The Secret of Personal Finances Revealed

“Is it getting dark outside? Are you having trouble seeing? Turn the lights on!” is the gist of one “Wiggles Tips” segment on The Wiggles television show. These segments introduce the show’s preschool audience to a bit of humor – even they are old enough to know to turn on the lights when it’s dark out.

Newspapers and other media often have the adult version of Wiggles Tips when headlines like “People Are Upset about Gas Prices” appear on the front pages. Why is that news? I often ask myself, thinking back to the criteria for newsworthiness I learned in Journalism 101. Others might say, “That’s stating the obvious.” And we personal finance writers are some of the worst offenders. Personal finance books and articles often state the same obvious ideas over and over, elaborating in different ways:

Don’t spend money you don’t have

The prevalence of credit has complicated this simple advice, but every purchase is still a simple exchange of one thing for another, and those who have nothing to exchange can’t make a purchase. Bobby can’t trade his salami sandwich for Jimmy’s chocolate chip cookie if he doesn’t have a sandwich in his lunch. He might promise Jimmy tomorrow’s sandwich for today’s cookie, but eventually he has to pay up or he loses all bargaining power. He can’t trade food he doesn’t have. Yet many of us are spending money we don’t yet have, promising tomorrow’s sandwich and banana tomorrow for today’s cookie.

Cash doesn’t expire

If you don’t use all your money now, you can save it for later. Yet, our spending often increases to match our income, and we tend to forget that we may have higher expenses and/or lower incomes in the future. Sometimes we do act as though we have to spend all we earn right now or the money will go bad. It doesn’t, of course. Yes, you may lose some buying power due to inflation or risky investments, and yes, you might not live long enough to spend all you save, but in most cases, the money you save now will benefit you in the future.

When offered a choice between two things of equal value, choose the one with the lower price

Companies spend a lot of time and money to convince us that their products are far superior to their competitors’. Sometimes we believe in this superiority even when it isn’t really there; we pay more for products without getting more value. Additionally, limited-time discount opportunities – coupons, rebates, sales – can convince us that we are paying less for something of equal value when we could actually pay less for a product (or at a store) with no special discount. Other times, those discounts do save us a good deal of money. The simple, obvious task of paying less for the same thing can become complicated; another person’s perspective can help us distinguish between real and fake bargains.

You can improve your financial situation in two ways: spending less and earning more

A lot of people want to improve their finances without changing their habits, but unless you can convince your boss to give you a raise without adding to your workload, I don’t know how that’s possible. Either you have to change the way you spend (or don’t spend) money or give up some leisure time to earn more. You can buy less, pay less for what you buy, work more, or find a higher-paying job, but something has to change, and it all boils down to spending less or earning more. All the financial advice I’ve ever heard is some variation on one of these two obvious basics: spend less or earn more.

Buy low, sell high

This proverbial advice for success in the stock market may be the most obvious statement of all, but thousands of people earn a living by trying to figure out how to follow that advice. As with most obvious personal finance advice, there is always room for some elaboration and some disagreements over the best methods of improvement. Even the obvious isn’t always obvious.

I don’t think I’m putting myself out of work by telling you that personal finance blogs and books often state the obvious. Everyone needs to hear the obvious now and then – we see our own lives so closely that it’s helpful to have someone else point out factors we’re missing when we try to make decisions or plans. We can be so used to doing things the same way we always do them or distracted by an unrelated issue or simply focused on implementing one solution that we fail to see a more obvious solution to our problems.

The challenge for personal finance writers is rarely figuring out complex answers to financial difficulties, but rather stating simple solutions in ways that don’t make people feel embarrassed for not having seen the obvious themselves. The goal is to help people improve their own finances by offering them perspectives outside their own. I know I have learned new things from other personal finance writers, even if they do state the obvious; I hope you have, too.

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4 Responses to The Secret of Personal Finances Revealed

  1. Excellent points Shannon!

    I recently saw a number of comments at another pf blog ripping into the blogger for stating the obvious. Comments ranged from the sarcastic “tell us something we don’t know” to the less than eloquent, “duh!”

    It never ceases to amaze me at how overlooked the obvious often is. Thanks for reminding us that just because something is obvious doesn’t mean it’s unimportant.

  2. AMarino says:

    You listed all good points which the former poster already stated. When you have a newbie reading some of this information for the first time, it is new to him or her.

    Frankly, I have read some bits of information that I already knew but because of the way it was written – I saw something new and different in it.

  3. Gail says:

    It is simple to say, yet for many it is so very hard. Families with crushing financial burdens refusing to give up cable TV, individual cell phones, etc. Saying that they need them. One of the most important aspects of personal finances is determining what you really NEED versus what you really WANT. Most of us can find ways to afford our needs, but most of us can’t afford all our wants. With proper knowledge and experience handling finances, the ability to afford some wants appears, so just because you can’t afford something now doesn’t mean you can’t afford it forever.

  4. Osadg says:

    I don’t think there is anything wrong with stating the obvious. There is no magical cure for debt, and it’s silly that people don’t think the obvious things through. (Some) People get into debt, by spending money they don’t have and then want a magical cure for how to get out. It should always be obvious, but hey maybe one day after hearing the same advice over and over they’ll finally get it.

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