I’m writing this post in Lima, Peru, on the last day of my six-week South American odyssey. I’ve had a great time. I’ve climbed mountains, explored ancient ruins, petted llamas (and cats), mangled Spanish, and eaten more maracuyá (passion fruit) than is probably good for me. In other words, this has been a perfect vacation.
But this trip wasn’t cheap. While it didn’t cost nearly as much as my trip to Africa last February, I still spent quite a bit of money. I could have bought a used car instead, or remodeled a bedroom, or paid rent on my office for the next year.
Some of you are probably thinking any of these would have been a better use of my money. Others could suggest dozens of different options that might seem more sensible. And for you folks, these options are more sensible. For you, travel isn’t important. That’s fine. But for me, at this point in my life, travel is something I value.
This, then, is the core of my financial philosophy: Each of us is different. We have different strengths, different weaknesses, different experiences, and different values. We have different goals, different abilities, and different definitions of success.
Because of this diversity, there’s no one right way to tackle your personal finances. In fact, there are lots of good approaches. Where one method might work for me, or for your mom, or for your best friend, you might need to try something completely different.
In short, it’s this I believe: There’s no one right way to build wealth. Because of this, you must do what works for you.
No Right Way to Do Things
It’s been a long time since I last wrote about this subject. In fact, it was exactly two years ago today that we last discussed it. That’s too long. Because it’s the core idea of Get Rich Slowly, I feel like we should touch on this theme fairly often. Especially after days like last Tuesday, when a lot of people were upset by our discussion about the differences between the rich and the poor.
There’s no need to get upset about any discussion of money, at least not at Get Rich Slowly. When I present ideas, I’m not trying to argue they’re right, that they’re the only way to look at money. They’re not. When I present ideas, I’m trying to share alternatives, to present ideas for discussion. I never believe that my way is the right way or the only way.
I actually believe the opposite is true. I believe there are many approaches to personal finance, and that there are many paths to success. (Whenever I think about this topic, I’m reminded of the Vulcan credo from Star Trek: Infinite diversity in infinite combinations, which celebrates the vast array of variables in the universe. But then I’m a geek of the first order.)
I’ve been thinking about this topic for the past week — ever since the contentious discussion about wealth and poverty — and I’ve decided that there are three specific ways in which of can put the “do what works for you” philosophy into practice.
Set Your Own Goals
First, it’s important to choose your own destination in life, especially with your finances.
It’s easy to find yourself working toward the same goals as those around you. If your family and friends all drive nice cars, it’s natural to want a nice car yourself. If your favorite finance blogger loves to travel, you might be tempted to travel too. But this is no way to set financial goals.
Instead, base your goals on the things you want, on the life you dream about. Do you want to get out of debt? Buy a boat? Send your daughter to Harvard? Do you want to build your own home? Start a charitable foundation? Each of these is a fine goal. So is owning a big-screen TV or the latest laptop. But the key is to make your goals personal. Make them your goals, not anyone else’s.
Choose Your Own Path
The next step is where it’s most important to do what works for you. In fact, this is what led me to this philosophy in the first place. I discovered that the traditional road out of debt just wasn’t effective for me. I needed to try something else.
The standard advice for debt reduction is to eliminate your high-interest debt first. Doing this makes the most financial sense because you pay less in the long run. But money management is more than math — it’s also mental. Psychologically, I wasn’t able to make the the standard path to financial freedom work for me. It wasn’t until I tried an alternate path — the debt snowball — that I was able to become debt-free.
This same principle holds true for other aspects of money management.
- For some people, credit cards are a curse. For others, they’re a convenient tool.
- For some people, credit unions are a great place to keep their cash. Other people prefer online high-yield savings accounts.
- Some people need $20,000 in their savings account to feel safe. They want a large emergency fund. Others prefer to get by with a $1000 safety net.
- There are those who believe that carrying a long mortgage at a low interest rate is the most effective way to leverage their money. Others prefer to get rid of their mortgage as soon as possible.
- For some, being self-employed is important. They want to have complete control over their destiny, even if the risk of failure is greater. (That’s me!) For others, like my wife, a stable job is more fulfilling and offers more security.
In most of these cases, there are indeed choices that make more financial sense than others. At least mathematically. But this doesn’t mean they’re the right choices or the only choices. You need to make decisions that reflect your values and your goals. You need to do what works for you.
Define Your Own Success
The final aspect of doing what works for you is tied closely to the first. It’s important to set goals based on your own strengths and values, and it’s also important to set your own standards for success.
For instance, now that I’m out of debt and building wealth, my goals are to travel and to save for retirement. I define success as being able to fully fund my retirement savings every year (by which I mean up to the limit the law allows) and by being able to travel to new countries. (If I want to travel more — to be more successful with this goal — I need to learn how to do so cost effectively. Six weeks in South America for less than three weeks in Africa seems like success to me.)
When you set your own goals, choose your own path, and define your own success, you’re able to find a financial framework that best suits your needs — and not someone else.
It’s All Relative
It probably comes as no surprise that I’m something of a relativist. I don’t believe in absolute rights and wrongs. I don’t think the world is black and white, but filled with shades of grey. (And the more I travel, the stronger this belief becomes.)
You can see this in my financial philosophy. I think it’s crazy to argue that there’s only one right way to pay off debt or to save for a house. I don’t believe there are a one-size-fits-all answers in the world of wealth. Instead, I believe there are many roads to many fine financial futures. And I believe it’s possible for all of us to be successful with money — even you.
The key, my friends, is to set goals that help you reach your dreams, to use methods that draw on your strengths, and to define success in a way that reflects your values.
In other words, the way to wealth is to do what works for you.