As you can probably imagine, as a personal finance writer, I think about personal finance quite a bit. Often enough that I write several articles a week on the subject. I don’t consider myself an expert, but I do think that I know a great deal about it. And I’m beginning to wonder if we aren’t going about it in the wrong way.
The problem with Personal Finance
We rail on the Joneses constantly. That, by itself, isn’t really a problem. The Joneses just aren’t very smart with their money. But, for all that we rail on them, we spend an inordinate amount of time trying to find ways that we can go about having things that are similar to what they have for less money. And that is the problem. The Joneses have the fancy cable television package? Try Netflix, Hulu, or Amazon Prime! The Joneses have a fancy new car? Try a newer off-lease car! The payments are half what they pay, and the car is almost as nice! The Joneses have a fancy house? Try making it affordable by DIY, gardening, and renting out a few of the rooms!
We aren’t the Joneses. We know that. We know that we really don’t want to be the Joneses. But, some part of our natural tendencies somehow pulls us back to them, time and again. We strain hard to become less like them, and find ourselves back where they are. That is the problem with personal finance.
Are we doing personal finance wrong?
Maybe the issue isn’t the Joneses. Maybe, just maybe, it’s us. I alluded a little to this recently (The Joneses and Jealousy), when I suggested that our tribal human history pulls us towards the leaders of our “tribe”, and that we should be looking for a new “tribe” that espouses the same values that we do. I think that we all end up returning to our Joneses because we haven’t fully made that switch yet. Because we’re afraid of what the rest of our tribe might think. What our families might think. Heck, what our spouses might think. And, maybe all this frugality and saving aren’t really what we’re looking for. After all, where does that lead us? A cheaper version of the Joneses lifestyle? Isn’t that what we’re pushing away from?
Changing personal finance
I think what we are really looking for, and what we are really jealous of the Joneses for is financial freedom. It may only be perceived in the case of the Joneses, but it’s still there. Freedom, financially, to be able to do the things we want to do, go the places we want to go, and have the things we want to have. We emulate those who have those things without giving much thought to how they got there. Maybe the Joneses did it through a boat load of debt. We rail against debt. Which only gets us so far. So many of us struggle with even that part of it. I know I have, and sometimes still do. But, I can tell you with certainty, that had my perception of debt not changed drastically from where it was when I began this journey, I would be in a far worse place than I am now. But, even that is only one small change in the way I think about personal finance. Our entire perception has to change.
What’s the personal finance endgame?
What is it that we are really looking for. We decide we want to change how we handle our finances, abandon the way of the Joneses, and make our way to a better life. But, what is that better life? If you’re thinking that a secure retirement is it, I think you’re wrong. I think there’s a better way. There has to be. HAS TO BE. There has to be a better way that doesn’t involve working for 40+ years, pinching every penny, saving every dime, only to end up at 65 or 70 with enough money to make sure you can pay for the medical bills your advanced age brings with it without having to live on welfare. That can’t be all there is to personal finance, is it? My word. What if you retire at 65, and die at 66? I submit to you, that what we are really looking for is personal finance independence. We don’t want to have to count on a job. We don’t want to count on a paycheck to (hopefully) cover the bills this month.
What is personal finance independence?
Here’s the tricky part. I think it’s going to vary based on the individual. What personal finance independence means to you is likely going to be a bit different from what it means to me. Take, for example, Jacob. Maybe you’ve heard of him, maybe you haven’t. He writes a blog about early retirement. He wrote a book all about it. It’s got more scientific content than some of the science books I remember from school. They guy is crazy smart about the subject. But, when he says it’s early retirement extreme, he’s dead right. If going to the measures that he went to in order to retire early is what is required, count me out. In fact, it seemed for a long time that it was either extreme or not. Nobody had really talked much about the in-between area. Enter Mr. Money Mustache. He, too, retired early. And, while he has his extremities, it’s not quite the same thing. It’s different for each and every person. What one person thinks of as retirement isn’t what someone else will think of. Heck, most of us have been so pre-conditioned to think that retirement should consist of afternoons golfing followed by bingo down at the VFW that it’s no surprise that we scoff at people like Jacob and MMM.
How do we get there?
Oh. Well, the truth is, I just don’t know. I think that, with a little help from the Jacobs and MMMs of the world, and a little trial and error, we can find our own personal finance independence. I think that we can take what we learn, adapt it to our lives, and make something brilliantly wonderful out of it. I know we can. We just have to try. We just have to change personal finance as we know it, and embrace something better.
I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.
You can also connect with me personally at Novelnaut, Thatedeguy, Shane Ede, and my personal Twitter.
Eric J. Nisall - DollarVersity says
The thing people are doing wrong is taking the “personal” out of the finances. It’s really easy to see if you look for it. How many people talk about “Everyone should be doing this…” or “No one should use credit…” or “Everyone’s goal should be…”
It’s more of a farce these days than anything, and if you look at all of the “advice” out there, hardly any of it is new or even taken from a different perspective. It’s all the same, and it adds very little value.
Same goes for the “gurus” out there. They espouse their self-grandizing books and programs but fail to realize that everyone is in a different situation. It’s not like hats, one size doesn’t fit all in personal finance.
I liken it to my view on reality tv: I guarantee that the majority of viewers pay so much attention to others that they know more about what’s going in those peoples’ lives than their own. Same with money, people look at what others have and do to the point that they lose track of their own finances and identity.
I don’t care about what others do, say or think…I do what works for me and my “unique” (not entirely so but close enough) situation. If someone doesn’t agree, fine, that’s their problem. I need to do what I find has worked, not what others claim to do that works miracles.
Kurt @ Money Counselor says
The issue I think is that ‘the leaders of our tribe’ are those with the most stuff! Sad. Wouldn’t it be great if our tribal leaders were those who worked the hardest to better our community or improve our parks or who wrote the most interesting books, even if they were poor? I know, I’m a dreamer…
Tim Huntley says
I believe a compelling case for creating financial security can be made for finding ways to generate supplemental income. There was a great post this morning on this topic over at One Cent at a Time, and it motivated me to write my own post about attributes of being an entrepreneur.
In some ways, I was the Joneses! I had more than my friends although I earned less than them. I am so good at managing my money, I was able to do more with less. This is still true although I have a lot more than before. Personal finance for me is simple, it gets down to choices you make every day.
Yes, it does seem to be that most of us are after what the Jones’ have whether we realize it or not. I think the key is to learn to be content with what we already have and not to always be looking out for more. Nice post.
I think everyone’s got a different plan. Mine is to live on $30K a year and save the rest, then retire once I reach financial freedom using leverage. My method isn’t very popular but that’s why personal finance is so personal 😀
Jon @ MoneySmartGuides says
The reason why it’s called personal finance is because it is personal. Everyone is different and everyone’s situation is different. Because of this, you can’t just lump everyone into a do this or do that mentality. Everyone has to figure out what is best for them and what works for them. Unfortunately, this is where many people fail. They don’t understand that their situation is unique and that a one size fits all approach doesn’t work. So they read all of the tips and easily get confused.
Unfortunately for me, my “personal finance” for most of my life has simply been about survival. I think your comment that “If going to the measures that he went to in order to retire early is what is required, count me out” is probably the main reason. I looked at what I perceived that others had to do to “make it” and thought “geez, those guys are killing themselves and ruining their family life.” I’m sure that that was not the case for all of them but it certainly influenced my thinking. I have since realized that for me, adding a good supplemental income to my current income flow without increasing my lifestyle (for now) should ultimately lead to a pretty decent retirement that will be more than golf and bingo! Enjoyed your thoughts.
I see where you’re coming from but everyone has different ambitions and goals. Mine is to build my business quickly and PF my way is a great way to track progress and hopefully in 10 years time enable me to live an extravagant life
I guess I’m lucky because I don’t worry about what others will think of how I choose to save. Guess I’m just lucky in my friends/family situation. (Helps that most of the people we know are broke, I suppose.) I always go back to what my mom says about frugality: Saving where you can so that you can spend on what matters. Maybe what matters *is* a shiny new cell phone. Maybe it’s a sports package for cable. In the end, real personal finance should be about deciding your priorities. People need to figure out what they’re willing to do without in order to get other things — including financial security. I don’t think it’s that we’re trying to have it all in a frugal version. I think most people are just choosing which things matter. If those things are flashy, then it might seem like they’re trying to have it all. But what you don’t see is the items they do without. (Unless they blog about it, of course.)
Josh @ Becoming Your Own Bank says
It’s difficult… I think this article relates a lot to finding your dream job as well as personal finance.
I’d say the first thing, what really matters, is having time. If you spend all your time working, and doing something you hate, until you are 65 and die at 66 then ya… it will leave anyone thinking what was it all for.
But if you’re job is enjoyable, or better something you love to do, well then it’s all about the journey, right? Not the outcome…
As far as the Joneses. They have all those things you listed, and the ipod, and the ipad, and the data plan, and all the apps, and the newest computers, and all the tv’s, and everything else. My favorite quote from the book “Money” is “you can have anything you want, but you can’t have everything you want.”
The more I have tried to shed the need for “things,” the happier I find myself today, with whatever I have.
In my opinion, what really needs to change is the “get something for nothing” mentality that Wall-street has pumped into us. The real answer, is teach people to save more money, and be happy living within their means.
I would almost go so far as to say, if you really want to be happy, learn to live on less and work 30 hour weeks and enjoy time with your family. Less stress, more hours to be with the ones you love… I think that is where true happiness comes.
I’m glad I haven’t been pigeon holed as an early retirement blogger yet! I think it’s because I don’t propose aggressive frugality, but more about making money.
To each their own indeed!
Kevin @ Credit Bureau Insider says
From what I have seen the story of most Joneses does not end well. A small fraction do have the resources to “live life” and end up fine financially, but bankrupted morally because the lifestyle does not satisfy them. The rest fall into a financial trap chasing the wrong thing.
Contentment is a far better strategy.
Brian @ Stocks and Cents says
I’m right there with you on the extreme retirement issue. MMM has done it best, I think, simply because the life he leads is extremely full. When you’re talking about NEVER travelling and taking all these other aspects out of your life, well, I think that a line has to be drawn. Like you said, count me out!