5 Financial Decisions I Recommend


I don't blindly follow people's advice; but when it is logical and rationally leads to a good result, then why not follow it?

When my wife and I were married, she was the more financially savvy one. I lived like many people live today-- without a plan. 

Of course, I was 22! So that's not abnormal.

However, even before I was married, my Dad had instilled some very solid financial knowledge into my head. Some of that advice will be listed here.

Personal finances aren't complicated. We're not talking about global economics here. It's simple addition and subtraction. No algorithms. No equations. No predictions.

Do you have money for something? Or not? Very simple.

So after taking some of my Dad's advice, learning from my wife's good habits, reading some of Dave Ramsey's materials, and managing our finances for 7+ years, I've learned which decisions are winners and which don't matter as much.

(I am not listing my bad financial decisions here!)

#1 Hate debt.

This decision may require lifestyle adjustment, humility, and some old-fashioned self-discipline.

I hate owing money--for anything. 

Aside from our mortgage, we have no debt; and we intend to keep it that way.

Although we are not wealthy and do not have fancy things to impress people we don't know, we do have a clean slate.

No debt.

See also: I Might Be One of the Cheapest People You Know

#2 Pay no interest.

The main reason I hate debt is because it would suck money right out of our bank accounts.

Don't you like to keep your money? I do.

I'm happy to say that we have never paid interest on a loan other than our mortgage (which I still hate).

Practically, this means we don't finance cars, furniture, carpet, or anything else. If we can't buy it with the money we have in the bank right now, we wait.

"What about 0% interest loans?"

I've never dabbled with fire while wearing a backpack full of gasoline, have you?

You probably won't get burnt though.

#3 Save.

We save money for unforeseen events or expenses. It's called an emergency fund. Everyone has a different idea of what it should look like.

We subscribe to the idea that a good, solid emergency fund should sustain your family for 4-6 months. So take whatever your baseline expenses are for a month and multiply that by 4, 5, or 6. That's a good target.

Aside from that, we also have cash ready for when we want to have fun. With money in the bank, vacations aren't funded by credit cards that will cost 23.8% more because of interest!

#4 Invest.

Having retirement accounts is the only way we will retire. I do not expect the U.S. government to support me when we turn 65. Call me a pessimist if you want.

So we have Roth IRAs.

I also have an employer-sponsored 403(b) retirement account that is deducted from my paycheck tax-free. I don't have to think about it or write a check. (Good for me, because I'm very forgetful!)

See also: Why I Don't Like Piggy Banks

#5 Insure.

You (and your spouse if you're married) need to decide what level of insurance you're willing to pay for. I generally avoid insurance when I can, but sometimes it's a must.

In my opinion, the most important insurance we have is life insurance. It settles my mind at night when I think about what would happen to my family if I died.

"How much life insurance should we purchase?"

Again, that's a personal decision. I chose a policy that should sustain my family for 5-7 years.

See also: Time To Act Like a Grown-Up

Conclusion:

It can be hard to make good financial decisions. I get that.

We often feel pressured to display outward indicators of "success" so people will know how "good we're doing."

I think that's a nasty trap to fall into.

If you use your income wisely and make good decisions, it will be best for you and your family--now and in the future.

And none of this means you must live boring lives filled with drudgery and smelly, old clothes. 

It means you postpone things of less value to earn things with the greater value.

Image credit:
Businessman holding money from freedigitalphotos.net.

1 comment:

  1. Good advice. My rule with life insurance is to have enough coverage to pay off the mortgage and provide for my family until the kids are old enough to leave home. If something were to happen to me, the last thing I would want is for my family to have to add financial worries to all the other new challenges that would arise.

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