Personal Finance Beliefs I Ignore
I’m confounded at the extent of financial illiteracy seemingly everywhere. Many people haven’t been taught key personal finance basics, and others have receive terrible advice from others. Inevitably, personal finance involves much people fear discussing: specific amounts, one’s unhealthy relationships with money and debt, poor decision making, etc. I feel that many crave personal finance guidance, and often, they’re satisfied with anything they can get – even if it’s not right for their situation. Today, I’m sharing a few common personal finance beliefs which I ignore and why. While they may be valid for some of you, others may find they can resist certain ones, as well.
Note: This article is for entertainment purposes only. Consult a professional regarding your situation.
I Need to Follow a Budget
Of course, those just building their personal finance foundation should set up and follow a budget. Over time, though, a budget may be unnecessary based on one’s natural adherence to healthy financial decision making. We haven’t followed a budget in years. Instead, we pay attention to cash flow. Why? In our situation, our spending can substantially vary month to month, we focus on consistently sensible spending decisions, we avoid a sense of deprivation, and we resist complacency. We naturally keep our spending in check by the personal finance muscle memory we’ve built up over the years.
Used Cars Are Best
I drove a few used cars over my high school, college, and early adult years. They were a constant pain. Looking back, I spent way too much money and time taking care of those cars. I quickly discovered I didn’t want to be a used car guy for the rest of my life.
Used car sticker prices can be attractive, but they don’t take into account the earlier or more substantial maintenance costs they might require compared to new cars. Certain car makes and models aren’t that great a deal used, anyway. It’s a roll of the dice compared to the right new car, in my opinion. Perhaps I’m scarred by my own used car experiences, but I enjoy the relative peace of mind and simplicity a new car offers me. Since my mid 20’s, I’ve focused on new cars and driving them as long as possible.
I Need 70-80% of My Income in Retirement
I’ve heard and read about this doozy for years. The saying goes that one will need 70 to 80% of his or her income to live comfortably in retirement. Nonsense! These figures imply that individuals allow lifestyle creep to permanently set in throughout their working years. Perhaps that happens with some people, but it didn’t happen with me or others who are financially independent. Just because someone’s salary increases over a career doesn’t mean spending must at the same rate. With those increases, many decide to save and invest more for their future rather than frivolously spend. And even if one wants to use a percentage measurement, each individual should tailor it to his or her specific situation. Arbitrary percentages can’t be evenly applied to everyone.
I Can’t Do My Own Taxes
Ads for tax services incessantly bombarded us this time of year. Many hire such services to do something they don’t want to do themselves. I get it. I don’t want to work on my HVAC, so I hire a guy. But I believe most anyone can do their own taxes if they are motivated enough to learn. Of course, this may take more time for many, but it can pay off. I’ve enjoyed doing my own taxes and what I’ve learned along the way. Nerd alert, I know. Going solo here isn’t for everybody, but it’s not as painful as you may think.
Don’t Touch Retirement Funds Early
When I was much younger, I was told that touching retirement funds early is a terrible move which should be avoided. Accessing them early would incur substantial tax penalties. Over the years, I learned more nuances of how to access them while minimizing or avoiding tax burdens. I routinely dive in as a financially independent individual. Beyond financial independence, one may need to access retirement funds earlier than expected for emergency purposes. Many frown upon such a move, but doing so may beat other higher cost alternatives to meet a specific need.
I Spend More Due to Inflation
Inflation happens. But I refuse to accept that everything gets more expensive over time. This stuff is now cheaper for my family and me: certain electronics, wireless plans, streaming services (replacing cable), travel (thanks to our points hobby), and certain utilities. My family and I also obtained cheaper housing, groceries, recreation, and dining by relocating to a lower cost of living area.
I Need a Financial Planner
Unlike tax advice, financial planning commercials beat us over the head year-round. But similar to taxes, some may choose to hire a planner because they don’t want to do it themselves. Fair enough.
For what it’s worth, I reached financial independence at 38 years old without ever paying for financial advice. I don’t say this to spike the football. Rather, I want to underscore that one can financially prosper without professional help.
It does take time and effort to soundly invest, but not as much as you may think. With a bit of interest, this can be a fulfilling solo endeavor. Here’s another way to look at it. Will it take you longer to identify a financial planner you trust or to learn how to manage your own savings and investments?
I Should Avoid Credit Card Annual Fees
Points and travel hobbyists generally reject this thought, but I feel it’s worth bringing up. In my view, people focus too much on waving annual fees and cancelling the card if they do not. Sure, I go after retention offers like any other savvy hobbyist. But I’m also fine paying an annual fee on a card when I get a higher value out of the benefits that I naturally use. I feel the same about cards with annual fee increases. Logic takes precedence over emotions.
These are just a few of the common personal finance beliefs I resist. Everyone’s situation is extremely personal and different, so you may disagree with some or all of my views. From my perspective, it’s key that we thoughtfully learn, adopt, and own each of our financial principles and the subsequent decisions we make based on them. More passive individuals are targets for exploitation. Question personal finance norms and identify your own unique path. What personal finance beliefs do you question?