out there (with gifs! there are so many great articles with gifs) why aren’t more people taking action? Why don’t they see what an impact this would have on their lives, their futures! *passionately shakes fist*

(…Right?)

Well, maybe it’s got something to do with the fact that so many ‘intro to personal finance’ books and articles open with Budget! BUDGET! Thou shall not proceed without a Budget!

Uhhh….

Newsflash—not a selling point. Like, no I don’t want to sit down and put numbers into boxes why do you think I’m avoiding my bank statements in the first place?

And I know (I know!) budgeting doesn’t have to suck. There’s a template for seemingly everyone’s taste and it can be as simple as you like and oh goodness did you know how life changing it is?!

None of that matters.

It doesn’t matter because people aren’t going to get that far. They’re going to shut off as soon as they skim the word ‘budget’, they’re not going to stick around to hear you defend it.

If we’re trying to get peoples attention—to sell them on the magic of caring about their money—maybe we should stop leading with budgets.

Not because budgets are bad, or useless, or unimportant (they’re none of those things) but because nobody cares.

Not at first, anyways.

I mean think about it. That person you know (friend, colleague, family member) that’s ‘bad with money’, do you honestly think all they’ve been waiting for is someone to tell them to get a budget and open a retirement account? If that were the case, wouldn’t they have done it already?

Now before you petition to have me kicked off the interwebs, let me be clear, I’m not against budgeting. I have a budget! I just don’t think they’re the starting point, and I certainly don’t think they’re the be-all-end-all.

If we want to get (and keep!) peoples attention, maybe we should try opening with some different material. Let people get through the door, take their coats off, offer them a drink, before we hit them with the hard stuff.

So where should we start, Kate?

If budgets are out—and retirement, but that’s for another post—how should we get people interested in money? Talking like this I must have the all answers, right?

Nope! (You hate me don’t you?) I think our relationship with money is a good kicking off point, but I don’t exactly know what that looks like.

But this is important. Really, really important. And I want to talk about.

I believe the sticking point with financial advice right now isn’t so much the content, but how it’s being presented.

Rethinking the delivery… That’s the key.

What do you think?


P.S. In lieu of a somewhat-passably-relevant stock photo… Please enjoy this snap I took of pretty red stuff growing on the side of a building in Huntsville, Ontario this fall.

Banks, budgets, and beauty bloggers

I’m scrolling through Instagram, as you do, and I get to thinking about sponsorships and the fact that Social Media Influencer is now a job title (explain that to your grandmother). Which leads to me wonder where are the banks and other financial companies in all of this? If it works for L’Oréal, would it work for Citigroup?

Take a lifestyle blogger for example. Look at their Instagram account. They’ve got millions of followers and one of those perfectly curated, envy-inducing feeds. Now look at their sponsors. Huge beauty, fashion, and fitness companies pay them (and pay them a lot, apparently) to fill their posts with branded products. Sometimes it’s a seamless fit, sometimes it’s not (hello, detox teas), but either way we’re taking it all in. And it sticks with us right to the checkout counter.

When we follow someone like that we’re not just learning what’s trendy this season, we’re absorbing a set of values.

What if one of those values was financial responsibility? What if more social media influencers talked about how they manage their money? So instead of just showing you their collection of Chanel bags, they showed you how to afford your own?

There’s a YouTuber, Chase Amie, who has a great video on exactly that. No one follows her because she knows how to budget, they follow her because they admire her lifestyle. It just so happens she has that lifestyle because she’s driven in her career and knows how to manage her money, both things she’s open about in her videos. Now someone who started following her because they envy her closet finds themselves learning about why they should open a savings account. None of it’s sponsored, just stuff she talks about naturally. Pretty cool, right?

What a great way to reach people that would benefit from financial advice but aren’t likely to Google ‘how to invest’ on their lunch break. If banks, robo-advisors or lenders found a way to genuinely collaborate with these social influencers it could open them up to a whole new audience.

I’m not exactly sure what this would look like, or if it would work, but it sure is interesting to think about.


P.S. In lieu of a somewhat-passably-relevant stock photo… Please enjoy this snap I took of the Flatiron building in New York while I was waiting at a crosswalk. It was a thousand degrees and smelled like garbage. It was beautiful. 

Why finance needs better teachers

What makes someone a good teacher? I’ve been thinking about this a lot lately, and I don’t mean teacher in the traditional chalkboard and apple sense. We’re all teachers. We all have to explains things we understand to others who don’t.

So what makes someone particularly good at that?

Empathy.

The best teachers remember what it’s like to not understand. They remember the questions they were too embarrassed to ask. They remember the sticking points.

The best teachers make you feel like they’re in the thick of it with you. They talk to you, not down to you. They make it okay to be exactly where you are.

The finance industry needs better teachers.

There are plenty of advisors, writers, and bloggers who know their stuff but aren’t great teachers. They assume this baseline financial literacy that, let’s face it, most of us don’t have. (Looking at you, education system.) Sometimes it feels like they’re just catering to other finance nerds. But what about everyone else? What about the people they claim they’re trying to serve?

By using fancy words to explain other fancy words, it creates an environment where it’s really hard to stick your hand up and say, “I don’t get it.”

And that, my friends, is dangerous. That’s how we get gaps. That’s how we get ‘us’ versus ‘them’. When this happens, we all lose.

Nowhere is this gap more obvious than at the cocktail hours advisors throw to get new clients (yes, I go to those for kicks). You can literally see it widen with every PowerPoint slide. No one’s going to interrupt Cindy mid-pitch and ask for clarification on, “Wait, where did that number come from?” because that would be embarrassing.

I don’t think it’s intentional (not always at least). I think they honestly forget what it’s like to not understand annuities because to them it’s second nature. But if you want to build trust and lasting relationships, you’ve got to know your audience so that you know where to start.

“RRSP contributions will lower your taxable income!” isn’t a selling point to someone that doesn’t know what taxable income is.

Do you see what I mean here? Just because it makes sense to you explained like that doesn’t mean it makes sense to someone else. You’ve got to be conscious of who you’re talking to (or rather, who you want to be talking to) and use language that makes sense to them.

Remember what it’s like to not understand.

That kind of empathy is really, I mean really, powerful.


P.S. In lieu of a somewhat-passably-relevant stock photo… Please enjoy this snap I took in Chinatown, New York. Note Mr T, he knows a thing or two about teaching…

Why banks should care about beauty vloggers

You know what’s really interesting? The rabbit hole that is YouTube beauty videos—monthly favourites, Sephora hauls, get ready with me’s… that slice of the internet.

It’s addictive. I can watch someone apply eyeshadow with 14 indistinguishable brushes for hours, knowing full well I’ll never try it myself. My idea of a ‘smokey eye’ is mixing two shades of skin toned beige I’ve owned since university, and I’m OK with that. I am not the product hungry teen these videos are targeting, and yet, here I am.

I know I’m not alone because these videos have millions of views. Beauty vloggers are building tiny empires on our support. They’ve changed the entire industry. They’re a new breed of celebrity.

And it’s fascinating.

Why? What makes a girl who doesn’t even own eyeliner watch a 20 minute smokey eye tutorial? I’m sure there’s some good psychoanalysis to be done here, but I’ve noticed it’s the personality I’m watching more than the content. ‘I don’t really care what you’re talking about as long as you’re the kind of person I’d want to hang out with on the weekend’ sort of thing.

It’s magnetic.

Do you see how influential that is? It might feel like passive entertainment, but think of what I’m subconsciously absorbing and how it’s affecting me. I mean, Wow.

If a stranger on the internet can keep my attention for 30 minutes on a topic I’m not even interested in… that’s powerful.

My question is how could you harness this magic to make topics that are traditionally a snooze fest, like finance, accessible? What can we learn from these content creators who have millions of teens hanging off their phones waiting for the next upload?

The way people consume content has changed, and the finance industry needs to pay attention. Banks thinking the YouTube beauty vlogger phenomenon doesn’t apply to them isn’t just stupid, it’s suicide — how do they think they’re going to get their next generation of customers?


P.S. In lieu of a somewhat-passably-relevant stock photo… Please enjoy this snap I took of pretty colourful things like flowers in Chinatown, New York. 

Are you a moderator or an abstainer?

I’ve been thinking about the whole Moderator vs. Abstainer thing. Is it just another label, or is knowing which side you fall on useful? Could recognizing it help you become more productive? Happier?

I always thought I was a moderator because I can do things like eat 2 squares of a chocolate bar and save the rest (Crazy, I know).

However, if I’m honest with myself I approach most of my life with an all or nothing mindset. I’m in or out. Full steam ahead or… no steam. But I act like I’m great at moderation, and that’s what gets me into trouble.

I should be able to watch a couple YouTube videos while eating dinner then get back to studying. I should be able to text back Sarah without checking Instagram. 

Guess what? Doesn’t happen. Like, ever. If I open YouTube I will still be there two hours later, probably watching a grooming tutorial for the dog I don’t own. And I can’t even tell you how often I find myself 48 weeks deep in some meme account on Instagram… Sigh.

I keep doing the exact same thing, genuinely expecting a different outcome. Because, “You should be able to do this Kate!”

What if I stopped trying to fight it? Instead of putting all this energy towards finding a balance I’m not wired for, what if I set up my life to take advantage of my all or nothingness?

I mean, it seems kind of obvious now that I’m thinking about it…

Consider how this might apply to different areas of your life—diet, work, fitness habits, or even the way you spend money. For example, maybe you think you should be able to go to the mall without buying anything because Jane can do that so Hey! You can too right? You keep going to the mall every Friday after work, because “this time will be different!”, and every Friday you buy stuff you don’t need.

Hmmm… Maybe instead of trying so hard to change your reaction to the environment, you should just change your environment altogether. You’re not Jane, accept and move on AKA stop going to the mall every Friday.

Do you see where I’m going with this? Instead of trying to fix our weaknesses, what if we put that energy towards leveraging our strengths? 


P.S. In lieu of a somewhat-passably-relevant stock photo… Please enjoy this snap I took of cream puffs my Mum made last Christmas. I know, I’m sorry.