Personal Finance Is Rarely Black and White

Let’s look at two people, Bob and Charlotte. Each of them has only one outstanding debt, a $100,000 mortgage with a 3.75% interest rate that has 28 years to go.

Bob is single and doesn’t enjoy dating, so he plans on remaining single for the rest of his life. He wants to retire early so he can get involved with managing the local food pantry, where he works part time right now. He is fully funding a Roth IRA and contributing 20% a year to his 401(k), but he still has extra money each month because he lives simply. He doesn’t really enjoy taking risks and he strongly desires having debt freedom as a personal goal as soon as possible.

Charlotte is married with four children. She and her husband love to go on family trips and plan to keep on traveling as long as they are both healthy. She contributes some to retirement – enough to get her employer’s match – but she intends to stick with her wonderful career until she can’t do the work any more. Charlotte was thrilled to get a mortgage with such a low rate because it meant she has a bit of extra money free to help her children enjoy extracurricular activities and help her parents out as they struggle with retirement. Charlotte’s biggest focus in life is bringing up her children well.

Bob and Charlotte are facing the same debt situation, but are living very different lives. If I were giving these two people advice, I’d tell Bob to pay down his mortgage quickly and tell Charlotte to make minimum payments for now.

Personal finance is rarely black and white. Every person out there has different income levels, different debt levels, different retirement accounts at work, different stress levels, different risk tolerances, different personal and professional goals, different levels of family support, and so on.

All of those issues matter. That’s why it’s personal finance.

Right now, in my life, I am closer to Charlotte’s situation. We have similar goals in that we want to raise our children well, and we both have multiple children and a spouse. However, I don’t really enjoy travel all that much and feel more like Bob when it comes to retirement in that I’d rather be careful with my money now and retire a bit earlier.

My closest friends are either single or married without kids. They have different income levels, different goals, and different risk tolerances. Some of them are like Bob. Others are like Charlotte. Most of them really aren’t like either one of them. Every time I talk with my friends about money, I’m fascinated to find how everyone is doing something different, but everyone has sensible reasons for doing what they’re doing.

To me, that’s the key.

Why are you doing what you’re doing when it comes to your money? Does the answer to that question make sense to you? Can you explain it clearly?

That’s the litmus test of money success: you’re making financial choices for a reason.

Does that reason have to apply to the lives of others? Certainly not. Everyone has a different life, and that’s why it’s hard to say that there are established rules of personal finance.

However, you can (and should) learn things from the choices others make. The decisions and tactics others use might not match your life at all, but it’s likely that you will find something useful in what they’re doing.

You might not agree with why they’re doing it. You might not agree with most of their tactics. But whenever you find someone that has achieved some of the things you want to achieve, they probably have something to teach you.

Whenever you read about or hear about a tactic that doesn’t seem to work for you, just move on without skipping a beat. That tactic isn’t for you, but it might certainly work for someone else.

For example, Bob will probably find a tactic related to inexpensive diapering to be completely useless, while Charlotte probably wouldn’t find a lot of value in minimizing all of one’s possessions. Bob and Charlotte are in different places in their life with different values, so they’ll find different tactics useful. However, there is a lot of overlap in what they will find useful, such as tactics for making an inexpensive and tasty dinner or holding a frugal dinner party.

Invest your time and energy on tactics that do work for you. If you see a tactic that you don’t find useful because it doesn’t match who you are or where your life is right now, don’t waste even a second of your precious energy or time on it. Share it with someone that it would work for (if you know anyone), then move on.

Life’s too short to spend it trying to jam your life into advice that doesn’t fit.

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