When you get right down to it, there aren’t too many things that personal finance writers (myself included) can agree on. Oh sure, for the truly basic of the basic ideas, there’s pretty high consensus: spend less than you earn (doing it the other way around is one of the surest routes to financial trouble), keep an emergency fund (because things do happen and you want to be prepared), invest what you have left, be careful about what debt you take on, all are pretty universal. It’s hard to find anyone in the personal finance field who doesn’t support doing these actions in one form or another.
It’s when you go on from here that things start to get more complicated. From the relatively small disagreements (How many months worth of spending should you keep as an emergency fund?) to the big arguments (How should you invest your money? How much debt (if any) should you be willing to take on? How quickly should you try to pay it back?), there’s a whole range of opinions out there in the personal finance sphere. Some advisers suggest saving up a storm, others recommend putting as much money as possible into investments, still others prioritize paying off debt as soon as is possible. When it comes to the types of investments suggested, there’s even more disagreement; ask ten different personal finance writers what the perfect investment (or even combination of investments) happens to be, and you’re liable to get one hundred different answers (along with a handy guide to deciding which option is best for you, at least from the more well-prepared writers).
‘What’s going on?’, you may ask, ‘How can there be so much disagreement on the subject of money? Shouldn’t intelligent, reasonable people be in agreement on how to handle money?” Well, in answer to your questions (in order): First, reasonable people can disagree, even on big, important issues (contrary to the impression you may get from many political commentators). Second, as with many important things in life, everyone has had experiences with money and has their own opinions on the subject. Lastly, while there is some agreement on the subject of money at the most basic level (see the few things personal finance professionals agree on listed above), there’s so many options available nowadays for how to use and spend your money, so people can disagree on how best to use your limited financial resources while still being responsible, reasonable sources of information.
Handling Multiple Sources of Money Advice
The end result of all of this is that there are numerous different approaches to personal finance currently floating around out there. What’s the best approach to take towards all of them? Well, as you might guess, there’s plenty of disagreement on that front, as well, but here’s my suggestions on the subject:
1) Familarize Yourself With the Adviser: In the modern era, there are so many ways to learn about a particular adviser’s approach to money and personal finance. If you hear about someone from friends, family or any other source, someone who sounds like their advice could be helpful to you in your current situation, search for them on the web or find one of their books in the local library and see what their money philosophy is all about. If you think their attitudes towards money jive with your own, you can go deeper in depth in your research and learn more about what they’d recommend to someone in your situation. Of course, using only one source of information can sometimes give you a distorted view, so…
2) Get a Variety of Perspectives on the Advice: It’s always good to step back and try to look at the bigger picture. Not only should you have an idea of what a given adviser recommends, but you should try to understand other alternatives and learn what other financial professionals think about their recommendations. Sometimes you can learn a great deal from the critical writings or commentary from others. (Note: There is a difference between respectful, informative disagreement and insults and mockery; learning to spot that difference and only use reasonable sources of disagreement is a major trick to gaining perspective on the advice you are considering.)
3) Consider Only Taking Some Advice: Many personal finance writers will lay out a full guide to personal finance throughout your lifetime. This is fine as far as it goes; many people like having a comprehensive guide to their money, and having a (reasonable) plan on how to manage your money is better than no plan at all. But just because a writer or speaker provides comprehensive advice doesn’t mean you have to take it. You can (and probably should, in many cases) take some advice from one source, other advice from another source, and perhaps further advice from even more sources. If you like one author’s views on paying off debt and another author’s view on the best investment portfolio, why not use the parts that are best (for you, at least) from each? (There are some pieces of advice that are mutually exclusive, of course; you can’t utilize leverage and stay completely debt free at the same time, for example. Other than such obvious contradictions, however, mixing and matching different advice can help you build the best plan for your own needs.) While we’re on the subject of shifting advice…
4) Don’t Be Afraid to Change Your Approach As Your Circumstances Change: There is a tendency for people to look down on others as ‘flip-floppers’ if they change their opinion. I don’t know why this is; as John Maynard Keynes noted, ‘When the facts change, my opinions change.’ It should be the same for you when it comes to money management. The advice (and adviser) that you used to get out of debt may not be the best advice to keep following when you are out of debt and trying to build up your investments for retirement. Re-evaluating your situation periodically (doing so annually is a reasonable minimum) and making changes to your financial plan if you feel it is necessary given your current circumstances will help you to stay on top of your money and manage it to the best of your abilities.
There you go, some advice on, well, advice. Hopefully this will help as you try to go through the process of trying to determine the best way to manage your money.