There is no shortage of personal finance advice available. I've been known to produce a bit myself here and there.
There are recurring themes like “buy vs. rent,” “spend less than you earn,” “the magic of compounding,” and so forth which are the cornerstones of personal finance, saving, and retirement planning. They're cornerstones because there's a lot of wisdom behind them.
Checklists and more checklists
I ran across Richmond Savers today, which is run by a couple of CPAs in my part of the country. The community is local to Virginia's capital, but they have a list of financial guidelines that they try to live by every day.
If you've read lists like these before, the themes are very familiar. They're the important financial issues that most of us deal with at one point or another: credit and debt, big expenses like automobiles and houses, health and wellness, and investing.
The points they list pass the reasonableness test. None of them are that off-the-wall. Lists like these are rarely off-the-wall.
What “reasonable” and “not off-the-wall” are not
Some of the items get pretty specific. Here is a flavor (check out the website for the rest):
- “Do not buy a house if you’re planning on moving within 5 or even 10 years….”
- “Make regular contributions (we suggest twice a month to coincide with your paycheck) to your investing accounts….”
- “Always automate as much of your financial life as possible, including your contributions to savings and all your bills….”
Are these and the other few dozen points reasonable? Of course they are. To the first point: There are a number of reasons why buying and quickly selling a house costs a lot of money. To the second: By making regular contributions you can reduce the effects of market timing. To the third: You're less apt to miss a payment if it's done automatically.
Reasonable advice, though, is not universal advice. We moved from our first house in less than ten years, but we kept it, and rented it out. It's less than four years from being completely paid off now. Making regular contributions to an investment account, or automating your finances, puts things on auto-pilot, but auto-pilot may not work for you, because it allows you to become complacent and forget about those monthly withdrawals.
It's still up to you to determine what to do!
Every website that gives this kind of advice should have a disclaimer. Richmond Savers does (at the bottom of the pages) and this site does on the sidebar.
Website owners put disclaimers to protect them from liability in the case that someone follows their advice, and bad things happen as a result. Richmond Savers can say “[b]uy a reliable car, such as a Honda or Toyota, and drive it for 200,000 miles[,]” but if you stretch to get that car (which run a bit more expensive than some others) or if you pour a lot of money to keep the car running 200,000 miles, and fall into financial hardship as a result, then perhaps it wasn't the best idea to follow that advice.
In fact, even if you pay someone for this kind of advice, it's still up to you whether you follow it or not! Setting aside that there may be criminal intent, advice is still just that: advice. Not a command, not a sure thing: just advice.
There's always context. No one knows that context better than you do. Which is good, because you are the one responsible for your financial decisions. As Tim McCarthy went into great detail in his book The Safe Investor, not only do you need to look at your own goals, but you also need to verify what your paid advisers are telling you. Extending this to the free advice you get from this blog and everywhere else, it's up to you to verify the sources and cast the advice in the context of your situation.
Hey the one person I want to be in charge of my money is me and I am willing to take on that responsibility. A lot of times we want the results of hard work without the accountability or the hard work that goes with it.
Well said!
Good stuff John, I was surprised to see my site used an example here, but I think you bring up a great point: “Reasonable advice, though, is not universal advice.”
There is no simple advice that can be used for all people in 100% of the cases. In life there are exceptions to every rule, and we just deal with that.
My “Rules” apply to our own lives and I think they are useful for the vast majority of people.
That said, it is always up to the individual to apply some logic and reason and see if any advice fits their circumstances and could be useful. Or even if they agree with it in the first place!
We could all use a little additional personal responsibility, but one of the biggest things is that people need to take actions to better themselves. It’s all well and good to read your site or mine or any of the thousands of other PF blogs, but it all comes down to what each individual will actually DO with that knowledge and advice.
Thanks so much for stopping by, Brad!
You’re spot on.
And although the point of the post was basically “think for yourself,” people could do far, FAR worse than following your list to the letter. It’s a well-thought-out and well-organized list.
Interesting, I just attended a training session today for CPA’s about volunteering in the community presenting PF topics. They provide the content and then you present, but you can add contextual examples to your delivery. I agree, any advice given is not mandatory, it’s just a suggestion of what works for you, or most people. The recipient needs to judge if this is relevant to their personal situation or not.
Thanks so much for stopping by!
That’s an interesting concept (the CPA presentation thing). Something I’d like to learn more about!