Over the years of writing this blog I’ve struggled to explain why personal finance is so difficult for some people to get. Some people know what the right thing to do is but often can’t seem to do it or get frustrated with the huge volume of choices. Then I read a quote the other day that I think helps explain my problem. I won’t give you an exact quote, but the gist was economics is not a science, but rather an art since it lacks one of the basic science requirements: predictable outcomes. Personal finance therefore is perhaps better described as a form of art.
In most forms of art there are some general rules to follow. Plays usually have acts and novels have beginnings, middles and ends while paintings have certain classes like landscapes or abstracts. In personal finance we have rules of thumb such as spend less than you earn, but like all art itself even the general rules can be broken at times. For example, a novel starts at the end and then flash back to the beginning or using the Smith Maneuver may result in you spending more than you earn. Granted with a Smith you are spending money on investments, but you could still be breaking the general rule.
Yet in the past people have been treating personal finance as a science by focusing on the numbers which would imply there are only a certain number of ways to achieve a particular outcome. Yet the truth is there are no limits in art, you can do just about anything you can come up with. So you might know that you are better off to invest than pay down your mortgage, but still choose to pay down the mortgage.
Thus we have a problem of we have been teaching personal finance the wrong way. Learning any art is not typically done from just one teacher but rather several, since each teacher will treat things differently and teach you different things. Personal finance should be much the same way. Each writer will typically have their particular views on the world and methods on dealing with it and will teach you different things. For example, I’ve never had a problem with credit card debt and as such don’t have much to say on it. On the other hand I do fairly well on eating well on a limited budget so I’ve written a fair bit about that.
Perhaps the issue is people are not accepting the fact that we need to get creative with our finances and find a method or system that works for you even if it appears to break the rules. It might be odd, awkward or even a bit silly, but if it works for you to help achieve your goals then DO IT!
In the end, there is not ‘right’ way to achieve your goals, but rather just some guidelines that have been developed over the years from trial and error. So take what you need from others and get creative with solutions for you. You will make some mistakes, but that happens in all art. Keep trying and keep working to your goal and you will find a way to get there.
How do you see personal finance: art or science and why?