There is a human element to every financial equation. In my years as a financial advisor, I’ve realized that, too often, financial advisors impose their own values on clients without taking the clients’ preferences, behaviors and emotions into account and how that impacts their personal finance decisions. We give advice that we are sure is correct because it makes sense on paper, but there are times when the clear-cut mathematical answer may be the wrong advice. The truth is, the right solution to any personal finance problem is specific to each person. While the math might be straightforward, how someone feels about and reacts to a given set of circumstances is arguably more important. Here are a few examples of when the human element trumps the math:

When To Pay Down A Mortgage

Many individuals are debt-averse. Recently, a client had a choice between purchasing a home with the help of a mortgage and buying the property outright, as she had the financial means to do so. After we reviewed all available options, she chose to purchase the house with cash. It felt right not to owe anything. The math might have told her to keep the loan, as mortgage rates were incredibly attractive at the time. (Check out this chart from Freddie Mac that shows the average 30-year mortgage rate over the past few decades.) After we reviewed her options, the client ultimately decided she was more comfortable living debt-free, even if she could have earned a return higher than the after-tax cost of the mortgage by investing the money elsewhere. The decision was simple on paper: Obtain the loan and invest. But that ignores the psychological impact debt can have. Some people view debt as a tool allowing for flexibility and the opportunity for financial growth; others view it as a burden or a risky endeavor. If being debt-free helps you sleep at night, then by all means pass on the mortgage and don’t look back.

How Much Portfolio Risk To Take

There are a variety of tools and rules of thumb to determine the optimal asset allocation for an investment portfolio. These range from simplistic approaches like the “100 Minus Your Age” rule to more robust methods like a Monte Carlo simulation to determine the probably of success in achieving a goal. While these calculations can guide you toward how much you need to earn to meet your needs, if too much risk forces you to hit the panic button and abandon the plan, then it’s not right for you. It may seem overly cautious for a 30-year-old to avoid stocks altogether in favor of high-quality bonds and cash, but it could be the right approach if the fear of loss is great enough that the client would want to sell at the first sign of a market decline. Conversely, consider an individual who has more than enough assets to support the lifestyle she desires. The numbers would say there is no need to take a risk with her investments, but what if she wants to invest for the next generation or grow her assets as much as possible for charity? These qualitative items can steer the asset allocation in a different direction.

How Much Tax To Withhold

In an ideal world, you would pay the exact amount of tax you owe so that when it came time to file your tax returns, you’d have a zero balance due. You would lose the pleasure that comes with getting a refund, but you would avoid giving the government an interest-free loan. Putting aside the excitement of getting a refund, there’s another reason why it could make sense to overpay throughout the year. For some, it can become a disciplined way of forced savings. If you use the eventual tax refund for a good financial purpose, like adding to your investment portfolio or paying down debt, then it could be a good thing.

When To Use Credit Cards

Using credit cards wisely can create a lot of value. First, smart use of credit can help boost your credit score for when you need it. Second, you can earn rewards for purchases you were going to make anyway, whether that be through cash back, airline miles, tangible goods or something else. It seems like a no-brainer. At the same time, credit cards can get you into trouble. Easy access to funds may encourage you to make purchases today that you wouldn’t make with cash, and purchases can cost an exorbitant amount more after accounting for interest. If you are someone who can and will regularly pay off credit card balances, then take the free rewards and build a strong credit foundation. If you find yourself in the other camp, then pass on the free stuff. You may be better suited to avoid credit cards, as it could save you more in the long run. While these are some of the most common examples, there are many more. There is often much more to making a decision regarding your personal finance than simply crunching the numbers; it’s important to factor in your behavior, preferences and mindset too. Keep in mind the right answer for someone else may not be the right answer for you, and don’t let your advisor forget the human element. [sc name=”HubSpot Quarterly Questions” ]