When your portfolio becomes your spending account
More people are raiding investments for everyday costs. Here's the brain bias behind it, and what to do instead.
The news in one sentence
CNBC reports that, according to new research from the JPMorganChase Institute, 8.2% of individuals transferred money from their investments into their checking accounts over the three months ending in April, up from 4% during the same period in 2019 and 2.4% in 2015.
That is a big shift. And honestly, it is not just an American story.
Why this lands on you
If you are self-employed, you know the pattern. A big invoice clears. You feel flush. You spend more than you planned. Then a quiet month arrives and you are scrambling, pulling money from places you swore you would leave alone.
The JPMorganChase Institute looked at more than 20 million de-identified Chase checking accounts. Their research director George Eckerd told CNBC that the amount held in checking accounts for liquidity stays stable, meaning the flows coming in from investments pass directly through to spending. None of it is being saved.
That is not a discipline problem. That is a brain problem. A very specific, very well-documented one.
The behavioural idea: present bias
Present bias is the tendency to give far more weight to what you can use right now than to what you will need later. The future version of you feels abstract, almost like a stranger. The present version of you has a bill, or a want, or a stressful quiet month. So the present wins.
Psychologists Daniel Kahneman and Amos Tversky showed that losses feel roughly twice as painful as equivalent gains feel good. When you are in a lean month, that discomfort is vivid and immediate. The cost to your future self, the retirement pot you just raided, the investment you just cashed out, is distant and fuzzy. Present bias says: solve the pain that is right in front of you.
The “wealth effect” that CNBC describes works the same way in reverse. When your investments look healthy, your brain reads that as permission. You feel richer. So you act richer. Spending rises not because your actual income rose, but because your perceived financial cushion did.
Richard Thaler’s mental accounting idea is useful here too. We keep different mental pots: spending money, savings, investments. But those walls are thinner than we think. When the investment pot looks big, the brain quietly reclassifies some of it as spending money. The pot is full, so you can dip in. Right?
The feast-or-famine loop
For coaches, therapists, practitioners and consultants, this loop is particularly sharp. Your income is lumpy by nature. A good month can feel like permission to spend freely. A bad month can feel like an emergency, which triggers the urge to raid wherever there is money sitting.
Brad and Ted Klontz’s research on money scripts is relevant here. Many self-employed people carry a deep belief that money is scarce and temporary, so it should be used now before it disappears. That script, laid down early in life, makes present bias even stronger. The brain is not just choosing now over later. It is following an old rule that says later might never come.
That is not a character flaw. It is information about how your nervous system learned to relate to money.
The ostrich effect, just briefly
Galai and Sade identified the ostrich effect: the tendency to avoid looking at financial information when we expect it to be bad. Quiet months often trigger this. You stop checking your accounts. You make spending decisions without looking at the full picture. By the time you do look, the investment account is lighter than you remembered.
One small action this week
Look at the last three months of your income, not your best month, not your worst, just the average. Write that number down somewhere you will see it. That number is your real baseline, not the flush month, not the scary month. When you make a spending decision this week, check it against that baseline, not against how your investments look today.
That one pause is not a budget. It is just a moment where the future you gets a seat at the table.
Want to go deeper?
If the feast-or-famine loop feels familiar, the Money Story Method is a 12-week 1:1 programme that helps you see the patterns underneath the behaviour, not just the behaviour itself. Or if you want a gentler starting point, The Thursday Money Note lands in your inbox each week with ideas like this one.
For decisions about your own investments or savings structures, please work with a qualified financial planner or adviser in your country. The patterns above are human. The solutions need to be personal.
Source: CNBC Personal Finance
Joel