One of my secret vices is that I play way too much Internet Solitaire. You know how it is, you're waiting for something to download, and the next thing you know, you're playing game after game.

I've gotten pretty good at it. Possibly because I allow myself way too many Mulligan's until I win, and then just keep playing and playing.

I've come up with a set of rules that, more often than not, work. I know this. I've put it to the test over and over again. For instance, it's almost always better to pull a card from the row of cards than from the general pile. Stuff like that.

And yet, I often stray from the righteous path because of a feeling, because....I'm not sure why.

Anyway, this reminds me of how I handle my business, unfortunately. I know, simply know how I should do something, but I let the whim of the moment knock me off course.

When I feel that there might be a problem, suddenly I become way more disciplined and focused. I make all the right moves. I make all the right decisions. Which is probably why I survived.

But when things are going well, I slack off and stop following the rules. Which is why I've probably never gotten very far ahead. I've mentioned before, emotion and personal quirks play a huge role in a small business.

If I would just do exactly what I'm doing now when things are flush, I'd probably start accumulating profits. Instead, I break the rules.

Mostly, I start buying too much.

Why?

I think the article at the bottom explains this better than anything else. Especially this excerpt:

We often think we deserve more. Leverage gets us more. With historically low interest rates, leverage is the easiest and quickest tool to get more stuff.

The problem is that too much leverage has a downside that is easy to overlook. When everyone else is using leverage so successfully to get more, do we wonder what will happen if interest rates go up? Not so much.

This is where the simple answer breaks down. So we turn to the more complicated answer: Blame our brains.

"LEVERAGE IS THE EASIEST AND QUICKEST TOOL TO GET MORE STUFF." Pretty much says it all.

In my personal life, I seem to be able to avoid this. I rarely -- never?-- borrow money for short time satisfaction. But for my business? Leverage current sales to buy more product with the thought that I'll sell that product in the future? Irresistible. I can have my cake and eat it too. Buy the product, sell the product, pay for it later.

But, logically, if I do that every time I get ahead, and then cut back whenever I fall behind, I will NEVER get financially ahead. Oh, I'll have more inventory.

I notice this because, here it is in a slowdown, and because I'm more disciplined, I actually HAVE MORE CASH RESERVES IN THE BANK! Just weird.

One of these days, I'll get it right.



from the Washington Post (excerpt):

Why We Borrow Until It Hurts
Leveraging Lets Us Gain in the Short Term -- and That's When We Stop Thinking

The question worth asking now is: Why do we love leverage so much that it hurts?

The simple answer, according to personal finance experts, is that we want more -- more money, more house, more car, just more, more, more. We often think we deserve more. Leverage gets us more. With historically low interest rates, leverage is the easiest and quickest tool to get more stuff.

The problem is that too much leverage has a downside that is easy to overlook. When everyone else is using leverage so successfully to get more, do we wonder what will happen if interest rates go up? Not so much.

This is where the simple answer breaks down. So we turn to the more complicated answer: Blame our brains.

That's what Jason Zweig thinks. He's an investing guru and journalist, and as many people wonder how we all could have been so dim-witted these past few years, he provides one possible answer in a book called "Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich."

Zweig has studied several experiments examining people's brains when they make personal finance decisions. The results, he said, are surprising.

"You would expect logically that the borrowing and spending of money would be emotionally painful to people because having money is intrinsically a good thing, and having less money would have to be worse," he said. "Going from more money to less would be painful."

If only that were true.

"When people borrow and spend money, it's really the reward centers of the brain that become activated," Zweig said. "When you borrow money, you are thinking not about the long-term consequences but the short-term result: You have more cash in your pocket. The pain you are going to experience down the road of having to pay -- that's in the future, it's remote, it's abstract."

Now think about the housing boom, particularly about people borrowing way more than they could afford.

"If I borrow a million dollars to buy a house, the fact that I can't afford to borrow it is dwarfed by the fact that I'm getting a million dollars," Zweig said. "That's just really exciting. And the entire subprime industry acted as the credit card industry has acted: focusing people's attention on what money can do for you right now and taking your mind off having to pay a lot of money down the road."

It's all so easy and cheap. This may sound perplexing, but money is inexpensive. Inflation levels have declined sharply since the 1970s and '80s, pushing interest rates much lower. For example, Americans spent 10.8 percent of their after-tax money on servicing debt back in 1982, when the federal funds rate was 14.5 percent. But as interest rates declined, making money cheaper, our debt -- and the amount we pay to stay current -- shot up, peaking in 2006, when interest rates were at 5.3 percent.

"Like any other product, if its price falls, households will consume more of it," said Mark Zandi, chief economist of Moody's Economy.com. "Rates fall, so households take on more debt."