3 Personal Finance Absolutes That Need to Go

personal finance absolutesThere are a lot of opinions out there in the personal finance world. I didn’t really know about how diverse they were until I started writing this blog. And let me tell you. There are a lot of C-R-A-Z-Y opinions out there. Which is cool. I’m glad I live in a country that allows people to not only have crazy opinions, but also lets them embarrass themselves with them all over the Internets. I’m sure we all do it now and then. I’ve done it a time or two (or maybe three or four…maybe). But there are certain things that have in some way or another become absolutes, meaning if you don’t follow them, you’re stupid and irresponsible.

In general, I don’t particularly love absolutes. Obviously, there are certain absolutes I do believe in, but when it comes to something like finance, most of the time they’re created because it’s really just easier to throw out general advice than it is to consider the diverse personalities and habits of the audience. With time, I’ve come to learn that there are certain personal finance absolutes that need to go away entirely. Why? Well, because they’re stupid and irresponsible.

There are certainly more than three that I believe should go, but for the sake of time and your attention, I’m only going to talk about three. Feel free to disagree with me. Maybe we can start an Internet fight and we can both walk away thinking we won (isn’t that how all Internet fights go? :)).

Credit Cards

Here’s one of my biggest beefs with Dave Ramsey, who blasts anyone who would even consider owning a credit card. The fact is, there is such thing as responsible credit card use. We’ve earned thousands of dollars off of credit card rewards without paying a single dime on interest or late fees. It takes following a strict budget and keeping yourself in check, but it can work. You can make it work.

Now obviously, there are people out there who would tend to spend more money if they had a credit card. And Dave’s advice for them is spot on. But a credit card is nothing but a financial product. If you want nothing to do with them, that’s your decision. But there needs to be more focus on the behaviors that lead to uncontrollable spending rather than blaming the products people use to do it.

Owning a Home

Americans are obsessed with home ownership, and it’s ridiculously unhealthy. And it doesn’t help that our government does its darndest to enable it, especially since the housing market crashed. Tax deductions, subsidies, and relaxed mortgage lending regulations for low-income people all point to the idea that owning a home is somehow part of the American Dream.

I’ve been asked more than a few times when my wife and I are going to buy a house. I was actually pretty focused on it as the end goal when we were living in Arkansas. But there are a few reasons why we decided against it, but the main thing is home ownership is a long-term investment. Most people lock themselves into a 30-year mortgage. But the average number of years people actually stay in a home is only 9 years.

So basically if you buy a $200,000 home today at a 4.5% interest rate, you’ve only paid $35,000 to the principal with another $74,000 going to interest. As investments go, depending on where you live and what the economic situation of the time is, you might sell the home for a gain–or you might not. And of course, that’s also not adding in property tax, homeowner’s insurance, private mortgage insurance, repairs, and all that other fun stuff.

People are also moving around a lot more than they used to. I know a handful of people who have been stuck paying two mortgages or stuck in a home too small for their family because they can’t sell it.

So remember, home ownership isn’t always an outward sign of financial success. In fact, nowadays it’s often a sign of sheer stupidity. That being said, if people want to make stupid decisions, that’s their right.

Term Insurance or Die

See what I did there? 🙂 Life insurance is a morbid topic. And sad. When I sold the stuff, some wives would even start crying right there. It was awkward. But here’s the thing. Most people will tell you that term life insurance is the only way to go. ever. And if you buy anything else, you’re a cottonheaded ninnymuggins.

The fact is, there are situations where whole life insurance is actually a good product to have in your arsenal. While we don’t have enough money yet to convert some of our term insurance to whole life, it’s definitely in our future plans. But that’s the thing. You get these wacko money-grubbing insurance agents who will do anything to get you to buy whole life because it gets them a bigger commission. So I get the turn off there. Trust me, I do.

But when I sold insurance, I met a ton of people who had great experiences with it and used it as just another tool in their overall portfolio. Does that mean it’s for everyone? No. And am I going to call you a cottonheaded ninnymuggins if you don’t want it for yourself? Maybe, but just for funsies. No really, it’s OK to go either way. Just don’t do it blindly or without a necessary research. AKA don’t be a moron.

Don’t Be a Jerk

In the end, it’s cool if you have differing opinions on what works best for you financially. We’re all different and there are thousands of different ways we can manage our finances. But don’t for one second think that you’re so special that you get to be the one person who decides how everyone should do it. We call those type of people dictators. Or jerks, if it makes you feel better about yourself.

If you think credit cards are bad, that’s cool. But don’t be self-righteous about it (the same goes the other way too). If you see someone buying a house before they should, don’t talk smack behind their back. That’s their decision, and they’ll probably pay for it later. And rather than spending all our time debating products, let’s focus more on behaviors, because that’s really where the seed of financial independence lies.

(photo cred)

Are there other personal finance absolutes that you think are ridiculous? Do you think I’m ridiculous? Do you like pizza?


12 thoughts on “3 Personal Finance Absolutes That Need to Go

    1. Yeah, I think going with absolutes just because someone said so is absolutely stupid. It's easy, and for a lot of people, it makes the process simpler, but in a lot of cases, it causes more harm than good.

  1. There are very few absolutes in the world even though some people only see the world in absolutes. I'm surprised about the the term insurance thing I guess that's been drilled into my head so much I thought that was an absolute too. I'll have to look into that. And you're right people need to stop being jerks about stuff! Great post.
    My recent post Standard Deduction or Itemize?

    1. Thanks Syed! You’re right, in fact I’d say MOST people see the world in absolutes, which is kind of sad. That’s usually what makes them jerks too.

    1. Yeah that dude needs to lighten up a little. But then again, he has a product to sell as well, and I'm sure he'll do whatever he can to protect it.

  2. First off, I can't stand pizza, it's just gross. Anyway, I do agree with you to some extent. The one thing I have to disagree with is home ownership. I'd rather pay 74k in interest and eventually own my home without having to make payments, than pay rent and get no equity out of my money. Sure, I like moving around, but who's to say I can't buy a house and rent it out…allowing my tenants to build the equity for me? Anyway, overall, great post here Ben, thanks for sharing!
    My recent post Are We Headed Toward Another Economic Recession?

    1. What?! No pizza?! My grandpa doesn't like it either. What a weirdo 😉

      I do see your points on the home ownership, and those are definitely the more enticing advantages of it. But some people aren't meant to deal with the hassle and costs of being a landlord or working with a property management company. Definitely a great opportunity, especially if you're after the equity, but I think it hurts some people who aren't ready for it because they think that's what they have to do to reach some prestigious level in their lives.

  3. I would eat pizza every day if I could. I believe there will be pizza every day in heaven. (Well, make that really delicious pizza with no consequences. There was pizza every day in law school, but if heaven is like law school, I’m not going.)

    1. If I had the time to work out an insane number of hours a day, I’d definitely eat pizza every day. Didn’t they do a thing on Michael Phelps’ 16,000 calorie diet back when he was training for the Olympics? That would be me, except it would be all pizza.

      As for law school, I can’t imagine how people get through it. I’d probably bash my head against a wall after the first semester.

      1. Even factoring in the medical bills associated with bashing your head against the wall, you would probably still come out ahead if you did that instead of finishing three years of it.

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