Squanderlust is a podcast about the emotional side of money. It is hosted by Martha Lawton and Alex Lemon and recorded with technical sponsorship at Wardour Studios, London.

Episode 4: All or Nothing

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Show notes

‘All-or-nothing’ thinking, aka ‘black and white’ thinking, means seeing everything as an either-or choice with no option for the middle ground. People who think this way tend to jump to extreme points of view and struggle to imagine a more balanced perspective.


Imagine a person whose job was made redundant and they had to take a new one with a lower salary. This is a situation where it’s difficult to avoid getting into debt, but not taking action soon enough will make those debts worse. If their thinking is very all-or-nothing they will either:

  1. see themselves as wholly at fault for their financial troubles and may be paralysed with guilt and shame or believe they are too stupid or ‘bad with money’ to be able to fix things, or

  2. see themselves as a helpless victim of circumstance and shrug their shoulders because they think the situation is out of their control.

They may even swing between these two points of view depending on their mood or who they’re talking to. It doesn’t occur to them that maybe they got into trouble because of something beyond their influence and then they also made some silly choices afterwards.

The Psychology

The psychologists’ term for this type of thinking is dichotomous thinking and teaching people to spot and avoid it is a key part of cognitive behavioural therapy.

Dichotomous thinking is appealing because it provides simple, easy answers. It gives a sense of  certainty and clarity when reality is filled with risk, uncertainty and compromise. It can also create an exciting sense of drama because it feels like your life is always either wonderful or horrible.

The big downside of dichotomous thinking is that it makes people perfectionist and judgmental because there’s a tendency to see everything as either brilliant and perfect or terrible and worthless. That means a person who thinks this way will often be very over-optimistic or over-pessimistic, neither of these leads to good financial decisions.

Since it’s normal to make mistakes with money, but it’s also true that most money problems have a solution, dichotomous thinking can really get in the way.

Our tips:

  • Start by acknowledging that it’s normal not to get things right first time. See budgeting as a process of testing/learning/refining.

  • Try out a few different methods. We have an episode on five ways to budget later this series.

  • Remember that damage limitation is valuable. Overspending by £10 is less bad than overspending by £100. It’s worth trying to catch yourself mid-splurge.

  • Controversial but true: even if you’re consistently overspending and getting in debt - overspending by less than before is still improvement.

  • If you find yourself beating yourself up for imperfections, ask yourself whether anything has gone right?

  • If you find yourself thinking everything’s going to be perfect and rosey from now on, ask yourself what could go wrong? You can’t avoid what you refuse to see.

  • Consider a less strict budget that’s more realistic longer term and leaves some space for fun. Ask yourself what moderation would look like.

Episode 5: Mental Accounting 1: Money In

Episode 3: Willpower Outage