Choose reasonable over rational
A plan you can stick with beats an optimal plan you’ll abandon.
Why it works
A mathematically optimal strategy you can’t emotionally sustain has a real-world expected value of zero, because you’ll bail at the worst moment. "Reasonable" decisions — ones that let you sleep and stay the course — outperform "rational" ones in practice because durability, not theoretical optimality, is what captures long-run results.
How to do it
- When two plans compete, ask which one you’ll still be following after a bad year.
- Permit small "suboptimal" choices that keep you calm and consistent (a little extra cash, a paid-off debt).
- Treat your own temperament as a real constraint, not a flaw to override.
Evidence
Reflects findings that adherence and sustainability drive long-run outcomes more than theoretical optimality, and that loss aversion makes people abandon volatile-but-optimal plans. (mechanistic)
A reasoned principle drawing on behavioral findings; "reasonable" is deliberately judgment-based, so it resists precise measurement.
Sources
- Behavioral economics on loss aversion (Kahneman & Tversky) explaining why people abandon volatile optimal strategies
Common mistake
Optimizing on a spreadsheet for the highest expected return, then abandoning the plan in the first downturn because it was never emotionally survivable.
Practice this with IX Coach
More practices for The Psychology of Money, Made Practical
- Treat money as a behavior problem, not a knowledge problem
How you behave under stress beats how much finance you know.
- Define "enough" before you need it
Name the point past which more money no longer buys you anything you value.
- Build room for error (margin of safety)
Plan so that being wrong is survivable, not catastrophic.
- Let compounding do the work (patience)
The biggest results come from time in, not intensity — if you don’t interrupt it.
- Remember wealth is what you don’t see
Spending signals income; wealth is the money you chose not to spend.
- Save without needing a reason
Saving for "flexibility and options" is reason enough — it doesn’t need a goal attached.