Expert Interview with Jason Hull on Investing and Personal Finance for Mint

Jason Hull is a financial planner and the founder of Hull Financial Planning. And as such, he's developed a strong and fascinating philosophy on personal finance. He was kind enough to share it with us in an interview.

What are some common misconceptions you see about personal finance?

The most common misperception that I see is that personal finance is all about investing. That's probably because most firms make their money getting you to give them your money to invest. However, shaving 5% off of your spending budget or increasing your job by 5% is a far more certain return than trying to get an extra 1% return out of your investments every single year. To me, investing is the final 20% of the puzzle. It's an important 20%, but it's not the paramount 20%.

Money is one of the few topics we have trouble talking about openly. Why do you think that is?

We want to measure ourselves by how we do against our neighbors. Studies have shown that we'd rather make $50,000 a year and live in a neighborhood of people who make $40,000 than to make $60,000 a year and be in a neighborhood of people who make $70,000 a year, because we look at our financial well-being relative to our neighbors. Therefore, we're scared that we're not going to measure up to some standard (rightly or wrongly) and we're going to take a psychological blow when we find out that we don't. We imagine worst-case scenarios (you mean I have saved less than anyone else?!?) even if they aren't likely to happen, and rather than taking that first step towards improving our situations, we just assume that everything will work out in the end to avoid that embarrassment.

Plus, society tells us it's taboo to talk about money, and rather than understanding the specific situations in which it applies - like not asking me how much money I make when you just met me and we're standing next to each other at the Willie Nelson concert - we take the broad generalization that it's never OK to talk about money.

We often look at the numbers when it comes to personal finance, but not the motivations. What made you focus on the psychological aspect of money?

I'm willing to bet at least 90% of people who have credit card debt know that they're spending more than they're earning. Knowing basic numbers and doing something about it are two entirely different beasts. We have to realize that while we know we should spend less than we earn, there's an entirely separate section of our brains, the limbic system, or what I call Monkey Brain, who doesn't care in the least about all of that saving for the future mumbo jumbo. Monkey Brain wants pleasure, and he wants it now, and no matter how slick the used car salesman is at convincing you to buy that car, Monkey Brain is an even better salesman. The excuses he uses to get you to buy things that you don't need with money you don't have or to try to hit a fifty bagger home run with your investments are called behavioral biases. Understanding what those behavioral biases are and how to counteract them will help you move from knowing that you should do something different to actually doing something different.

What would you recommend to someone just starting out with saving? Where should they go first?

They should build a very basic, forward-looking budget. I know, some people think budgeting is a waste of time, but if you don't create the processes and systems so that you understand how money flows from your paycheck to all of the different places where it goes, you can't take actions to improve those flows. Automate as much as possible so that there's very little left in the bank account for Monkey Brain to blow.

For more insights, connect with Jason on Google+.