The more I have written about personal finance, read about it, and discussed it with others, the more I have come to the conclusion that all personal finance advice can be distilled down to two categories:
1. tactical (strategic)
2. ideological (values)
I’ve noticed that a very large majority of personal finance advice asked and given focuses on the tactical. You’ll recognize some of the standards:
“How to save on…”
“Where to invest…”
“How to make money with…”
“The best account for…”
“Where to buy/sell item x, y, z…”
“3 ways to…”
A much, much smaller portion focuses on the ideological components. Things like:
“Do I value money or time more?”
“What’s more important: my family or ascending in my career?”
“How much money is enough?”
Maybe it’s just because I’m the founder of a personal finance blog, but 99% of the time, I get approached with tactical questions. I like tactical discussions. But I feel like most of the time, people put the cart before the horse – often to their own detriment.
Personal Finance is Rarely Black and White
The thing is, personal finance is mostly gray area. Even statements as seemingly universal as “debt is bad, savings is good” can be challenged.
For example… I’ve been asked dozens of times what the better investment vehicle is: a Roth or Traditional 401K. There should be a definitive answer, right? Not exactly. Questions like this are impossible to answer fairly without a healthy number of follow-up questions.
- “Do you plan on making more now or in retirement?”
- “Do you think the tax rate will be higher now or in 40 years?”
- “If you go with traditional, are you investing the tax savings to retire early?”
- “At what age do you want to retire?”
Some of these questions are tactical in nature as well, but their answers are all guided by ideology (or… they should be).
An Observation About Personal Finance Discussion
When I ask more questions, something interesting happens. People get irritated, impatient, or simply don’t have an answer. Their body language is telling me, “JUST ANSWER MY ONE SIMPLE QUESTION NOW!!!”. This observation has led me to believe that most people don’t consider, or at least undervalue the ideological nature of personal finance. Like most things in life, they want the 30-second sound bit, so they can quickly move on to the next distraction.
That’s rarely a good thing. Non-values driven personal finance decisions seem a bit hollow or short-sighted at times. Goals are much more easily achieved and sustained when they are firmly rooted with values.
There is nothing wrong with getting tactical – most of the topics you’ll find here are tactical in nature. It’s a necessary component.
Just don’t overlook the ideological.
Besides, ideology often makes for much more interesting discussion. Especially over a beer or two.
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