Personal finance is personal for a reason

Have you ever noticed how conflicting personal finance advice is? Even financial experts can’t seem to agree on the most basic of topics such a debt, emergency funds, or homeownership. Why? Because personal finance is personal.

There is no one size fits all solution. Of course, numbers are numbers. The math to get you where you want to be is what it is.

But there’s much more to it. If the math requires you to do things outside of your comfort zone, then the math likely won’t work.

Good Debt vs. Bad Debt

Dave Ramsey, perhaps the most well-known financial expect alive today is adamantly opposed to debt of any kind. To King Dave (sorry, I couldn’t help myself), there is no such thing as “good debt” even if that debt is used to buy a home or to pay for college.

In this two minute video, Ramsey tells you why he’s anti-debt, in typical Dave Ramsey style. If you’re not familiar with him, you’ll know what I mean by the end of the video.

But Robert Kiyosaki, the well-known author of the best selling book Rich Dad Poor Dad disagrees. He says “the rich use good debt to grow their worth, and they invest in cash flowing assets using Other People’s Money (OPM)—both the bank’s and investors. OPM is a fundamental concept of Rich Dad and a sign of high financial intelligence.”

Debt Elimination

Not only do financial experts not agree on debt, but they can’t even agree on how to best pay off your existing debts. The two most popular debt elimination strategies are:

The Debt Stacking Method
The Debt Snowball Method

The Debt Stacking Method is the strategy of paying off your debt with the highest interest rates first. This is the preferred debt elimination strategy of personal finance guru, Clark Howard. He says “if you have several (credit) cards, your first goal is to pay off the card with the highest interest rate. Pay more money toward that credit card and slightly less toward the other cards, until the card with highest-interest debt has a zero balance. Then you move onto the next card, and so on and so on.”

The Debt Snowball Method tells you to go after your debt with the lowest balance first. Dave Ramsey is a proponent of this method and so are the folks at NerdWallet, one of the largest personal finance websites on the internet. They believe that “a system front-loaded with rewards can help keep you on track. Small victories up front keep you engaged.”

Paying off high-interest debt first is the smart move mathematically. But personal finance is more than a math equation. Emotions are involved and paying off the smallest balance debt first allows you to have a quick win. From a psychological standpoint, getting that win could be more beneficial to you, even if mathematically it’s the “wrong” move.

Renting vs. Buying a Home (as an investment)

Whether your rent or buy, your home is probably the largest expense in your budget. With so much money on the line, what do the experts have to say on the matter? That depends on who you ask.

David Bach, author of The Latte Factor says “if you’re not prioritizing home ownership, you’re making a costly mistake.” He believes this is the biggest mistake Millennials are making. “The most important advice I can tell you right now if you’re young is: Don’t listen to these people that tell you should rent versus buy.”

That’s a very strong opinion. One that Jim Collins, author of The Simple Path to Wealth disagrees with. Collins argues that buying a home could be the worst investment ever constructed, “any investment that ugly would make my skin crawl. In fact, I’m not sure you could rightly call anything with those characteristics an investment at all.”

Conflicting Personal Finance Advice

Debt, debt elimination, and renting vs. buying are important financial topics that financial experts completely disagree on. The disagreements don’t stop there. Look for advice on any number of financial topics and you’ll quickly find compelling, yet conflicting personal finance advice on:

  • How to build an emergency fund
  • Using credit cards
  • Earning extra money
  • Buying a car
  • Investing
  • Retirement

Yes, even retirement is a source of conflict in the personal finance space. I’m a fan of the FIRE Movement and am actively pursuing early retirement. And while I don’t think everyone should pursue early retirement, everyone should pursue financial independence.

I hope that’s one financial goal that everyone can agree on, but someone will no doubt disagree on even that.

Final thoughts

If you spend enough time learning about personal finance then you’re guaranteed to quickly run into differing opinions or outdated financial advice. When you do just remember that when it comes to personal finance, one size fits one.

  • Don’t let conflicting financial advice discourage you
  • Take the advice that works best for your current situation and ignore the rest
  • Understand that what works for you today, might not work tomorrow
  • Be willing to change your plan when you find a better way, or when circumstances change

Do all of this long enough and soon you’ll achieve your financial goals, but always remember that just because something works well for another person, doesn’t mean it will work for you.

A financial plan is like a toothbrush. Everybody needs one, but everybody needs their own!

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