If there’s one thing that law and personal finance have in common, it’s that the right answer is often “it depends.”
So many of us look outside ourselves for the “right” way to do things with our money, but there’s no one-size-fits-all solution. It truly depends on the individual.
If you ask three different people the best way to pay off debt or which savings account is the best one, you’ll probably get three different answers.
Each of those three people bring their own thoughts, emotions, and experiences to their responses.
Plus, you have your own thoughts, emotions, and experiences that color the way you receive their advice.
In this episode, we dive deeper into this topic and talk about why personal finance truly is personal and what not to do as you’re learning about your money.
Lightly edited transcript appears after the show notes.
Topics Discussed
- the truth about the “right” way to manage your money
- examples of where this comes up
- what not to do as you’re learning about your money
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Lightly Edited Transcript
Hey friend. Welcome back to the show, I hope you are doing well and having an amazing day. So today I want to talk about the right answer. When it comes to pretty much any question regarding managing your money. I get questions about what is the right way or the best way to pay off debt, whether you should pay off debt or invest and it’s not just me I see these questions in different forums and stuff like that, like we’re all looking for this certainty of making sure that we’re making the right decision and doing the right thing. And with the debt question paying off debt like there tend to be two camps you know the Debt Snowball camp which says that you pay off your debts from smallest balance to largest balance, regardless of the interest rate, and then the Debt Avalanche camp, which says that you pay your debts from highest interest rate to lowest interest rate regardless of the balance, and there are pros and cons to both like, for example on the debt snowball side, you end up seeing quick progress so you’re motivated to keep going so that’s a big advantage of that one on the Debt Avalanche side, you tend to pay less money over time because you are paying off the debts with the highest interest rate so you’re accruing less interest, but ultimately the best method is the one that works, right, the one that you’re going to stick with the same is true with paying off debt versus investing, like some people believe that if the interest rates on your debts are lower than what you could earn in the stock market, then you should pay off your debt after or in tandem with investing. Other people think that you should just not worry about your debt at all just pay the minimums. And others think that you should split the payments and you know be paying off your debt aggressively but also making sure that you’re putting money into the market.
At the end of the day, it really comes down to what works for you, what will make you feel the most comfortable like we all have different thoughts about money, about debt, About savings, that kind of thing like one situation in particular I remember talking with someone about her money, and I was asking about how much she had in savings you like oh you know it’s not really a lot. Okay, well, how much isn’t a lot. Oh it’s just it’s not as much as I’d like it to be like okay well how much is it. It’s only 50,000 I was like, ma’am 50,000 Right, like for most people, for many people that would be a significant amount of money but for her it wasn’t a lot, it wasn’t what she wanted it to be. And the same comes up with savings like your emergency saving some people are comfortable having, you know what other people would think is too low and amount. Other people just want to keep saving money, but it’s not about the amount in the account. It’s about your thoughts about that amount. Right. Your thoughts are what create the feeling of security or insecurity, which is why someone could have $50,000 in savings and feel insecure and think that they need to save more. I also remember a situation with a blog that I was reading years ago. The blogger used to post reader questions, and the community would weigh in on them and so this particular one was a couple who, like they were maxing out their retirement accounts and investing in a separate brokerage brokerage account, and you know all of that and they had a savings account that had grown to six figures like you know $100,000 or so, and they were trying to decide what to do with the extra in that savings because they didn’t want it just sitting there in the savings account. And so the blogger posts their question in the community weighs in, and there were so many different responses so many different strategies for what they should do. Generally the comments broke down into, you know, paying more on the mortgage or investing. But, you know, some people said, invest the money, because the interest rate on the mortgage is so low, and other people said, you know, just pay on the house you’re gonna you know significantly decrease your mortgage and that’s so freeing. And then there were suggestions in between like our number one was keep putting money in the savings account until the balance in the savings account was larger than the mortgage, and then you can pay off the mortgage, all at one time and that way you keep the money liquid in case there’s an emergency, but you’re also making progress on the mortgage, and again the right answer is it depends. Right. We say that all the time as lawyers, it depends, we’re answering legal questions and people want this cut and dry answer yes or no, but it’s always fact dependent. And the same is true with our personal finances, right, it really depends on you. It depends on your situation. We’re all different ages, we’ve got, you know different things going on in our lives, there’s no one size fits all approach, personal finances personal. So what I believe and what I recommend might be different from other people, and that’s okay. But what I don’t want is for you to spin out because you’re listening to me, or listening to other podcasters, or reading blogs or following people on Instagram, and you’re seeing all these different approaches. And so you can’t decide which one, and you just do nothing right it goes back to our conversation last week about taking action, or the conversation I think it was episode 32 The cost of indecision. There’s no right answer, you just get to decide. You decide what works best for you and what works best for you is what you’re actually going to do right what you’re going to stick with personal finance is so much more than math, so we can’t just come up with a cookie cutter plan for everyone. What works for you might not work for the next person might not work for me. Right, so that’s how we get all of these different approaches to paying off debt or investing or whatever situation comes up in personal finance. That’s how we get all of these different responses to this couples question about what to do with their extra savings. Each of those responses, each of the podcasts that you listen to each of the posts you see on Instagram, reflect what that person would do in the same situation. But everyone has to take the advice they receive the information that they’re consuming, and figure out how it fits with your life. Maybe this part works for you, but you don’t like that part. Right, I’ve. When my husband and I started our debt journey, we came across, Dave Ramsey among other people. And I liked some of his philosophy, like the Debt Snowball paying your debts off smallest to largest. But I didn’t like some of the other stuff like only keep $1,000 in a savings account. Right, but that doesn’t make him wrong. That doesn’t make me wrong. Take the information that you’re coming across, take what works for you, come up with a plan that will move you toward your goals and that you can stick with use those things that you learn as guidelines, but don’t feel stuck right don’t get stuck in, not making a decision because there are so many different things that you have to do or not moving forward because you don’t want to do everything that somebody suggests that you do personal finance is personal. If you’re making progress if you’re moving in the right direction, you are achieving your goals or making progress on them, then you’re doing the right thing, right, figure out what works for you to get the results you want. And whatever is working for you, is the right thing. If you need help, coming up with a plan that works for you, you need help figuring out what that plan is for you I can help you. I’m a coach, you can head to rho Thomas comm slash coaching. Let’s set up a call and we can chat about how I can help. Alright, so I hope that is helpful for you. If you got value from today’s show, share it with a friend, please subscribe on whatever platform you’re listening on leave a rating and review those help the show get seen by more people come connect with me over on social media. I’m mostly on Instagram, also LinkedIn, but you can find me at I am rho Thomas. You can find me at I am rho Thomas art friend as we close out, I pray that you will go through all of the information that you have learned about personal finance and decide what works for you. I pray that you will come up with your plan and actually put it into action to reach your goals. And as always, I pray that you continue to take steps to regain control of your time, build wealth and live the life of freedom and choice, you deserve. Talk to you later.
Hi, I’m Rho! I’m a wife, mom, and Biglaw associate who believes that true wealth is having control of your time. I help busy lawyers like you take back control of your time by teaching you how to achieve lifestyle freedom through mindset shifts and financial independence. Read a little more about me here.
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