Optimization Is Personal: The Math vs the Mind in Financial Planning

Financial planning is both science and art, a steady balance between math and psychology.

You’ll often hear financial advisors talk about what’s “optimal.” But the real question should be: is it optimal for you?

In personal finance, there’s more than one kind of optimal. There’s the math. What the spreadsheets say will maximize your expected net worth. And there’s the psychology. What keeps you grounded, confident, and actually following through. What actually is tailored to your goals.

The art of planning is knowing when those two things differ, and helping people navigate the trade-offs without losing sight of the goal.

The Lump Sum Paradox

Let’s start with a classic: lump sum investing vs dollar cost averaging.

Mathematically, the decision is clear. If you believe markets generally go up — that there’s a positive expected return to equities — then the odds are in your favor the sooner you invest. Professor Ken French puts it plainly: if stocks have a positive expected return, then you should, on average, expect to see an equity premium daily. That doesn’t mean the market rises every day, but probabilistically, waiting costs you.

So, the math says: invest the lump sum all at once.

But the mind? That’s different.

If the money comes from a business sale, inheritance, or other life-changing event, the emotional weight is real. It’s not "just" money. It’s tied to years of work, identity, or even grief. Moving it all into the market overnight, even if optimal on paper, might feel reckless. Dollar cost averaging can ease that tension. It removes the temptation to time the market and gives people space to adapt.

That discomfort isn’t irrational, it’s human. A good plan respects that.

You may dollar cost average a windfall not because you think it will outperform (statistically, it likely won’t), but because the peace of mind helps you stay invested. That’s a win.

Roth Conversions and the Tax Trade-off

Another example: Roth conversions.

Software can show you a perfect glidepath — convert $X per year through age 72, reduce future RMDs, minimize lifetime tax drag, increase terminal wealth by $Y.

Sounds great, right?

But when the actual tax bill hits — say, an extra $35,000 over several years — it suddenly doesn’t feel so optimal. Especially if you’ve spent your life avoiding taxes and now find yourself writing checks voluntarily. The benefit might not materialize until your mid-80s.

What’s optimal for your spreadsheet may not be optimal for your sleep. And that’s okay.

Sometimes, the “best” Roth strategy isn’t the one with the highest terminal net worth. It’s the one that balances tax diversification, reduces RMDs, and feels reasonable to implement.

Buy the Beach House or Family Travel?

Not every trade-off is about taxes or timing. Some are about how you want to live your life.

Consider this debate: purchase a vacation home with plans to rent it out, or spend that same capital on meaningful annual family travel.

On paper, the property can look like the more financially sound option. It may appreciate over time, generate rental income, and serve as a hybrid personal-use asset. But depending on the financing, especially for higher-priced properties, rental income rarely offsets the full cost of ownership. Once you account for the mortgage, property taxes, insurance, maintenance, and management, it still may maximize net worth, but with trade-offs.

In contrast, allocating a large budget to annual family travel may look like pure consumption. But in some scenarios, that choice can actually increase the probability of meeting all other long-term goals. It avoids fixed costs, preserves liquidity, and keeps optionality in the plan.

That doesn’t mean one path is inherently better or worse.  Both can be “right,” but that is a household-by-household choice.

Planning isn’t about declaring a winner. It’s about putting both options on the table and letting people make their personal decisions.

Planning Is Trade-offs, Not Absolutes

Financial planning is full of trade-offs:

• Maximizing expected return vs minimizing regret

• Paying a tax now to avoid one later

• Spending less today to ensure spending in the future

As Dr. Bob Merton put it: “Everything in life, individually or socially, is a trade-off. We determine the risk levels we're willing to tolerate.”

We can run the numbers all day. But optimal is in the eye of the beholder. The best plan isn’t always the one with the highest projected value. It’s the one you’ll actually follow and is tailored to you.

Sometimes that means leaning into the math. Other times, it means pausing to evaluate how the psychology of a decision might shape your behavior, and building the plan around that.

As long as the goals are met and the plan works for the individual, that’s success.

About the Author

Carson McLean, CFP®, is the founder of Altruist Wealth Management, a flat-fee, fiduciary firm helping clients align their financial decisions with what truly matters. Learn more at altruistwm.com Disclosure

This article is for informational purposes only and should not be considered personalized financial advice. All investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Before making any financial decisions, consider your personal circumstances and consult with a qualified professional.