I’ve always subscribed to the notion that “mighty oaks from little acorns grow.” I’ve enjoyed the classics of personal finance. To be quite honest, I’m now wondering if my thinking as outdated as Windows 95.
A while back on Living Rich Cheaply, Andrew posted an article asking if personal finance bloggers are “pound foolish.“ In it, he poses a very legitimate question: “Do you think personal finance gurus and bloggers give valid advice?” He pointed out that when personal finance bloggers are confronted with an individual struggling with money, the same generic advice is doled out; “cut the cable, brown bag your lunch, stop going out to eat, stop shopping, cut up your credit cards.”
It still sounds like solid advice to me. Those that disagree may attribute the financial problems faced by Americans to macro factors, such as unemployment, health care costs, and the price of higher education (all very real issues).
Then, literally the next day I read this post from Charles at Getting a Rich Life. He opens by saying he’s a “firm believer that worrying about the cost of your coffee habit will not build you wealth or help you get to early financial independence.” Well crap.
Andrew and Charles are both very smart guys whose opinions I respect. So, this wrinkled my brain. Am I an idiot here for still believing that it’s important to make the so-called “little” changes? Do the classics of personal finance still work?
As “personal” as finance is, there are very real, defined, and clear cut ways to prosperity that haven’t changed in nearly a century. Literally. The Richest Man in Babylon was published in 1926. It’s financial advice dispensed by a collection of parables (thank you Wikipedia). In it, there is a section providing “Seven Cures for a Lean Purse.” Basically how to not be poor. Tell me if they sound familiar.
- Save a portion of your income.
- Control your expenses.
- Invest.
- Invest wisely.
- Buy a home.
- Save for retirement.
- Increase your earning ability.
Yep. The classics of personal finance. That sounds like the base for pretty much everything on just about every personal finance blog ever. There is a very simple reason for that- it works. Every personal finance blogger and aspiring guru are going to tell you to do at least one of those things. And why wouldn’t they?
J. Money (you know who he is) posted something in the comments of Andrew’s article that stuck out to me- basically, he said most personal finance advice sounds the same. I’ve written about cutting cable, making your coffee, and saving on groceries. Very boring stuff (although I don’t think the end results are boring). Someone recommended it to me. Someone will recommend it again. And again. And again. The classic suggestions are the ones that get repeated.
But, I think there is more to the fact that bloggers recommend cutting your expenses on things like coffee, groceries, and cable. They are expenses most people have. Personal finance blogs are often written for a very diverse population.
A lot of the comments on Andrew’s piece centered around the fact that no two situations are the same. That’s true, and I think bloggers take this into account. It’s why we paint with such broad strokes.
We provide generalized knowledge from which readers can extrapolate to their personal situations. I know there are readers who are in debt, learning to get out, to those that own multiple properties, have million dollar portfolios, and could retire tomorrow if they so chose (and yes, but I have at least five readers now). Some blogs provide more niche information- have a focus on debt, real estate, investing, or exist as a general finance site.
Aside: this blog, as I’m sure many others were, was started with the general goal of helping people. Hopefully, help as many as possible. It’s morphed from there. And…obviously, I hope to one day earn something from the site. I’m not going to pretend this was an entirely altruistic endeavor. I’m not Batman.
Not only are personal finance blogs written for a diverse population, but they are also written by a diverse population- I don’t mean racially, ethnically, or religiously (of course that’s all there). I’m talking about economically diverse people. Net worth is ranging from $1.5M to (-)$130k. They are also, for right or wrong, often written from a position of authority; “how to” and “what to do” guides abound.
But with good reason- these folks have the experiences to back them up. I can tell you that I’ve saved $2500 since cutting the cord from cable. This small maneuver should result in over $100k extra I’ll have for retirement in 30 years. It’s why I advise it, and it’s why bloggers typically advise people to do what’s known- it works.
There are many ways to grow wealth, but short of winning the actual lottery, or inventing the next myspace (because wasn’t Facebook the next myspace?), they are all going to involve the classics of personal finance. I would never say that brewing your coffee alone is going to make you rich, but I do I think it is representative of the mindset required of anyone trying to get out of debt, or, build wealth.
Seemingly small changes can result in an extra million or so dollars when they have 30 to 40 years to compound. I highly doubt anyone is going to advise against cutting your expenses, saving your money, investing it wisely, and earning more. That is literally how you get rich. The classics may not be quick. They may not be sexy. They may be as fun as a game of MineSweeper. But they are proven. After all, they’re classics for a reason.
Do you agree? Or Am I daft here, and if so, can I go back to getting Starbucks everyday?