Posted on October 18th, 2012
**Today?s guest post is contributed by Jeffrey.**
One of the greatest pieces of personal finance advice I ever received was to know myself well. Personal finance is personal. No matter what the financial gurus say, one size doesn?t fit all when it comes to personal finances. What may work for one person often doesn?t work for the next and vice-versa. Due to this, it?s important to know yourself well so that you can take the financial advice that is out there and decide whether or not it really makes sense for you.
I Snack When There?s Food Around
The classic example for me is buying food in bulk. Most articles about how to save money on food recommend to purchase food in bulk to save money. It seems to make sense when you look at the numbers. If you eat a certain snack on a daily basis and it usually costs $1.00, buying a month?s worth of that same snack for $0.75 when it goes on sale will save $7.50 during the month (paying $22.50 instead of $30.00). If you only look at these numbers, buying in bulk when things go on sale makes sense.
For me, however, I have learned from experience that it doesn?t quite work like that. My problem is that if I have a month?s worth of a certain snack available, I will eat it much faster than if I only have a day?s worth. In fact, that month?s worth of food would likely be eaten in less than a couple of weeks which actually makes buying in bulk more expensive for me (plus I eat more than I should). Since I know this about myself and know I don?t have the discipline when I have a lot of food around, I keep my shelves and refrigerator practically bare. Yes, I end up paying more per item when I shop, but I end up spending less on food overall and eat a lot healthier.
In this case, it was important for me to go beyond the actual cost of the food and understand how I consume food when it?s around. If you have the willpower to stick to eating set meals and not constantly snacking, buying in bulk can be a great way to save money. If, on the other hand, you are like me and know that you will eat more when there are extras around, then buying in bulk may not make financial sense.
I Have A Lot of Credit Cards
A lot of people get into trouble with credit cards and therefore limiting the number that you have (or not having any at all) is often recommended by financial experts. I?m not one of those people. In fact, I usually open a few new credit card accounts each year to take advantage of the bonuses that come with opening them up. If a credit card is going to give me a couple of free flights or a week?s worth of hotel stays just to carry their card, it makes it worthwhile for me to get it. I have always paid off all my credit cards in full each month and I have never paid a yearly fee for a card (I simply call and get the yearly fee waived or close the card if they won?t waive it). Credit card companies make money because they know most people who get their cards won?t do these things, but since I do, getting them saves me a lot of money.
Experiences Make Me Happy
I had the fortunate revelation many years ago that experiences are what makes me happy, not things. I don?t own a lot of things, and the things I do own are basic and utilitarian ? they were bought to serve a purpose rather than to make a statement. When it comes to products, I buy what I need and nothing more. I have an inexpensive, no frills car that?s super reliable. I don?t own a cell phone (I?m always on the computer so there is really no need). I don?t own a home, or even rent. My wardrobe consists of basics that both travel and layer well. Everything I own besides the car could probably fit into a small closet. By not spending a lot of money on the things that most people feel they need, I am able to spend the vast majority of my money on experiences that make me the happiest.
I Love To Travel
Most financial gurus will say that owning a house is a good investment, but when it came time for me to decide whether I should purchase a house, it simply didn?t make sense. I happen to have a job where I can work anywhere as long as I have an Internet connection. I had the choice of buying myself a house and then spending my days sitting in the home-office doing my work, or I could forego a house and travel full time. After running the numbers, it ended up being much less expensive for me to travel full time than to own a house, enough so that I could invest the difference and come out way ahead with much less risk.
The above are just a few examples of how me knowing myself well saves me money. They are about me and may not apply to you in the least bit. My guess is that they probably don?t. But just as I am different from you, you?re different from many of the people you know, including that average person which all the financial gurus write toward when they create a book.
A perfect example is getting out of debt. When people are looking for the best way to pay of their debt, they are often told to snowball it. What many people don?t realize is that there are a number of different ways to snowball debt depending on what factors are most important to them. This is the case with much of the financial advice out there. It?s good advice for a generic person, but you really need to look at your situation and your financial goals to decide if it really applies to you. When you know yourself well, you have put yourself in a position to do this.
Jeffrey Strain is a personal finance writer, digital nomad and owner of savingadvice.com
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