I have owned and operated this tiny slice of the internet for the better part of the decade; I do it, because, I enjoy it. During this time it I am not sure why, but I am always shocked when a personal finance topic becomes ‘hot’ again. It seems to happen when a number of larger personal finance bloggers start writing about a topic, then the smaller ones chime in with their opinion…and eventually you see a mainstream article on the topic. Most of these popular questions/issues are perfect examples of missing the forest through the trees.
These are just a few topics that I have read about recently read about that were discussed in excruciating detail that just didn’t matter for most people. This isn’t meant to bash those that are truly trying to optimize their particular situation, it is just to emphasize that following items should not stop actual financial improvement.
Personal Finance Topics that Do Not Require that Much Thought
Roth vs Traditional Qualified Account
This hotly debated topic gains a tremendous amount of attention every few years. This always struck me as odd considering the media is comfortable telling everyone that the average retirement account is basically zero. Regardless of the study/statistic you believe the question of whether to contribute to a roth or traditional IRA should not be a decision which causes paralysis by analysis.
The question comes down to whether you would like to contribute to a traditional IRA and take a deduction (if you are eligible), but have your retirement funds taxed as you take it out (hopefully) later in life OR contribute after tax money (if you are eligible) and have tax free access to your funds (hopefully) later in life.
There is no best answer, otherwise, the other wouldn’t exist! People get bogged down in the details (i.e. the trees) and miss the bigger picture (forest) that saving for retirement is the larger hurdle, and according to any study Americans are pretty shitty at it!
15 vs 30yr Mortgage
This is a debate that I have to admit I threw down an opinion on back in the day…way back in 2008. Being 9 years older (not wiser, just older) I can safely say, it probably just does not matter for most people. First, you have the question of whether most can afford a 15 year mortgage, and with a new surge of a ARM applicants my assumption is, simply, no. Hell, we, as a country, can’t even save for retirement, but we are going to take on an articificially higher home payment? No shot.
Even if we are going to ignore the question of whether we can afford, the next question is should we? Just because someone has a 30 year mortgage does not mean they have to pay it off in 360 equal payments. All someone has to do is pay the 15 year amount on the 30 year note and create their own 15 year mortgage with flexibility built in. Obviously there is a rate difference between the two, but that becomes a rounding error given the amount paid into the note when accelerate your mortgage in such a manner.
Which Credit Card Perks are the Best
With Credit Card debt higher than 4 years ago (and probably beyond) why would the average person with credit card debt care about points? It doesn’t matter if you have point system A or point system B, if you are carrying debt the credit card companies are winning!
Time spent on researching credit card point options could be much better spent trying to figure out how to get out of debt!
Optimization is Great But not at the Expense of Action
I am a huge fan of Chris Guilebeau’s Side Hustle School Podcast and he says something at the end of every episode that should make you think,
Inspiration is good; inspiration combined with action is better. Now get back to work!
Inspiration with regard to optimization is fantastic, but without action it is worthless and becoming paralyzed trying analyze every angle should be avoided at all costs!