A phrase that I often heard while growing up is, “Take the meat, and leave the bones.” In essence, the phrase means that you should take what is valuable or applicable to you and leave behind what is of no use. Chances are that if you read a personal finance article, the article will not be customized to every nuance of your specific financial circumstance. If you expect it to be, it is likely that your expectation will not be met.
This is where modifying any relevant tips is helpful. Workout routines are a good example. I recently completed Shaun T’s Insanity workout, and I modified the heck out of it. If a circuit involved various pushups, and holding a plank was all that I could do at the time, then holding a plank was all that I did. Modification is also the magic that makes personal finance personal.
In my experience, I have found that sometimes people can be intimidated about taking control of their personal finances because they feel like they have to measure up to some perfect ideal or standard in order to do it "right". For example, it is often said that is how your income should ideally be divided up: Housing: 25-35% Insurance (including health, medical, auto, and life): 10-20% Food: 10-15% Transportation: 10-15% Utilities: 5-10% Savings: 10-15% Fun (entertainment and recreation): 5-10% Clothing: 5% Personal: 5-10%
The key word in the above is ideally. Depending on where you are in life and what your priorities are, your income may not be neatly divided into the above categories. Some of the above categories may not even be categories that apply to your lifestyle. Alternatively, some of the categories that apply to your lifestyle may be missing from the above. There are multiple ways to manage finances well. Percentages may work for some. Dollar-for-dollar allocations may work for others. There is a lot of trial and error that you must go through in personal finance to find the financial practices that best work for you.
At the end of the day you and whoever you share your income with are the people who have to deal with the consequences, good or bad, of how you handle your finances. If you spend 20% on food, the Finance Police will not come to your house and arrest you. What I take from looking at the percentages is that I have 100% to work with and that the more I devote to one area, the less money I can devote to another.
So if you spend 20% on food instead of 10%, it means that there’s 10% less of your income that you can spend on something else because you decided to spend it on food. If you’re okay with that consequence, then that’s what matters most. There are pros and cons to every financial decision that you can make. The key is to make conscious decisions about your money, in light of your specific circumstances, that you are comfortable with.
You may be inspired by one person’s savings methodology, another person’s debt methodology, another person’s investment methodology, and so on. I encourage you to sprinkle your own spice on what inspires you, and make your own methodology. In my opinion, that’s the exciting part of personal finance. I love to see people’s faces light up when they take control of their money and use it to build a life that they desire. Your financial life, like the rest of your life, should not be a carbon copy someone else’s. Some people prefer to rent and have no desire to own a home. Some people view home ownership as the gold standard. Some people are okay with always having some amount of debt in their life.
Some people want to be debt-free. Some people are foodies and want to spend their money enjoying the cuisine of different restaurants and countries. Some people want to spend their money on a vast and stylish wardrobe. Some people want to invest in real estate. Some people want to invest in their own business. Some people don’t like investing at all and would rather build up their savings. Some people would rather invest than save because investments have higher interest earning potential. Some people view savings as a waste of time because no one is promised tomorrow, and they may not be alive to spend their savings. The list of different finance personalities and perspectives is long. Decide which type of person you want to be, and let your financial decisions mirror that. The choice is up to you.
Zikora is a Certified Public Accountant (CPA) by day. When not assisting and advising clients, she can be found writing, singing, songwriting, exercising, cooking, and or plotting her next move. She is a sounding board for friends and family and enjoys showing people that they can indeed do things that they believe to be difficult or impossible. Send questions and/or topics that you would like Zikora to cover in future articles to firstname.lastname@example.org.