| I'm mixed on your views, I agree with your math problem analogy, but I think there is general advice - just as there are general properties of numbers - that can always lead to better financial outcomes if people abide by it. For instance, what I've always done and it has worked very well for me is the following: 1. Maintain constant revenue stream, even if work is part-time or all you have is just an investment paying dividends. 2. Never purchase anything you can't pay for in cash at that moment. 3. Try to save 10% of your income every month - even in low income months. 4. Don't be wasteful and don't blow money on "small crap" you don't need. i.e. junk food, fast food, trinkets, taking unnecessary trips or riding first class, leaving devices/lights on in your house, gym/any memberships or monthly recurring fees you don't absolutely need. 5. Finally, don't purchase things on a whim. I've tried to live by these rules my whole life, learned them from my Dad, and they've worked very well for me. I spend money, but usually only for high quality things I research into for a long time before purchasing, like a piano, a plot of land, tools, etc. I have zero knowledge of actual research into personal or home finance so this example is just my gut intuition based on personal experience, so just view it as a biased anecdotal opinion :) |
Your general rules are fine and make sense, but sometimes when you do break them, it becomes difficult to see the effect or know when to stop. If you didn't save 10% this month, without the math you don't get any immediate negative feedback. So then maybe a 2nd month with no saving is OK. In fact, with credit cards the feedback will be positive!
I've had a corporate finance career for 10+ years and here's my "math". I take the amount in my accounts today, then add and subtract my expected income and expenses out daily until I'm 80. Tada! Addition and subtraction. Nothing a basic spreadsheet can't handle. I know what my balance will be when I'm 40, 50 or on June 19, 2017. Anybody's well intention advice can be inputted and evaluated.
It's not a budget per se because I don't restrict myself like a budget. It's also a longer term look in detail, instead of just monthly numbers out a few years. I see what my daily overpriced coffee will do to me and I can decide if it's OK. (The daily walk to the coffee shop with the cute baristas is well worth it haha.)
"Dad or Mom advice" does have its spot, but I think it should stay values-based. Many years ago I got a lot of criticism when I bought my expensive new car. Everyone threw out these general rules to me, but I knew it was fine and I really enjoy driving it. I've had it for 9 years now. When it hits 10 years I planned to hand over the keys to my nephew (free). The "Dad advice" kicked in appropriately here when my brother said no way to giving my 16 year old nephew the car with its horse power and tinted windows etc.
So I understand family should teach you the appropriate values and such, but with all the mis-information in the personal finance industry, I wish people would do the math instead of following rules.