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3 Personal Finance Hills I’m Willing to Die On

Personal finance can feel like an insider’s club. There’s also a lot of “rules,” often centred around frugality and fitting into a clearcut style of budgeting — even if it doesn’t necessarily fit your circumstances. When I started writing about money a few years ago, I thought I’d automatically have to give up Starbucks and takeout and become ultra-thrifty because that’s what People Who Are Good With Money do.

As I continue to hone how I manage my spending, saving and investing, I’ve noticed some of the most-repeated financial tips out there are actually pretty stale or misleading. I think some of these personal finance rules are meant to be broken, and there are a few hills I’m willing to die on:

Hill #1: Life’s too short to pack a sad desk lunch every day

People on the internet love telling other people on the internet to cut back on takeout, delivery and restaurants if they want to save up to buy a house. I find this hilarious: tiny condos in Toronto (where I live) can cost $500,000, while semi-detached and detached houses average around 800,000 to $1 million and require a down payment of at least 5-20% with mortgage default insurance, or 20%+ without. Thanks for the advice, Dave from Twitter, but it’s a drop in the bucket.

I honestly can’t remember the last time I brought a homemade lunch to work, but I’m also not blowing $15-$20 on lunch every single day — I have a rotation of cheap choices around my office, and use pick-up apps like Ritual for deals and specials. This is a balance I’ve struck for myself, and it works.

What to do instead: I’m a big fan of the budgeting approach outlined by certified financial planner Shannon Lee Simmons in her book Worry-Free Money. According to Simmons, every single dollar can be slotted into four categories: fixed expenses, meaningful (aka long-term) savings, short-term savings and spending money. After the first three categories are satisfied each payday, what’s left over is yours to spend however you want: lunch, makeup from Sephora, coats for your dog, etc. — I call it my “fun money.” I’ve been managing my budget this way for about a year and find it really effective because I make meaningful contributions to my savings, never feel deprived, and yet still have to exercise some personal responsibility in how I allocate my fun money.

PS: if you have any tips for making a chic desk lunch, please comment — I can’t afford a house regardless.

Hill #2: A daily $5 latte isn’t hurting anyone’s retirement fund

That’s right, $5 — I pay an extra $1 for almond milk (don’t @ me). I’m not even going to address the “latte factor” because it’s been widely debunked, but I find advice like that condescending. I’m pretty sure it’s growing wealth inequality, wage stagnation, too many university graduates carrying loads of student debt, the high cost of living in cities (where a lot of the jobs are), and capitalist shenanigans like a 14-year-long price-fixing scheme on a basic grocery staple that hurt people’s ability to save for retirement, not small discretionary purchases.

What to do instead: Again, if you’re living within your monthly “fun money” budget, it’s your money to spend. The latte factor is a gimmicky metaphor for trivial spending, but it does underline the important lesson that small contributions do add up — especially over an extended period of time. Instead of wasting time nickel-and-diming your budget, channel this idea toward building savings and growing your long-term wealth through investing. Last December, I made it my new year’s resolution to open a robo-advisor account and put my savings to work. For 2019, my resolution is to get more involved in my investments and learn more of the lingo. I’m making steady progress — and still buying a coffee every day.

Hill #3: The FIRE movement isn’t aspirational

Financial Independence Retire Early (FIRE) is a movement of turbo-savers who aim to retire in their 30s or 40s, or just want to have the flexibility to not worry about money — the general definition of “financial independence” is when your net worth is 25x your annual expenses. The basic strategy involves saving money through reducing expenses (extreme frugality usually comes into play) and funnelling savings into low-fee investments. It’s one of those weird lifestyle things some people really embrace, like CrossFit, except it requires a higher than average income paired with fetish-level frugality. Personal finance blogging has always walked a weird line for me in general because the number one rule of personal finance is don’t compare yourself to others. But the FIRE community seems all about… comparing finances? It’s exhausting.

What to do instead: To be fair, a lot of FIRE and personal finance blogs serve as great resources on how to pay off debt, build savings and invest. They’re just not the best place to boost your confidence if you’re not one of those people with $100,000 saved by age 30 (I totally am, I just don’t want you to feel bad). Like diagnosing a medical issue, you probably shouldn’t get your financial advice purely from the internet. For planning around big issues like cash flow, investing, retirement and taxes, a fee-only certified financial planner is the better option.

The bottom line

A lot of nip-tuck financial advice comes from a good place: trying to prevent overspending and promoting living within your means, a tenet of good money management. Some advice will be clear and spot on, some will be depend on the individual and situation, and some will be downright incorrect. Do your homework, and be critical — it will improve your overall knowledge of personal finance and help filter out the noise.

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Photo by Ian Froome on Unsplash