Do the Tools of Personal Finance Actually Work?

New visitors to Get Rich Slowly are sometimes skeptical. “Do the things you write about actually work?” they ask.

Absolutely they work.

They work financially, but many of them also work psychologically. That last bit may be the most important. I frequently say that money is “more about mind than it is about math”, and I mean it. We all know the basic arithmetic behind money management — it’s the psychological stuff that gets in our way.

The techniques I write about are tools. Different tools are appropriate for different situations, for different jobs. And whereas I might use a hammer and a nail to hang a shelf, you might use a screwdriver and a screw. So it is with money. Each of us needs to assemble a toolbox appropriate for our own circumstances, for our own needs.

There are some important things to know when putting together your own personal finance toolbox.

Not every tool works for every job

Just as it’s important to select the proper tools for a home improvement project, you need to choose the correct methods for managing your money.

You would not use a hammer to cut a board. Similarly, your Roth IRA is not the right tool for saving an emergency fund. The “ask for a raise” tool isn’t critical if you run your own business. You can’t clip coupons to buy a house. (Well, not yet anyhow.)

If you work at minimum wage and have already cut your expenses to the bone, frugality tools are going to be less critical to your success than tools that help you raise your income. When you can no longer reduce your expenses, it’s time to take a different approach.

Some tools become less useful over time

Now that my non-mortgage debt has been eliminated, I no longer need the debt-reduction tools I used to employ every day. They’re still in my toolbox in case something breaks in the future, but for now I’m working on other projects.

Certain tools are almost always useful, however. Frugality and thrift generally reward those who know how to use them well. Everyone can profit from knowing how to save for the future.

You cannot be an expert with every tool

It’s a mistake to believe that every piece of financial advice — every tool in the toolbox — will be applicable to you and to your situation. In fact, I’ve learned that most individual pieces of personal finance advice aren’t useful for me at all! (Many of the techniques I share at GRS don’t apply to my life, but I share them anyhow because they may be useful to others.)

Just as I cannot seem to use a real-life reciprocal saw correctly, for example, I’m not good at investing in individual stocks. Instead, I use a different tool: indexed mutual funds. I’m still building my financial future, but I’m doing so with tools I understand and feel comfortable using.

You become skilled with a tool by using it

You cannot strap on a tool belt and expect that you’re ready to build a house. Everyone starts with the basics. You build a shelf for your wife. You repair the chair your husband shattered.

So, too, with personal finance. You don’t make a million dollars overnight. It takes time to develop wealth-building skills, but you learn them by doing. As you learn, the changes are small and imperceptible, but they’re very real.

I’ve seen the power of small changes in my own life, and I’ve read similar success stories from Get Rich Slowly readers. Your fantastic responses to yesterday’s article about emergency funds are a perfect example. Over 100 commenters explained how emergency funds give them peace of mind or have helped in past times of crisis. An emergency fund is a small but important tool in your personal finance toolbox. As you use it, you gain skill.

Building your financial future

Financial success takes work. For all but the lucky, wealth is built slowly, one smart choice after another.

Personal finance knowledge is like a shop, filled with tools and plans and materials. Your aim is to use these things to build a solid financial future. To do so, you must use certain basic tools (saving, investing, etc.), but beyond that you have control over how the final product will look and feel. Do you like frugality? Make that the focus of your project. Hate frugality? Use only a little, but compensate with other tools and resources.

Don’t expect perfect results right away. It takes time to build something lasting, and so does building wealth. Financial success requires patience and consistency. The techniques I share do work, but only if your aim is to get rich slowly.

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