Why Most Personal Finance Advice Feels So Overwhelming
If you’ve spent any time consuming personal finance advice through social media, books, or articles, You’ll notice that everyone has an opinion about what you should do with your money.
It can be overwhelming, and sometimes downright discouraging.
The more you learn about the world of personal finance, the more you’ll find yourself lacking in one category or another. There are rules, frameworks, and general principles that are touted as being golden standards. A lot of the rhetoric sounds something like this:
- “Pay down all of your debt as soon as you can.”
- “Max out your 401k”
- “Never lease a car. Run your old, used car into the ground!”
- “Save for 6 months’ of expenses”
- “Follow the 50/30/20 rule.”
The list goes on and on. The problem? If you look at common pieces of personal finance advice, you’ll find that, at best, it’s incomplete, and at worst, it’s contradictory.
I understand that a lot of personal finance advice is intended to help you navigate the sticky world that is money. But some of this advice creates overwhelm instead of clarity.
Mainstream personal finance advice is not outright wrong. Rather, it fails to take into account context, real-world constraints, and sticky tradeoffs. It rarely gives people a framework for making financial decisions around their actual values, constraints, and life goals.
Problem 1: Personal Finance Advice Often Contradicts Itself
A lot of “good” advice contradicts other “good” advice.
Here’s one you probably have heard: All debt is bad and you should pay it off before all else. But wait, you’ve also been told that you need to be aggressively saving. And you have to have six months’ worth of income saved up. Oh wait, and, you must max out your 401k.
If you are at a certain income level, these pieces of advice aren’t contradictory. You likely can accomplish all of these goals. But, for a lot of people, especially if you’re in your 20’s or 30’s with student loan debt, maybe not so much. You may be left wondering what exactly you should prioritize with your money.
In some ways, the fixation around eliminating all debt may not be practical in today’s world.
For example, buying a car in cash (even a used one) may not be financially feasible without draining your cash reserves. In a sense, reasonable debt can protect your nest egg in the event there is an emergency and you need cash fast.
I’m not saying this is all bad advice. I’m saying it’s incomplete, because it rarely gives people a clear framework for deciding when to save, when to pay down debt, and when to invest.
Problem 2: Financial Advice Quietly Punishes Late Starters
A core narrative in the financial world revolves around the sage wisdom to start investing early. Now, this isn’t bad advice, but it’s often overdone. Moreover, if you didn’t start investing at a young age, you may be left feeling like “why bother?”
Here’s the reality. A lot of people spent their 20s either paying down student loan debt, “finding themselves,” or simply just trying to climb the ladder at work to make money. If you started investing in your twenties, great.
But if you’re like a lot of people, you either may not have had the means to save, or it wasn’t on the forefront of your mind.
Of course, if you’re young and are able to start saving a little for retirement, of course you should. However, for those who are in their 30s, 40s, or beyond, it can feel really disheartening to listen to advice over and over again how you should start early.
The problem is not that “start early” is bad advice. It’s that it becomes useless when it’s offered to someone who can only start from where they are.
Good advice should help people move forward from their actual starting point, not shame them for missing an imaginary one.
Problem 3: Financial Advice Assumes Everyone Values the Same Life
A common theme that runs through personal finance advice the assumption that we all want and value the same things.
Sometimes it’s said outright, and other times it’s implied. For example, I notice that a lot of financial gurus will focus on the importance of travel and not spending your money on frivolous things like going out to dinners or buying expensive clothes.
There is a swath of examples, but the underlying theme implies we all generally value the same things and therefore that’s how you ought to spend your money.
Here’s the thing: What we spend our money on shows us what we value (in theory). Perhaps having the latest and greatest iPhone is something you value. Perhaps driving a brand new lease vehicle is something that holds a lot of value for you. What is a “waste” to one person, may actually be incredibly valuable to the next.
Money is not a blanket value system that should be applied to everyone in the same way. It’s a tool we use to live out our own values and shape our own lives.
So Who Should You Listen To?
Alright, so if mainstream personal finance advice is so “broken,” who are you supposed to listen to? What are you supposed to do with your money?
The answer is: It depends. The best place to start, is making sure that you’re following people or listening to people who value mostly the same things as you.
Even still, you want to make sure you’re critically analyzing what they are saying. Consider the source. Consider that we all come from different backgrounds, have different life circumstances, and have wildly different goals.
Make sure that you’re learning and applying what makes sense for your life.
The next time that you’re listening to a financial advice guru spout off, ask these three questions:
- What does this author/creator/person assume about me, my life, and/or my values?
- Does this advice align with what I truly value?
- Does this advice match the way I want to, or intend to, live?
The goal is not to reject financial advice altogether. The goal is to stop treating every rule as a commandment, and start asking whether it belongs in the life you are actually trying to build.
Money is not just math. It is tradeoffs, timing, personality, values, fear, freedom, and the life you are actually trying to build.
So take the advice. Learn from it. Question it. Then decide what belongs in your life, and what does not.
