Episode 231: Stop Letting Your Emotions Sabotage Your Financial Freedom

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Is your financial freedom being hijacked by your emotions?

We all like to think we’re logical with money—crunching the numbers, weighing the odds, making the “smart” move. But the truth? Most of our financial behavior is driven by emotion, not math. In this episode, Jon Orr and Kyle Pearce unpack the hidden psychological tug-of-war that shapes our habits, investment choices, and long-term wealth strategies. Inspired by Freakonomics Radio and grounded in behavioral finance, they explore why knowing what to do isn’t the same as doing it—and what actually makes the difference.

You’ll discover:

• A practical framework (elephant vs. rider) for understanding and overcoming self-sabotaging money habits.

• How to bridge the gap between financial theory and real-life action—even when fear or doubt creeps in.

• Smart ways to align your investments and financial systems with behavior you can actually sustain.

If you’ve ever struggled to follow through on the “right” financial move to gain financial freedom, press play now—this episode could change how you think (and act) with money.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Building long-term wealth in Canada takes more than just knowing the numbers—it requires understanding why we make the financial decisions we do. Rooted in behavioral economics, a smart Canadian wealth plan aligns rational thinking with emotional intelligence to create lasting financial habits. Whether you’re focused on financial freedom in Canada, early retirement strategies, or choosing between salary vs. dividends, success depends on bridging the gap between theory and action. From RRSP optimization, tax-efficient investing, and corporate wealth planning to real estate investing and legacy planning, this episode explores how to set a clear financial vision, use proven investment bucket strategies, and develop financial systems tailored for entrepreneurs. You’ll also uncover tools for personal vs. corporate tax planning, estate planning, and building a diversified, passive income stream that supports a modest lifestyle and sustainable financial independence in Canada.

Transcript:

So John, recently we were chatting about some podcast ideas and you had flipped me an episode from the Freakonomics podcast and you said, you gotta listen to this. It covers so much great ground and it was an episode, it’s called Our Personal Finance Gurus Giving You Bad Advice. right away, I think what probably intrigued you to listen and what intrigued me to listen is that title. I go,

shoot, like I don’t want to consider us financial gurus by any means, but I’m like, I wonder what they’re saying in there. And I wonder like, are we on, you know, are we getting called out? Right? Like some of the things we’re saying and ultimately listening a hundred percent like, but really what I loved about this episode, as we went through the whole thing, it’s a long episode, a full hour. And I just recently finished it and I said, you know what, let’s hit record and let’s chat about this because I think it’s so

Right. Maybe. difficult. We’ve talked about it and really what this episode is, is kind of like a really good overview of a lot of the things we bring up on the show quite often where you and I are always talking about rational, I call it rational Kyle and emotional Kyle, right? And really everyone’s got that. It’s the angel and the devil on your shoulder, right? Like the financial angel and the devil on your shoulder. Like you’ve got like basically,

Yep. Right. There’s two, there’s two sides.

The angel is like the rational one. Like it’s the one like do the right thing all the time. And like if we lean on research, we can lean on the data. And like if we just did that, it would be better. But then on the other hand, we’ve got this thing on our shoulder. The devil here is the emotional side. It’s like the behavioral side that we tend to like find ourselves trapped in and we go, ⁓ crap. And we end up doing, I don’t want to call it the wrong thing. It’s like it feels right.

Right. at the time, but it’s certainly not what the research says is right, according to the numbers in many cases.

Yeah, I think whether you’re like, and there’s there’s actually like psychology, like behavioral economics behind this, which is where like, where the, you know, the podcasts talked about, but you know, we’ve we’ve read a bunch of research, a bunch of books on these this very topic. And it brings up a few things. but one, what you’re talking about is like, there are financial decisions we all have to make. And there’s the math that says do it that way. And then there’s the emotion that says like, I did it this way, but it’s not what the math said. And I think that’s what we’re talking about here. And so and so what

And you probably don’t tell people about it either, right? Like you’re like, did that and I’m not gonna tell anyone. Right, well I do it like this, but then they’re

like, but somebody else might be like, the research says, like the math says, the historical returns say, like, do it like that way, but then you’re like, oh, I didn’t do it that way. So like when you’re saying the devil on your shoulder, like where the devils really come from, in my opinion, is basically from like Daniel Kahneman’s work in thinking fast and slow. Like there’s two sides of your brain that you cannot, like everyone has, like it’s psychology. Like you have two sides of your brain. You have your quick side of your brain, which is.

your emotional side of your brain. You have the slow side of your brain, which is your rational side of your brain. You’re careful, your analytical side of your brain, and you’re constantly battling. Here’s the problem. The problem is you think you live on the rational side of your brain, but 90 % of the work, the things you do is on the emotional side. It brings up another resource that we heavily rely on when we’re trying to coach people and thinking about shifting habits.

Yeah. 100%. Cause that’s a lot of what we end up doing with our clients is like the habit is where things stick. The math might say this, the, the, might say that, but it’s like, what can we commit to? Because that’s the gap between the math and the rational side. But it brings up like some, a framework that we often think about, which is actually from the book switch from Chip and Dan Heath, which is a book about how to change when change is hard. And they position those two sides of our brain.

in a way that kind of gives us a nice framework to work on. Because what they say is like, you have to imagine that any decision you wanna make or any pathway you wanna go down or any change you wanna make in your habits lies inside the jungle. And there’s an elephant and a rider and they’re trying to go down a pathway. And at the end of the pathway is the shift, is the change, is the habitual new moves you’re going to make or the financial choice that you want to commit to.

The elephant represents your emotional side of the brain. if you don’t want to, like if the elephant doesn’t want to go down the pathway because of fear, because of ⁓ worry, of social implications, or, you know, I can’t sleep at night if I go down that pathway, you’re not going down the pathway, right? The rider is the rational side. So that’s like, you can see the physical difference. This is why this is a nice framework, is because the physical difference here represents the barrier you’re up against.

The math says go down the pathway. The rider’s like, I want to go down that pathway. And the elephant’s like, no way I’m going down that pathway because there’s a mouse over there and I’m going down this pathway over here. So the framework is like, you have to motivate your elephant. You have to like get around that the elephant is going to do what it wants to do. But you have to battle that. You have to realize that. And a lot of times we just don’t realize it. Whereas the rider is saying, go down that path. And the other third part of the framework is the path has to be clear. It has to be easy. And that’s where the habit parts come in.

And so there’s like lots of things in this episode too that kind of are, that we want to unpack, but that’s an important framework to consider as you’re kind of battling this, like the math says this, but behavior says this. And there’s a gap between those two things.

⁓ 100%. You laid it out so well. And if you look at it, there’s so many aspects of life that we can apply this to. And I want to bring it all the way to like financial decisions that we make and the wealth building decisions that we make or don’t make. But like I always start with exercise and health, right? Like it’s like, we know, like we know rationally what, will be healthy, like what, what’s going to help us do what we need to do. Right. We, we eat less bad things. We eat more good things. We eat less in general.

right? Instead of eating more and we exercise more. But the problem is, is that a lot of those things sometimes the elephant gets in the way, right? Like in the morning when you’re like, shoot, I got to get up and put these shoes on and get it, you know, and I got to go for the run or the, you know, whatever it is that you’re going to do. That’s the elephant. Like the elephant there is like blocking that for you, right? Now, if we fast forward and we go all the way over to like financial decisions and wealth building decisions, right? So the, the, the rider is saying, okay, listen, find the,

Yeah. I don’t do that, I’m not doing that. you know, the asset that’s gonna give you the greatest return over time, right? So right away, we’re gonna lean on like S &P 500. Again, that may not necessarily be the best return, but it’s a consistent one, right? We go, on average, over, know, historically, it’s like, hey, we believe in the US and so forth. And assuming that that continues, right? We, at some point, maybe the US isn’t gonna be the greatest world power again. I don’t know, we don’t know when that is. But assuming everything in the past is true,

We just take all of our extra money and we just put it in there. Like just do that. And rationally the rider saying like that should work out well for you. Notice the keyword should, there’s no guarantee here, but it should. But people don’t do that. And like even we won’t do that. Why? Because it’s like the elephant is like, I don’t know if that’s gonna work, right? And like another example, another financial example that’s really important. Like we have so many people that…

that contact us about the Smith maneuver and we love talking about it. I think it’s such a fantastic financial tool, especially for those who have high net worth or like they’re they’re experiencing high tax brackets at a personal level. Smith maneuver is so fantastic. So we have so many people that learn about it. It’s the rider right there is like, I’m going to learn all about this, make sure all man I can, I can invest right off the interest on borrowed funds. All of these things happen, but then

know what happens when they get to the place where they’re ready to do it. When they actually go to do it, the elephant shows up and the elephant sits there and goes, what if, what if, what if, like, what if right now the AI bubble pops? Like, I don’t know if you’ve been living under a rock, John, but there’s this thing called AI. And right now there’s like all of this noise out there that the AI bubble is going to be like the 2000 bubble when the tech bubble, the internet bubble popped.

Right. in 2000, right? My parents held shares in a company called Nortel. Canadians, most Canadians who were around back then know about Nortel. Nortel was a spin-off company from BCE, which is Bell Canada, and that stock went to zero. My parents were like, riding that thing up, and they were like, man, this is amazing, may, boom, it’s gone. These are the reasons.

I remember playing this stock game in my business class back then. We were all putting money, like you had fake money and was like, Doortel was the place to put your

Nortel?

Yeah, for me, it was ⁓ it was Blackberry, right? So like me myself, I was like, hey, Blackberry, this thing, like I didn’t even have a phone at the time. But I was like, there’s this thing like Blackberry is going to be amazing. And I put some money very, very small amount, basically, like a weekend dinner, a version amount of money in there and saw that thing go all the way down. So that’s what gets the elephant going, right? And like the elephant is the thing that sort of like stops us

from being able to go down that path. And this is why it’s so important for us to not only understand, like help the rider to better understand the whole financial picture, but it also, we need to do things that are going to be manageable to do. And you’re talking about like the habit, right? And like clearing the path. So sometimes I’m gonna put certain funds in certain places if I know I can do it and I’m willing to do it.

Like, so for example, I’m not a big dividend investor. We’ve talked about on the show why dividends is kind of like a bit of a farce. Like it’s like, hey, I got a dollar dividend per share on this stock that’s worth a hundred bucks. But as soon as that dividends paid out, now the stock’s worth $99. And you’re like, wait a second. Like I didn’t realize that was happening. Like a lot of people don’t realize that’s happening. It’s like, you can reinvest the dollar back into the company, but now the chocolate bar is whole.

and now you’re in the same spot, but you created a taxable event. So I’m not big into dividends, but when I borrow funds against my home using the Smith maneuver, I like the feeling of more certainty. There’s never certainty, right? Anything can happen, but I like the feeling of knowing that there’s going to be a payout and that payout is going to be at a higher amount monthly than I’m going to pay an interest personally. That is the elephant.

there that sort of like holding me back from doing the right thing, which is putting it into like equity ETFs and shutting my eyes and never looking at it again, and just knowing that rationally, it makes sense. And that’s my elephant sort of going, I don’t like that idea. But since every month, I can see that like, I’m in like a private credit fund over here, like that private credit fund, or maybe it’s a mic, if you’re in private mortgages, like whatever it is, and you’re like, I see that like,

you know that 9 % getting paid out monthly and my 4.5 % on my HELOC getting paid out monthly or costing me money monthly and I’m seeing the arbitrage like that allows me as the rider to move my elephant a little further down the path. Right. And like these are pieces that are so important so that when we’re out there and we’re like contemplating different moves that we make, we have to be careful not to just pick absolutes and go like

You know, most people, you know, buy term invest. The difference is always the right move. And it’s like, well, rationally, you know what? You’re probably going to do better if you took every extra dollar in your world and did that. I’m with you on that. The problem is I literally don’t see 1 % of the people we’re chatting with actually doing that process. So it’s great that you knew it, but if the path is blocked and you’re not able to walk down that path, now you’re like you’re nowhere.

Like you’re not making any progress at all and you’re going to be in the worst scenario. You know what the best scenario is, but now you’re in the worst scenario because there’s no action being taken.

Yeah, another example is like Dave Ramsey’s debt snowball effect is that, you know, the math says if you’ve got debt, you know, so math says you should pay down the highest interest rate debt first because you’re paying the most interest regardless of the balance. But he’s, know, if you ever listen to Dave Ramsey and his move is to say the math, and he agrees, the math is right there. But the problem with that is that

Yeah, regardless of the balance. it’s hard to look at that because maybe your largest debt, like the largest interest is the largest debt and it’s gonna take years to pay that down. Whereas over here you might have a small debt, like another debt that’s smaller than that and you could actually pay that off within two years or a year if you contribute your money there. He’s like put all your money on that first because that snowball effect of going seeing the wind.

Right, the habit of like, my gosh, I got a win out of that and it feels good. It hits the endorphins to be like, move on to the next one and then all of sudden put your money on the next lowest one and then that can build. The math says that’s wrong. But the habit is what you’re building towards and that’s the actual stick-to-it-iveness that you need. And that’s if you have say debt, like this is, he’s talking about people trying to get out from under debt. Now if you’re listening to this podcast, you’re probably in that not situation, but it’s about the habit.

The other idea is like economists, the math says that it’s completely wrong to think of sectioning off your finances in terms of buckets. So think of it like sometimes like I have this, like we’ve talked about this is that I try to account for every single dollar I have in my tracking. So I track like ⁓ that dollar went into that bucket or I put this, I put these savings bucket over here. I have a vacation bucket over here.

I’ve got a bucket that’s gonna pay for my emergency fund or my wealth reservoir bucket. And these buckets, in the math says, they’re all the same bucket, It’s all one pot of money and it doesn’t matter that it goes to these buckets. The math says you’re kind of crazy about that, but it’s easier and it’s habit forming to visualize it in terms of those buckets because the economist, the math people would say like,

If you think today the best use of that dollar is to go into your vacation fund or to pay for in a vacation, then go pay for the vacation. Don’t try to segment off your money into different buckets. Just pay for it the way that you want. Like if today you got to pay the credit card bill, you pay the credit card bill. Today you got to pay the vacation fund, you pay the vacation fund. But he’s like, don’t, they say don’t think of it like that, but it’s easier to think about that to live your life. And that’s the habit forming component. Cause it’s like, I can make a habit out of this to start putting

Right. money and different things and it makes you feel good, it makes you sleep at night. Like the math is different there than what it is. And I think that’s our big message here is that, is that when you think about the gap between the math or the, or the rider and the elephant is can you create, what is the, what is the habit form that you can put into place to hit the goals of your vision component? So if it’s like, where do I want to go? What habit can I commit to for this year or next year?

That’s the move, like that’s the better move to make than trying to like squeeze out every rational dollar. And don’t get me wrong, I think knowing how to squeeze out the rational dollar is important. And that’s probably why you’re listening. But it’s like, because that’s what we try to do. And then, but then knowing what the move is, once you know the math and once you know the strategies, that’s whatever you can commit to, that’s the move you want to make.

Yeah, and you did a great job. And I want to make sure that people are seeing the connection between the two sides of the brain, the quick thinking and the slow thinking, right? So the quick thinking is that when we create a habit, you’re helping feed that part of the brain that likes to take control. Like that quick thinking brain is doing most of the work throughout the day. Why? Because it’s the easiest, right? So it’s like, yeah, Steve Jobs wore the same, you know, the same golfer or whatever it was polo shirt every single day.

same black color, he never had to make any decision, it was a quick decision. So he had rationally thought about it, don’t care what the color is and I don’t care, you I just want the same one every day. I go to the closet, boom, I put it in because it’s easy, it takes less effort and energy and he can focus his energy on other things. So the same thing is happening here. So whether you’re sitting there looking at yourself and going like, you know, if you wanna pay down that mortgage, your primary mortgage as fast as possible, that’s your elephant.

taking control, right? it, it, and it again, understand rationally whether that’s the right move or not. But if you want to do it, go for it. Just be aware of what it may be quote unquote costing you, right? So if I’m taking a lot out of my corporation in order to do it, I’m paying a large tax bill in order to satisfy my elephant. What we want to do instead is go, okay, let’s make sure the rider has the information he needs. And then

You’ve got to use the rider to try to figure out how am I going to use this information in order to help me overcome that elephant without necessarily like going to extreme where I’m not going to be able to do it at all. Right. And I think this is one of the biggest pieces. Like if you can get that from this episode or this show, there’s never going to be a perfect right or wrong way to do it. Now, rationally, there always is there always is, but it’s like I’ve

I don’t think I’ve ever seen anyone who’s doing it quote unquote perfect. And I want to use the example of the all in equity ETF investor. I had one client who came and was like rationally, had very, we’ll call it control of their elephant. Their elephant was very small, which was great. And I was like, fantastic hats off to you. They take like all of their money and they put it into equity ETFs. And they’re like, I will not. And again, we’ll see whether this is true or not, but.

on a downturn, they’re not gonna touch it, it’s just gonna stay. And mathematically, he’ll be in a better spot than the vast majority of people that have any other dollar in any other place likely over the longterm. But here’s the nuance and the problem is that mathematically it makes even more sense for you to take the money out before the crash, right? So like, if we go rationally, we wanna talk rationally, the right move for that person is to pay attention to macroeconomics.

and to know that there’s a high risk of the market going down. There are ways to do this. It’s very incredibly difficult and I’m not gonna say that I know how, but if you did, you’re gonna be way ahead than keeping the money in and riding out the entire crash. So here’s the problem. If you do it wrong, you’ve got a big problem. I would much rather see that, listen, your money goes where it goes. Things are gonna happen the way they happen, but if you have other buckets, non-volatile buckets around,

that you can lean into to take advantage of those opportunities when they show up, you’re going to be, in my opinion, miles ahead and you may be able to actually pull that trigger. It is so much harder to lean into let’s say debt. If you see your entire investment portfolio go to 50 % of its value within a week or a month to be able to lean in and bring more funds from somewhere else through leverage in order to dump it on there.

So why I say this is that staying diversified, understanding your buckets and understanding your own elephant as we’ll call it, so that you can make a habit that makes sense for you, knowing that there could be a little bit of money left on the table here or there, but it’s actually way more money that you’re taking because you’re actually taking action instead of sitting back and waiting and waiting and never pulling the trigger.

That’s a great message. I think that’s, you mentioned it earlier, is that that’s what we want to do here on the show. So if this is the first time you’ve listened to our show and this is the first episode you’ve listened to, then know that that’s the lens that we try to come at from every single episode. Most of our episodes are a little bit more technical. Most of our episodes look at case study. Most of our episodes look at the math and the strategy behind what we’re trying to, what those secrets are out there.

In the tax world, the investing world, the business world, the finance world, and we try to bring those to you so you have that information to look at the rider, look at the elephant. But that’s what we’re hoping to do here in every single episode. And if you’ve listened to many episodes before, then I want you to kind of reflect. Like, do we do that? Like, have we done that in the past? And next time you listen to one, try to think about it from that lens.

What does the rider say here in this episode? And what is, what is the elephant saying for me? if you listen to other finance episode, you know, finance podcast, it’s likely you do then look at it from that lens too. Like, what can I commit to for habits? What’s my rider saying? What’s my, or how is this episode addressing the rider and how is it addressing the elephant and, is addressing the pathway as well, which is the habit.

Hey, listen, and listen, friends, if you need some help teaching your rider and you need a little bit of help making the path manageable for your elephant, you should reach out to us for a discovery call over at Canadian wealth secrets dot com forward slash discovery. Remember, right now you can head over to the website, Canadian wealth secrets dot com forward slash pathways so that you can actually do your wealth health assessment and you’ll get a report to see where things are going well.

and where you might want to improve your wealth journey along the way. Of course, for our incorporated business owners, we do have a masterclass for you and how to understand your retained earnings and some of this very commonly used corporate strategies that we implement with our different clients. You can head over to Canadian wealth secrets.com forward slash masterclass and you can dig into that 100 % free at a self paced level. And finally, just a reminder that

Everything on this show is education only and for entertainment purposes only. It is not to be construed as legal tax accounting investment financial or other advice. And as a reminder, Kyle is a life licensed and accident and in sickness insurance agent and the president of Canadian Wealth Secrets Incorporated.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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