One of my favorite Money Rules is Money Rule #1: Personal finance is more personal than it is finance. I wish I could take credit for it — as I wrote in the book, it comes from financial planner Tim Maurer, one of the many people I tapped when I was gathering rules for the book.
But I love the sentiment so much I tend to share it often. Because while there’s a lot of standard advice out there when it comes to your money, ultimately, you have to make the decisions that are best for you. That may not be what’s right for your sister, or your mother, or your best friend or your coworker. But when it comes to your finances, the last thing you want to do is follow the crowd. Often you’ll show up too late — as is frequently the case when people hop on an investment bandwagon — or you’ll make a decision that isn’t in your best interest. Below, a few scenarios in which this rule plays out:
- Building a bigger cash cushion. No, money in the bank isn’t going to pay you a great deal of interest these days — you’ll be lucky if you snag above one percent. Standard advice, given by me and other financial experts, is to keep three to six months of expenses in there anyway, so you have cash to fall back on in an emergency. But what if you don’t feel like that’s enough? Maybe you think a years’ worth of cash would help you sleep at night, or you’ve thought about your expenses and you know that nine months is the right number for you. That’s fine, too. Your money won’t get the growth it would elsewhere, but your contentment is worth it.
- Chasing the biggest strategy. We’d all like to earn more. But it’s also okay to turn down a higher-paying job because it will leave you limited time to spend with family, or because you don’t feel that it suits your interests as well as your current role. And it’s fine to leave a higher-paying job for a lower one because you think you’ll enjoy the work more — as long as you’ve thought it through, consulted your budget and talked to your family about your decision. A big, flashy salary isn’t the end all be all if you’re forced to sacrifice your happiness. And — unsurprisingly — taking on a role you won’t enjoy doesn’t often lead to success.
- Setting your own retirement age. Yes, 65 is the standard. But maybe you’ve set yourself up with some strong savings efforts early on and you’ll be able to pull back at 60. Or you want to work a few extra years to foot the bill for your kids’ college education, so they’re not saddled with loans. Or maybe you never want to retire completely, because you enjoy your work too much (I often fall into this camp). It’s your choice to make.
- Paying bills automatically. You probably know I’m a big fan. It keeps me organized, and makes sure bills get to their destination on time. But if you like writing those checks each month, and you prefer to continue to do it manually, that’s okay too. Some people get nervous at the prospect of money being pulled out of their checking account without them physically triggering the transaction. If you want to sit down on a set date each month (preferably one close to when the bills arrive) and write out those checks or click the keys to send the money on its way, you should do it the way it works best for you.