This is a guest post from Paul Williams, a fee-only financial planner and the founder of Provident Planning, Inc. He regularly writes about personal finance from a Christian perspective at Provident Planning.

About a year ago, there was nearly an epic battle between Ramit Sethi of I Will Teach You to Be Rich and Trent Hamm of The Simple Dollar. Ramit is firmly in the “earn more” camp of personal finance, while Trent tends to focus on the “spend less” side of things. Thankfully, no blood was shed as Trent chose not to engage Ramit in the challenge.

But I’m not here to discuss the politics of personal-finance blogs. I want to talk about something that Trent touched on in his post: People go through stages (or phases) of personal finance. J.D. has talked about this as well, so I’m sure most of you are familiar with the idea.

J.D.’s note: It’s been a while since I mentioned them, but Paul is right. I think most of us do pass through various stages of money management. I’ve written about these before: Fumbling in the dark, A candle in the dark, The light at the end of the tunnel, Lighting the way, and Financial independence. It may actually be time to revisit this notion in greater depth.

I like to think of these phases as a “continuum of personal finance”. It looks something like this:

The Continuum of Personal Finance

The divisions between low, moderate, and intense effort are arbitrary, but you get the idea. There exists within each of those loose categories a wide array of options that will get you closer to achieving your personal-finance goals. In any given effort category, some activities will provide a larger reward than others. This is true for both sides of the “spend less than you earn” equation. Let’s look at some examples.

Low Effort
“Big wins” fit in the low effort group of spending less activities; these are the easy things you can do to start saving money. Some offer a huge reward, like negotiating your cable/satellite subscription or gathering several insurance quotes. These tasks don’t take much time but offer huge payoffs. Others offer a smaller reward (like switching out your regular light bulbs with CFLs).

There are also some low effort ways to earn more money. Switching from a low-interest savings account to a high-yield savings account doesn’t take much time or effort, but it can help you earn quite a bit more in interest. (On the other hand, switching from one high-yield account to another that’s only 0.1% higher usually won’t provide a very large reward.) Taking a few minutes to send in a rebate form may only get you an extra $20, but it’s easy to do.

Moderate Effort
Sitting down to plan your meals before you go shopping requires a bit of effort but offers a good reward. Changing you car’s oil can also take a bit of time but probably doesn’t offer nearly the same savings.

Freelancing, picking up extra hours at work, or starting a “side gig” (part-time entrepreneur) also require some moderate effort and will yield varying rewards depending on your situation.

Intense Effort
This is where the extreme frugality tips fall. Some will free up a lot of cash, like downsizing your home. But most intense-effort thrift activities? Not so much — and these are the kind that Ramit hates. (I’d put J.D.’s tip on using less hot chocolate powder in this category. No offense J.D.!)

But there are “earn more” techniques that fall in here as well. Starting your own full-time business takes a ton of effort but can be one of the highest-rewarding activities. Blogging, on the other hand, requires intense effort but usually doesn’t result in huge rewards unless your website becomes extremely well-known. Full-on career changes also require intense effort and the results can be mixed.

Those are just a few examples. I’m sure you can all think of other activities that fit in these loose categories and offer a range of resulting rewards.

What’s the Point?
What struck me is that none of these activities is inherently wrong or bad. Sure, you can argue from an economist’s point of view about opportunity costs and utilization. But if the activities you choose get you to your goal, were they stupid? You achieved your goal. You reached the desired result. You did it the way you wanted to. What’s so stupid about that?

“Do what works for you.” — That’s J.D.’s mantra ,and it’s a great philosophy when it comes to making choices on the continuum of personal finance. These categories of low, moderate, and intense effort are going to vary by personal opinion and preference. Your willingness to engage in any specific activity is going to depend on your situation, motivation, skills, and personality. Just because I wouldn’t follow the same path doesn’t mean your choice is wrong. It’s just your choice, and that’s fine. You’re doing what it takes to reach your goals. And that’s all that matters.

If you’re not approaching your personal finances in a way you enjoy, you’re going to be miserable, and that will have one of two effects:

  • You’ll give up because you hate the way you’re doing it, or
  • You’ll achieve success but experience unhappiness on the entire journey.

Don’t reject better ways of reaching personal finance success. But don’t beat yourself up because you’re not doing it the way someone else prefers. Do what works for you.

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