There are No Money Rules

I abhor when personal finance bloggers and authors create “unbreakable” rules when it comes to finances.  To be blunt, I think most of them are simply bullshit.  I think a lot of them are made to be “unbreakable” because the author thinks the reader is too stupid to understand there are gray areas in personal finance, or alternatively, the author is too stupid to understand there are exceptions and gray areas.

Even the simple, spend less than you earn is in direct violation when someone is using leverage and credit to build a new small business.  Imagine if no one violated the holy grail of personal finance?  People should act because they have logic and reason behind their moves and avoid the title of “financial sheep.”

There are gray areas in life and thus there are gray areas in personal finance!

Money Rules That Shouldn’t be Considered Holy

  1. Everyone should buy their home – This is just ridiculous. There are tons of reasons why one would want to rent.  Maybe you don’t know where you want to live or maybe rents are really cheap in comparison to home prices;
  2. A professional Degree is an easy path to riches – Ask doctors with 400K of loans if they “feel” rich…ask any 4th tier law school recent graduate how they are doing?
  3. Leasing is bad – Why is owning a depreciating asset always the right call?
  4. All Whole Life Insurance Is Evil – Want some reasons? Funding a buy-sell, Estate Tax Reasons, bond fund alternative, planning for a child with special needs, building your own pension,
  5. Annuities are should never be thought about – First you have the problem that most personal finance bloggers don’t even know the differences between immediate and deferred variable annuities. Then this leads you to the problem about fixed versus variable and why variable annuities could be a good thing depending on the risk tolerance of an individual.  There is a reason they exist and it isn’t just because the person selling them contain jedi powers.
  6. You Can’t Beat the Market So don’t Bother Trying – The efficient frontier is questionable at best considering there are market corrections weekly. Besides who is completely comfortable with just throwing their money at an index and hoping for the best?
  7. If someone has Nice things they must be in debt – This one is frustrating. Maybe they followed the same path as you but were better at number 6? lol
  8. Only use a fee only advisor – This one usually makes me laugh for a couple reasons.  One, it creates complete distrust in the professional you are choosing to use. Two, most people who spout this advice usually aren’t using any financial advisor.
  9. You Shouldn’t Leverage, Take on Debt or ever use a pay day service – See above.
  10. Don’t Buy Insurance on a Child – I never understood this one.  Who the Hell is going to work after their child dies?  I bought Life Insurance on my Child and I am proud of it.
  11. Credit Cards are Evil – No they aren’t there are just people who use them that don’t understand that they should be paid off.
  12. ARMs are Terrible – Would I use one now? Probably not because the spread isn’t big enough, but a 10 year or 5 year Adjustable Rate Mortgage might be perfect for short ownership of a house. Are there risks? Of course, but are they controllable, yes.
  13. Lists have to end at 10 lol

You don’t have to agree with any of these 10, that isn’t the point of the exercise.  It is just to get one to think that there are other alternatives out there.

13 Responses to There are No Money Rules

  1. Sam says:

    As I always like to say, Everything is rational! People do what feels good to them, otherwise they wouldn’t do it!

  2. Great points here evan – there are no rules that shouldnt be broken. Personal finance is personal, so the more information you have about decisions to make the better off you’ll be, but if you hew to a rule like that, you could end up being stuck (ask anyone in an underwater house)

  3. You are so right, but what if everyone did follow the established “rules” — then what would we write about?

  4. Mike Collins says:

    They don’t call it personal finance for nothing. What works for one person may be completely wrong for the next. Nothing is ever completely black and white.

  5. Glen Craig says:

    You’re absolutely right! But unfortunately that’s what makes personal finance hard at times too – there isn’t any one answer that’s right.

    Thanks for shedding light on some of these rules!

    I think another is Never Buy a New Car (or always buy a used car).

  6. Here are more:

    - You must index. Active management is always bad.
    - You must go to college to earn a good wage
    - Owning a business is risker than working for someone else
    - Your house is an investment
    - Treasuries are “safe” investment
    - You shouldn’t own gold or silver since it’s not money

  7. I totally agree. It’s “personal” finance right?! There are always exceptions and differing circumstance that can change what one person would do compared to the next. I tend to look at things as guidelines or as a base line, not as a rule.

  8. Drew says:

    Good to see somebody try to give the PF Establishment a bit of shake-up. I don’t like it when PF experts and authors are referred to as ‘gurus’, as if only they have privileged access to mythical financial knowledge and it’s to be accepted and followed blindly, without question.

  9. Tawnya says:

    Yes to each is own. As for me, I am comfortable paying my mortgage than renting. What I do is just to save money from being frugal on other aspects of my finances so I can have extra money while paying my mortgage and other bills.

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