As I have learned recently, there are lots of books and articles out there about parenting. They all have one thing in common: there is a RIGHT way and a WRONG way to parent.
For example, there are some people out there who are totally opposed to letting your baby hang out in a Pack’N’Play all day. This is supposed to be isolating to the baby, bad for the mother-baby bond, cause a flat head*, and increase digestive issues. According to anti-Pack’N’Play contingent, it is much better for your baby to be carried around during the day in a sling.
However, for every proponent of carrying your baby around in a sling, it appears there is an equally passionate Anti-Sling-Ian. “Bad for night-time sleep!” “Your baby will never become independent!” “Dangerous – baby could suffocate!”
In the face of this (and other similar fights), the DebtFreeJD household has adopted the following test for good parenting:
If the baby is happy and healthy, you’re doing it right.
Plus an important corollary:
Every baby is different, so there’s as many ways to have a happy and healthy baby as there are babies.
BabyDebtFreeJD, for example, likes to nurse stretched across my belly. He prefers to snooze in his baby carrier during the day. And he doesn’t like hats.**
In short, I’ve got an “ends” rather than a “means” test for good parenting: I think I’m doing it right when BabyDebtFreeJD is happily eating, napping, and going through Costco diapers at a terrifyingly fast rate, and doing it wrong when he’s screaming so loud in the middle of Stop&Shop that little old ladies stop to offer unsolicited advice on how to calm him down.
I feel as if personal finance is like parenting. Everyone has an opinion on how to do it. And there’s a lot of books and articles that claim there is a RIGHT WAY and a WRONG WAY.
For example, some people might think spending the last year aggressively paying off my law school loans was WRONG. If we’d invested that money in the stock market, we’d be a lot richer. If we’d put a bigger chunk of it into retirement savings, we’d have paid less in taxes. Etc. etc. etc.
That’s all true. However, having one financial goal gave us lots of motivation to actually pay off the loans. I don’t know that we would have had the same kind of discipline regarding our budget if we were investing money in the stock market or trying to optimize our retirement accounts. Plus, I’m naturally risk-adverse.*** There was no way to know what would happen with the stock market when we started paying off my loans. By contrast, killing the loans was a guaranteed win.
My test for “good” personal finance – like my test for good parenting – is results-oriented:
If you are saving enough that you don’t have to worry about the future, but are still enjoying the present, you’re doing it right.
In my opinion, there are two big financial pitfalls out there. The first (more common) problem is failing to save enough so that you are unprepared for an emergency/retirement/kids going off to college/etc. The second is being so miserly that you’re not actually enjoying your money in the present. Of course, you don’t have to spend lots of money to enjoy yourself. The Frugalwoods are a great example. Our own strategy was that we kept living like graduate students even after we got real jobs – so Chinese takeout feels luxurious and we don’t feel deprived by not eating at four-star French restaurants.****
Everyone’s going to be different in how they achieve the balance between saving for the future and enjoying the present, and so I think there’s a lot of ways to do personal finance “right.” Basically, if you’ve got enough in the bank account to sleep soundly at night, and you have enough little luxuries that you feel rich (even if you’re most definitely not), I think you’ve got it figured out. Everything else – retirement savings strategies, your Starbucks budget – is just coloring in between the lines you’ve drawn correctly.
*The flat head thing might be true, but is temporary.
** Unfortunately, he’s fighting a losing battle on the hat front. That’s an area where we prioritize healthy baby over happy baby.
***In other words, I’m a lawyer.
****Confession: I actually like take-out pizza more than fine dining. Something about very fancy restaurants (and I’ve been to a few with my job) gives me the heebbie-jeebies. There are exceptions, but that’s my general rule.