Personal Finance Continuum

Several PF bloggers have talked about the continuum they’ve traveled from ignorant to finance novice to book writing ‘expert’. And it seems there’s an untold progression to financial awareness that many presume look something like this:

Pay someone to clean my house
Buy my own cleaning supplies and do it myself
Use coupons to buy my cleaning supplies
Use half the recommended amount for cleaning
Substitute paper towels with rags
Make my own cleaners
Downsize my house to make cleaning easier and cheaper

Or perhaps like this:

Lease a new car
Finance a new car
Finance a used car
Save up for a used car and pay cash
Sell the car and buy a nice bicycle
Sell the nice bicycle and pick one up on freecycle
Sell the freecycle bicycle and walk everywhere
Make your own shoes

The tendency is to believe that when one moves from financial illiteracy to mastering the basics of personal finance that you become more frugal as awareness grows.

Not necessarily.

Instead of assuming that taking financial control means living in a shack eating beans out of a can and showering once a month while compiling a Scrooge McDuck worthy vault of cash – let’s look at a more likely scenario.

When someone becomes financially savvy it’s not just the amount of cash outlay that’s changing, it’s the mindset. It usually looks like this:

Buy whatever I want to buy because I can – on credit, loans or cash
Consider new options – buy instead of lease, do it myself?
Test one or more option – check out other insurance rates, try meatless meals
Weigh the cost savings against the time commitment, personal values and lifestyle
Make an informed decision considering all (or most) of the options and chosing the one that aligns best with personal values.

That might mean hiring a cleaning service. Or spending money on a newer vehicle, going out to eat or buying a smart phone. Changing your spending criteria will result in spending money when there are ways to be more frugal. It’s true that a gym is cheaper than a personal trainer and free weights are cheaper than the gym and water jugs are cheaper than free weights and… it’s always possible to find a cheaper alternative and debates have been waged for years over who is the most frugal of them all.  But financial literacy isn’t all about frugality – it’s about conscious choices.

The difficulty comes when we’re slugging through the endless number of personal finance choices and consider friends and family who have different values. While it’s difficult to see people make bad choices because they didn’t consider all the options it’s sometimes even harder to see someone look at the options available and choose different than you did.

It feels like judgement, doesn’t it? I mean, I have a 3 bedroom house and they bought a one room cabin. Or I use decade old cleaning rags while he hires a housekeeper.

It’s useful to take a step back and ask in these situations, how did you come to that decision? It’s non-threatening, seeks to understand and allows you to hear the other person’s point of view. Not just their point of view though, you’ll begin to see their values. That family that lives in a cabin, splits their own wood and cans vegetables from the garden places a high value on self-sufficiency. The couple that live in a busy city, use public transit and enjoy Pub Trivia place a high value on community.

How do your financial choices demonstrate your values? Do they communicate your values? As I mentioned yesterday, I engage in frugality in some very basic ways but I don’t feel deprived or cheap. The things I don’t care about spending money on are in line with my value system.


3 thoughts on “Personal Finance Continuum

  1. I think I read your post wrong. It doesn’t make sense to me. My financial picture when it comes to spending less looks more like this:
    Make the things you have last longer by taking care of them, make your own cleaning supplies,cloth instead of paper as much as possible,reusable items over convienence,trade/barder for goods and services,choose homemade over store-bought…things like this.

  2. Franchise concept, if implemented properly, helping them to eliminate costly errors, and effectively leapfrog the learning curve that many companies fail and let the growth of a much faster pace. In the longer term, the franchise model help to outperform franchisees and over to achieve what they could do by themselves independently.

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