Today’s post is part of the Women Rock Money movement, with a massive 42 contributors at last count alone. Yes, that’s right, 42+ kickass women dropping knowledge today. While I haven’t been able to read the others at the time of this writing, as all the posts went live today at 6AM EST, but the snippets and titles alone make me question if I’ll be able to get any of my 9-5 work done tomorrow.
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You know who’s used to hearing often-conflicting advice about what they should and should not do in life? Women. We’re taught being fat is a crime punishable by spinsterhood, yet it’s somehow also our vain faults that eating disorders are on the rise. We’re supposed to lean in and be assertive at work, but only if we aren’t bitches about it. It’s exhausting and futile to try to satisfy all of society’s expectations. In a word, it’s bullshit.
In honor of International Women’s Day, I’m calling bullshit on one more thing, because personal finance rules are for dicks.
There are no blessed stone tablets of personal finance truth by which you need to live your life, and any expert that tells you your choices are wrong because they’re different is not an “expert” you should listen to. Hell, even “don’t play the lottery” isn’t one-size-fits-all advice, as there are undeniable exceptions.
We women are particularly judged for our spending choices, and on top of that, we still haven’t acheived pay equity with men (the wage gap is especially prominent for women of color), and we have to deal with the pink tax because apparently, we can’t use regular pens? [Real talk: do yourself a favor and read the comments on those “For Her” pens—comedic gold]
You don’t believe me? You think the “experts” are right and anyone who disagrees is just whiny, jealous, or playing the victim?
This is going to be fun.
BS Rule #1 Anyone Can Save a Million Dollars, No Excuses
This is not an exaggeration of personal finance advice. Real
dicks people say this without any sense of self-awareness and have even specifically called out disability and divorce as illegitimate excuses.
First off, this is straight up factually incorrect. If you are an individual with a disability receiving public benefits, you are legally not allowed to save anywhere close to a million dollars without losing benefits. Currently, because of the 2014 Achieving a Better Life Experience (ABLE) Act, eligible individuals can save up to $100k. Before 2014, and for those not eligible for an ABLE account? No more than $2k saved before being cut off. These means-testing programs force families to stay in poverty, and even the long process of applying for disability in the first place is mentally and physically taxing.
Most personal finance bloggers and experts would have heart palpitations if their checking accounts dipped below $2k. Making sweeping statements and generalizations as an able-bodied, high-income earner is as disgusting as it is profitable.
BS Rule #2: You Need to Save X% of Your Income or Have $XXX,XXX by Age Y
I get the impetus for rules like these. Really, I do. Guidelines give us a sense of where we stand in this “shades of gray” world, with the certainty of ye olde letter grade from school. But these rules are a disservice to people on both ends of the personal finance spectrum. It’s like teaching physics without calculus: If you don’t understand the underlying concepts, all you’re doing is memorizing equations.
Any savings percentage or age-based rule ignores the reasons for saving, as well as the specific constraints of the individual.
Allow me to introduce the equation I most love to hate. In the book The Millionaire Next Door, Thomas J. Stanley introduces a wealth equation to determine if you are an Under Accumulator of Wealth (UAW), Average Accumulator of Wealth (AAW), or Prodigious Accumulator of Wealth (PAW). Even for the math-shy, this is a super simple formula:
You are an Under Accumulator of Wealth (UAW) if your net worth is less than [your age] * [your income] / 10
You are a Prodigious Accumulator of Wealth (PAW) if your net worth is higher than [your age] * [your income] /5
Math! That means it’s time for some graph action up in here.
Graph: How a Constant 20% Savings Rate Can Be Simultaneously Awful, Average, or Amazing According to a Stupid Formula
The above charts an above-average person (let’s call her Jill) graduating from college at 22 with a salary of $55k, annual 4% raises, a constant 20% savings rate, and 8% annual growth on investments. Jill is a UAW until age 35, an AAW up til age 49, and a PAW from 50 on. In fact, unless you’re a trust fund baby or are similarly blessed, there’s virtually no way to start out as anything but a UAW in your twenties. Could a formula be any more useless?
To be fair, Stanely has stated that the equation is not meant for people much younger than 57, and that any time spent in something like Medical school should be subtracted from your age in the wealth equation (e.g. if you’re 56 and spent four years in medical school, use age 52 in the equation).
The problem is, this equation fails on both ends, as it doesn’t take into account the magic of compound interest or even the idea that saving a lot of money is Not The Point.
Look, I love money, but not because I have Scrooge McDuck fantasies. I love what money can do for me. Fergus and I are planning to retire at the ages of 29 and 35 to travel the world and focus on random projects without the need to profit (we’re notoriously bad at profiting). Using standard financial advice, I’d never have considered retiring before 50.
As another example, take a look at Gwen from Fiery Millennial. She’s walking away from 9-5 work at the age of 28 to take a risk and work for herself pursuing her side hustles full time. That is amazing! It’s also not something any sort of metric or rule of thumb was made for. That’s okay because Gwen is too badass for metrics anyhow.
As far as I can tell, the best use of these sorts of personal finance rules is for high-income dicks that just want to feel better about themselves.
Introducing the New FFF Wealth Indicator!
Do you, too, want to use a random equation you found on the internet to gauge your self-worth? Look no further!
Simply enter a number (literally any number; it does not matter), and we’ll tell you how much society values you.
BS Rule #3: Spending Money on Makeup or Fancy Clothes is Stupid and Frivolous
There's a stigma around "girly" purchases. Spending money on personal appearances is vain and silly, but a fancy new Tesla only ever seems to get compliments.
In case you haven't noticed, I'm a fan of math and facts, which is why I have no qualms saying buying and wearing makeup could actually increase net worth over time. Makeup alters perception, and almost always in a positive light. Wearing makeup could be one of the easiest and most rational things to do when preparing for a job interview, and the same could even be said for designer clothes.
And hey, if spending money on quality clothes that will last for years (while simultaneously promoting good labor practices and being environmentally conscious) is frivolous, sign me up.
More importantly, though, who cares? Just as your health is between you and your doctor, I'm going to leave the responsibility for your financial health between you and your accountant or you and your family. What kind of dick cares about how you spend your money?
Dick-Free Personal Finance Advice
Want some general advice to help you out in your own jouney to financial freedom?
- Write out your goals and values. What is it you want out of life? Do you want to travel the world, become a philanthropist, paint all the things, open a bed and breakfast, eat lots of chocolate?
- Get to know your spending and income. Tracking your money is a scary but eye-opening experience. Even if you think you know how much you're spending each month, you might be very surprised. Use Mint or Personal Capital to make it a little easier, and see if your spending aligns with your values.
- Make a plan. Are you going to cut down on eating out? Start an emergency fund? Are your expenses higher than your after-tax income?
- #1GoodMoneyThing. Don't get overwhelmed and think you need to change everything at once. Doing one small thing to help your financial life now is infinitely better than ignoring your finances.
That's it, y'all! Oh, and make sure to abide by Wheaton's Law at all times.
Do you have examples of bad personal finance advice? Let us know in the comments! Or, if you'd rather stay positive, we'd love to hear about your goals and how you're working towards them!