Personal finance is personal and…
I see this advice in the personal finance world a lot: “personal finance is personal”. It’s often used to say “make bad decisions and it’s okay!”. To me, it’s akin to the advice you often see of “invest in yourself” used as a marketing tactic. Such as “Invest in yourself! Buy this product and then you will feel that you love yourself!” Those saying that “personal finance is personal” are often selling something. So, when you see that advice, take it with a grain of salt and instead consider this:
The way we spend our resources – time, money, energy – is based on our own values and goals. We must make decisions about how we use these resources in the ways that best serve us. To that extent, personal finance is personal. My values and goals are likely different than your values and goals.
Having different values and goals, doesn’t mean that there are sound financial principles that we should ignore. At the most basic level, we do have similar values. We all value feeling safe. The core feelings of safety come from having enough food, clean water, and secure shelter. Sometimes the advice “personal finance is personal” causes us to neglect creating safety around this core value because as a societal marketing tool, it encourages us to engage in behaviors that put this at risk. What are the sound financial principles that can let us have those feelings of safety? Keep these principles in mind:
- Know how much you earn each month and how much you spend.
- Spend less than you earn. Ideally, there is enough money left over every month that you could cover a minor emergency ($1000 or less).
- Do not utilize debt, especially for something that you might justify by saying “personal finance is personal” or “invest in yourself.” Having debt jeopardizes that core value of safety.
- Have a plan for how you use your resources and how you will maximize them.
- Plan ahead for any expenses you can anticipate and create a savings account for those expenses.
- Create a savings account that is used for those things you truly cannot expect.
Beyond having a solid foundation for how you use your money, the actual things you use your resources for are personal. If travel is something you enjoy, travel! If shopping is something you enjoy, shop! Use your resources in a way that satisfies you. Be sure you take care of your core needs first, that you follow good financial practices, and that you spend your resources on things that work towards your unique and individual values and goals.