As I’ve said many times before, the world of personal finance and this hobby are closely intertwined. It’s a natural progression, really. Someone is responsible with money, so they look to optimize their savings and investment strategy. Before long, they come across information on credit cards, touting accumulating rewards at a greatly reduced cost, err… for free. And the rest is history.
Why I (mostly) stopped reading personal finance blogs
While there are some unique voices in the community, they all essentially say the same thing. Oh sure, they invent fancy names to present the information as something original. It’s usually not. If it walks like a duck, quacks like a duck… and you know the rest.
Personal finance content boils down to these ten nuggets of wisdom:
1) Stay out of debt (mortgage is OK).
2) Live below your means.
3) Set up an emergency fund. Start with $1,000 and work your way up to 6 months’ worth of living expenses. Make sure to keep it in a CD or other FDIC-insured account.
4) Get life, health and long-term disability insurance. The last one is especially important for one-income families.
5) Save at least 10% of your salary.
6) Maximize your retirement contributions (if you can). At the very least, contribute enough to get a company’s match on your 401(k)
7) After you get your match, invest in a mutual fund IRA managed by Vanguard. (60/40 split of stocks and bonds is often recommended, increase stocks percentage if you are young.)
8) Once you are on the right track, you can start enjoying things like eating out and travel. But not before!
9) Wasting money on sports cars is dumb. If you need a family vehicle, always buy used (a minivan, naturally).
10) Buy my course where I can rehash the above information over a period of three hours.
Boom, I just saved you hours of reading. To be clear, I’m not saying there is no need for finance blogs. I mean, look at the consumerism culture we have in this country! People are obsessed with buying more and more stuff on credit and don’t worry about long-term damage it does to their finances.
Eventually, many find themselves in a hole and start looking for a way out. That’s where personal finance blogs come in. They provide motivation, expertise and tools needed to achieve the goal of debt-free living. There is clearly a demand for this type of information. But you can only skin a cat in so many ways.
The latest craze is FIRE blogs (financial independence/retire early). Mr. Money Mustache is probably the most well-known website in this niche. Warning! The author uses profane language quite often, which is why I reluctantly gave up on it a few years ago. And no, he doesn’t really care. MMM is an incredibly gifted blogger with original thinking and unique ideas. But I believe even he said most of what he wanted to say at this point.
While I admire FIRE crowd for their tenacity, I always wonder if they have a long-term plan on what they really want to do with their time. Retiring at 40 is great, but then what? Industrious person doesn’t just change overnight. Sure, many plan to travel and all that good stuff rather than sit in a rocker all day long.
But the thing is, most FIRE people end up starting a hustle of some sort after they officially “retire.” Type A personality (which most FIRE folks possess) needs a purpose. Heck, Mr. Money Mustache got into blogging, so clearly something was missing. And blogging regularly is no hobby, it is a business. So, why not just do what you love to begin with? Maybe start a business you enjoy and outsource most of the mundane tasks once you are in great shape financially?
Obsession with getting out of debt can equal depression
Most finance bloggers acknowledge miles and points hobby, some even participate in it. But the mentality is that ALL travel should be put on hold untill you get out of debt. Here is where I disagree. Don’t get me wrong, flying to Maldives should not even be on your radar. But using IHG PointBreaks promo to put together a cheap vacation or driving somewhere for a weekend can be wonderful for your psyche.
Taking the kids to the beach during one of our local IHG PointBreaks getaways
Sure, there will probably be dining costs (buy some discounted gift cards ahead of time) and few other expenses. But if this trip can pick you up emotionally, then it’s not really that bad, is it? Of course, I’m talking about doing something reasonable cost-wise. Yes, that credit card debt will take a bit longer to pay off as a result. But as long as you are on the right track, I think it’s OK.
Of course, do what works for you. I’m NOT a financial expert by any means, and still search for the right savings/fun balance myself.
Edit: I’m not necessarily referring to applying for new credit cards when you are already in debt. Sometimes buying points at a deeply discounted price can actually make sense. See comments section for more on this topic.
We got a loan for a sports car
It wasn’t my idea (I have an old minivan), but it’s what my husband wanted. He loves driving his Mustang and since he makes most of the money in the house, pitching a fit wouldn’t be fair. Contrary to “short-term adrenaline rush” argument, he still gets giddy about his new toy a year later.
Before we had kids, we drove junkers. We even called one of our cars Frankenstein. It was a tiny 1991 Toyota Corolla, and my large husband barely fit in the front seat. I had a 1992 Dodge Shadow that leaked oil and was even flooded at one point.
But we made do, mostly because I was saving money so I could one day be a stay-at-home-mom. I was laser-focused, putting away $10,000 out of our combined $40,000 salary each year. With that type of money, FIRE was not really an option, so we set a more realistic goal. We always paid cash for things (after charging them on a credit card first) and hardly ever bought anything new.
But my husband has always wanted a brand new Ford Mustang, so we finally got one. Not a base model either, but one with a special expensive package. I actually insisted on it because he will be driving the car for at least 10 years, so may as well get what he really wants. To be clear, we are paying 0% interest on it, and his job seems fairly secure. Is there a guarantee it will stay that way in the future? Well, no. Is there guarantee with anything in life?
Of course, I’m not suggesting you should take out a loan on a sports car! Male readers, don’t use me as an example to convince your wife, OK?
The best of both worlds
Like it or not, miles and points hobby is about spending, even splurging in many cases. It’s like Ford Mustang, only cheaper. Let’s face it, we don’t really have to travel, just like nobody needs a sports car.
Sure, you are usually saving a huge percentage off retail cost, but so what? If you wouldn’t have otherwise taken that trip, it doesn’t really matter.
It is extremely easy to get caught up in the fallacy of “free travel.” I’ve been there too, friends, but not anymore. These days I look at opportunity cost as well as nuisance factor when chasing after any credit card or promotion. If a deal requires a sizable upfront cost or effort, I will usually pass on it.
But it would be unfair not to acknowledge all the wonderful things made possible with the help of points. Like our upcoming trip to South Pacific or getting a presidential suite at a Hyatt resort via status match. None of it would materialize if it wasn’t for this hobby. If I only focused on the bottom line and putting as much as possible into retirements accounts, we would be sitting at home eating ramen noddles. What’s the fun in that?
That said, ignoring sound financial advice would be a mistake. Taking a vacation every month is an overkill. It’s fun, sure, but what is the long-term price? Would putting money in an IRA instead (while getting a 10% Saver’s credit) be a wiser course of action? I think for middle-class families the answer is Yes.
Leana is the founder of Miles For Family. She enjoys beach vacations and visiting her family in Europe. Originally from Belarus, Leana resides in central Florida with her husband and two children.