I’ve been in the personal finance world for a little more than five years now. In that time, I’ve seen a lot of different opinions about how people should use their money. I’ve come across myriad ideologies, perspectives and products. The most important thing I’ve learned, though, is that personal finance is exactly what it suggests: personal.
Personal finance rules of thumb and absolutes
Personal finance bloggers, experts and gurus all have their opinions about how we should do things. There are certain general guidelines I believe everyone should follow. But I also believe that people should take financial rules of thumb in money with a grain of salt.
Of course, these things aren’t inherently bad. Some people aren’t passionate about personal finance and want to spend as little time as possible managing their money so they can do things that are more important to them. They’d rather stick with simple, structured steps and leave it at that. That’s why Dave Ramsey is so popular. Hundreds of thousands of people across the country sleep better at night having created a disciplined financial plan thanks to his motivation and methods.
Following the rules that experts like Ramsey suggest is going to better your situation, no argument. But at the end of the day, they should be viewed as a stepping stone, not an end goal. And when we act like they were brought them down from Mount Sinai etched into stone tablets, I think we undershoot our potential. Just a few examples:
- Getting ten to twelve times your income in life insurance is a good start, but it may actually be less or more than your family needs. I like the needs-based
approach instead. Basically, you list out everything you and your spouse want taken care of and then give dollar values to those things. This approach helps ensure you have enough, and you’re simultaneously creating a plan for what to do with the money in advance.
- Saving 15% of your gross income toward retirement is a worthy goal we should all aim for. But if you want to go on multiple senior missions or spend time traveling or doing fun things with grandkids, you may need to save more.
- Some people don’t do well with credit cards, and the credit card industry certainly isn’t virtuous. But that doesn’t mean there’s no such thing as responsible credit card use.
Some of the people reading this may disagree with me on any one of these, but that’s the joy of the whole idea that personal finance is personal. You can disagree, and that’s OK. You’re wrong of course…kidding.
In the end, my point is this: there’s no one-size-fits-all approach to managing money. There are certain guidelines we can follow to work toward fiscal self-reliance. Some include having a budget, getting the proper insurance coverage, avoiding unnecessary debt and saving for future financial goals. But exactly how you do all those things should be up to you, not the people selling you books and courses.
Judging others’ money decisions
That brings me to my next point. Because personal finance is personal, it’s important to recognize that it’s not my or anyone’s place to judge how others use their money.
I used to struggle with this a lot. To be honest, I still do at times. It’s easy to be judgmental when you see someone overspend on a car or a house when you know their income is barely enough to cover the monthly debt payments. On the other side of the coin, maybe your friend is the stingiest person in existence, foregoing even nominal expenses you wouldn’t blink at.
The thing is, you’re entitled to use your hard-earned money the way you choose to, and so are others. Of course, that doesn’t mean you shouldn’t exercise judgment in, say, avoiding going to the mall with an avid shopper that’s prone to convince you to overspend as well. And, as a friend or family member, there are ways to lovingly reach out to someone and help them recognize some problems their financial decisions may be causing. But if they’re not receptive, leave it alone. If you or people around you want to follow one extreme or another when it comes to money, we all get that choice because we have agency.
I think we in the LDS church and culture especially feel the pull to be judgmental if others aren’t living up to what we think they should be. We have a lot of rules and commandments to follow, so it’s easy to use those as a measuring stick for ourselves and others to see how well we’re doing. The key is, to quote President Dieter F. Uchtdorf, to “stop it.”
This blog’s purpose
My mission with this blog is to educate people so that they can make better financial decisions. I definitely have some strong opinions about most things personal finance. But I understand that a) not everyone thinks like me and b) not everyone does money like me. So take or leave whatever I write here.
At the least, I hope you read my blog with an open mind and seriously consider how improving your own money management skillz can better your life.