What’s Your Financial Philosophy?

Have you ever thought about your financial philosophy? Or what you think of the leading financial philosophies out there today?

You might be surprised to find out that many popular ‘financial gurus’ of our day actually propose very different views on how you should spend your hard earned cash.

Let’s do a quick poll, shall we? Which of these popular authors on finance have you heard of before….

• Dave Ramsey (author of the book: The Total Money Makeover)
• Tim Ferris (author of the book: 4 Hour Work Week)
• Mr. Money Mustache (blogger and 30-year-old retiree)
• Robert Kiyosaki (author of the book: Rich Dad Poor Dad)
• Joshua Sheets (producer of Radical Personal Finance podcast)

Do you subscribe to any of their financial philosophies? Admittedly these people are sometimes considered extremists for their views.

Where am I going with this?  

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I think you need your own financial philosophy….

Why? How are you supposed to achieve your goals, live the life you dream of, or even know what that dream is without a personalized and well-thought out approach to your finances?

Everyone’s financial philosophy will look different for them, and their journey to find said philosophy will look just as different too.

I’d like to share the evolution to my personal financial philosophy. Then I’ll give you a few suggestions at the end on ways to start exploring the differing views out there and to start forming an opinion of your own.

The Evolution of my Financial Philosophy

Most of us inherit our initial views of finances from our families and their spending/saving habits.  So, where better to start than my foundational view of finances that I inherited from my family?

My Inherited Financial Philosophy

I grew up in a single-income household.  I was very blessed to have a dad who earned enough enough that my mother could take care of us kids full-time. My family spent within their means at all times and thus I inherited a healthy view on debt: you just don’t do it.

My parents were able to pay for my expenses, including college and a wedding by saving for them ahead of time. I knew that other families didn’t do it this way, but for us, debt was never an option.

Budgeting just wasn’t part of how my family did finances, so I didn’t exactly know what that would look like in my life.  But I generally viewed them as good things. As someone who enjoys manipulating and analyzing numbers, they seemed fun and positive.   A way to control your finances.

Spending wasn’t given a ton of thought in my upbringing, or at least I wasn’t brought into that thought.  So, while perhaps still on the frugal side, I had no fear of buying the extra purse I liked or going out to eat one extra time.

As I’ve learned recently, you can’t talk about financial philosophy without having a work philosophy as well.  So, my perception of work saw my father as the dedicated bread-winner, who never once complained about his role.  He dutifully worked with honor and pride in what he did.  And my mother (whose path I figured I would follow), worked several years at an unfulfilling accounting job until she had me and officially became a SAHM.

My (mostly inherited and personally unexplored) financial philosophy going into marriage looked like this:

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary (I assumed I would eventually become  a SAHM)
• Give your first-fruits to God
• Money is for our enjoyment
• Shopping is fun!!!!
• Retirement? Isn’t that forever away? Why should I care….

DH’s Inherited Financial Philosophy

When you get married you merge two financial philosophies into one set of finances.  That generally means that it’s important to understand the other person’s background and belief on the topic.

Jake’s family has some similar financial philosophies to mine, and some very different ones.  He also grew up in a single income household with a SAHM. They also believed that you should never ever go into debt.  Additionally, they saved money and contributed to most of his college tuition. In all these ways, we grew up very similar.

But, Jake’s family had a few different philosophies than my family.  First, they generally minimize all spending at all costs. By virtue of spending as absolutely little as possible, they saved much.  This philosophy of highly valuing every dollar spent also meant that they valued work.

Jake and his siblings all worked every summer from their early teens on. They saved for college and bought their own non-necessities. So they were instilled with the value of hard-work early on.  Jake’s father and mother had similar work situation to my parents, so I believe we both saw this as our path going into marriage. (Him eventually becoming the sole bread-winner while I assume the role of SAHM)

Going into our marriage, my understanding of Jake’s inherited financial philosophy is summed up below:

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary
• Give your first-fruits to God
• Pinch every penny you possibly can
• Wealth isn’t important; so long as I can support a family

Merging Philosophies: Cue Dave Ramsey

So going into marriage we thankfully didn’t have too differing of views on how our jointly earned money should be handled.  We both conceded some to our major difference: spending.

Basically, I reigned in my shopping habits and endured hot nights without air conditioning, and he said yes when I asked to eat out on the occasion and didn’t contest the monthly clothing splurges that I enjoyed.

This seemed to work out fine for us, but we were eager to take the best approach going forward now that we were both ‘adulting’.

And that is when Dave Ramsey entered our life… 

Our first shift in financial philosophy came when we merged two lives into one, and the second was when we read the ideas of popular Christian finance expert, Dave Ramsey.

We read his book, The Total Money Makeover (or was it Financial Peace… I can’t remember). Overall, his views did not hugely vary from our inherited ones.  And, for the most part, we decided to adopt his financial practices. These are the 7 steps in Dave’s financial philosophy:

1. Save an emergency fund of $1,000
2. Wipe out all debt, except for a house mortgage
3. Create an emergency fund equal to six months of salary
4. Invest 12% of your income into retirement funds
5. Save from birth for your child’s college education
6. Pay off your home mortgage
7. Build wealth by investing a significant amount of your income once you have no debt at all.

When we read his book, we were at step 2 and decided to achieve step 3 and create an emergency fund.  This was a bit difficult for me, as I like to see money working for us and having all that cash in a liquid spot meant no interest….

Now beyond those steps there are key philosophies that Dave preaches and they are these:

• Budget, budget, budget, budget!!!
• Budgets are freeing… not oppressive
• Stick to your budget by using cash
• Don’t use credit cards!
• Prioritize paying off debt
• Save for your kid’s college fund
• Save for retirement (and don’t worry about it too much, the market will do the work for you)

I would say that these ideas were not a far deviation from our new joint philosophies and we adopted them all with two exceptions: we use credit cards.  We already have a firm stance against going into debt with them, use them like debit cards, and see them as free points that would be unwise to leave on the table.

And secondly, while we created a comprehensive budget and used it to experience freedom in our financial decisions (knowing that we had set aside that amount for the purpose of enjoyment: restaurants, clothes, fun, etc.), we generally stuck within it but did not heavily enforce it.

Now, a year into marriage our financial philosophy has developed as follows (with changes highlighted):

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary
• Give your first-fruits to God
• Money is for our enjoyment
• Pinch every penny you possibly can
• Wealth isn’t important; so long as I can support a family
• Shopping is fun!!!!
• Budgets allow us to enjoy our money
• Accumulate an emergency fund
• Retirement? Isn’t that forever away? Why should I care…. 
• Save for retirement, but don’t worry too much about it
• Save for a house

And that last one became our newfound financial focus.  Living within one person’s salary meant we had to save the other’s.. but for what?  A house, yes, we decided that is what we would save for. (Notice at this point we are both fairly new to our careers and ‘adulting’ and had yet to develop our own ‘work philosophy’)

Buying a House: the HGTV phase

Looking back, I realize that the process of buying a house as an investment and to fix up has greatly altered our financial philosophy.  While I can’t necessarily assign one person’s ideas to this shift, I will generally call it the HGTV phase.

We bought a fixer upper for a good price and bought wholeheartedly into the idea of sweat equity presented by so many HGTV shows. This home was our greatest asset (an idea I now believe to be a fallacy). And we would pour our spare time and effort into making it even more valuable.

At this time we were still committed to living on one income which meant that instead of saving for a house, my salary now went to paying it off.  Our goal was to be able to pay off our mortgage entirely before I left the workforce to inevitable join the ranks of SAHM’s. (This prioritization of mortgage payoff is highly influenced by Dave Ramsey’s philosophy that all debt is bad debt.)

At this point in both our careers we both began to realize that for some reason neither of us understood, neither of us approached work the same way our fathers did. We both felt dissatisfaction, angst, and overall like we were not the diligent, dutiful workers that our dads both modeled.

That is not to say we didn’t try/work hard and maintained a high work ethic. In fact, Jake worked very hard and well exceeded his boss’ expectations.  Yet, for some reason we didn’t find the satisfaction or contentment in this as we thought we should. Foreshadowing a work philosophy shift…

We throw ourselves into making over our home, and spending for the house was considered an investment.  At this point let’s take another look at the developing financial philosophy:

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary
• Give your first-fruits to God
• Budgets allow us to enjoy our money
• Accumulate an emergency fund
• Save for retirement, but don’t worry too much about it
• Save for a house
• Our home is our greatest asset
• The best way to invest our time/money is in renovations
• Pay off our mortgage so I can become a SAHM debt-free

Career Dissatisfaction: Financial Stagnation

That’s a fun title, right? Haha… but truly we did (or at least I did) enter a period of deep dissatisfaction. I was discontent with my role as a tax accountant and had an intense longing to have a business of my own.

This took on many forms and pursuits.  Jake even experienced it too, briefly considering the possibility of flipping houses as a new job.

After chasing several rabbit trails, I realized that for the time being it was financially advantageous to continue as a tax accountant as long as we were prioritizing mortgage pay off.

And in the end (this is a topic for another time), Jake and I learned to be content where we were.  But, we also finally recognized that we may not have the same work philosophy as our families had.

You can chalk it up to our millennial-ness, or an entitled culture, or even a generation that saw their parent’s work away much of their childhood (not that this was our experience). But, we realized that we did not subscribe to the past generation’s Live to Work philosophy, we felt akin to the millennial outlook: Work to Live.

So long as we were employed to carry out another person’s agenda, our work is merely a means to fund living our life – which is what truly mattered to us.

Why am I talking about this? Because at this point, our work philosophy began to significantly impact our financial policy.

The first mindset shifts looked like this, and were very gradual but steady in direction:

• As long as I have to give 40+ a week to someone else; I am going to enjoy the rest of my time
• I’m selling all my time in exchange for this cash; let’s enjoy it
• We’re working so much… so we NEED and can AFFORD to eat out more, travel more, and buy MORE

Do you see the direction we’re moving?  I would actually say that it was a decided shift from a heavily weighted slant towards Jake’s inherited philosophy back to my inherited philosophy.  The key being a distinct change in how we view our spending habits.

We still budgeted, but we just raised our budgets… We still put my income towards the mortgage, but each raise went directly to funding a lifestyle increase. And now our financial philosophy looked like this:

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary
• Give your first-fruits to God
• Budgets allow us to enjoy our money
• Accumulate an emergency fund
• Save for retirement, but don’t worry too much about it
• Our home is our greatest asset
• The best way to invest our time/money is in renovations
• Pay off our mortgage so I can become a SAHM debt-free
• Pay off our mortgage so I can stop being a corporate slave and work for myself
• Spending is enjoyable… let’s do it some more, since we’re stuck working for it

And maybe now you see why I also titled this period ‘Financial Stagnation’. Because, while we didn’t stop any of our healthy money habits, we certainly didn’t push to improve them or grow our wealth.

Millennial Mindset Adoption: Enter Tim Ferris

We were well along on our journey of consoling ourselves on our newfound work philosophy with increased spending and lifestyle enhancement, when I came across the book: 4 Hour Work Week by Tim Ferris.

Most would call this a book on ‘lifestyle’ rather than ‘finances’, and I would agree and alternatively say it completely altered my ‘work philosophy’.

Tim proposes this fanatical idea that you can work only 4 hours a week, escape your 9-5, live anywhere, and join the new rich. Ludicrous sounding, right?

Well, his ideas were just revolutionary enough to make me re-think my entire work philosophy.  Why did I accept the societal dictation that my work should take me exactly 40 hours a week? Why did I accept the ‘deferred life plan’ offered by society that said we had no choice but to slave away until 60+ before we can begin living and enjoying life?

Now Tim Ferris offers many views and suggestions on “lifestyle-design”, some of which I found interesting, other I dismissed.  But, in the end I finally inducted myself as a millennial and rejected society’s safe, comfortable, and terribly boring plan for my life.

Someday, somehow I would escape my 9-5, build passive income streams, and enjoy ‘mini-retirements’ redistributed throughout my life.

Now it’s important to note that Tim Ferris and Dave Ramsey promote very different financial philosophies… Tim says it’s all about cash flow to sustain a ‘rich’ lifestyle.  But he rejects material possessions as a means to live a rich life, and instead suggests that experiences are what you should seek and can now afford since you no longer buy material things.

This is all very different from Dave, who advocates building wealth and leaving an inheritance.
In fact he states that you should live like no one else now so that you can live like no one else later. This is a strong affirmative view of living frugally now in order to retire well later in life.

At this point, I shift from Dave’s mindset to Tim’s and thus a new financial philosophy emerges:

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary
• Give your first-fruits to God
• Budgets allow us to enjoy our money
• Accumulate an emergency fund
• Save for retirement, but don’t worry too much about it
• Our home is our greatest asset
• The best way to invest our time/money is in renovations
• Create passive income streams (but how?) to free us from the 9-5
• Pay off our mortgage so I can stop being a corporate slave and work for myself
• Spending is enjoyable… let’s do it some more, since we’re stuck working for it
• Spending on travel is enjoyable… let’s do it some more, since we’re stuck working for it
  

FIRE (Financial Independence & Early Retirement): Enter Mr. Money Mustache

My Tim Ferris stage began in January of 2016 and I again poured my energy into attempted to figure out some way to create a passive income stream for us.  Once again, I basically struck out, and defeatedly postponed those efforts to post-mortgage payoff when I would have the ability to actually quit and pursue a business full time.

I accepted my fate as a corporate pawn for the time being and stored the desires that Tim had sparked as a pursuit for another time.

Then several months ago I stumbled across a new (to me) financial philosophy that hadn’t even entered my realm of possibility… the FIRE movement. 

These people pursued financial independence (meaning the independence from relying on a job to sustain you) and early retirement (accumulating enough wealth and passive income streams to allow for a very early retirement).

I was first exposed to these ideas by Tim Ferris who achieved them by creating a business which he turned into passive income streams.  I had also heard of real estate risk-takers who invested in rental properties and amassed income streams through rentals.

But, what had never crossed my mind, was actually saving enough money in traditional retirement accounts that we could (both) retire long before the age of 60.

This article by Mr. Money Mustache rocked my world.  He lays out the idea so simply and makes this seemingly impossible objective attainable. In fact, his ideas have garnered a cult-like following who call them selves Mustachians and prescribe to the Mustachian philosophies of life.

A core tenant of Mustachian-ism is the idea that spending more DOES NOT make you more happy.  In fact, the entire belief hinges on the idea of spending as little as possible (hmmm, sounds like Jake’s parents were fairly Mustachian!)

Mr. Money Mustache suggests a mindset shift: view all spends as ‘luxuries’, cease desiring more, and save over 50% of your income to achieve early retirement in 10 years (give or take). I highly encourage you to check out his blog for a more in-depth explanation of his strategies to achieving FIRE.

This is a sudden departure from our spend more for consolation stage. And it is also a curious meeting of Dave Ramsey’s and Tim Ferris’ philosophies…

As Dave proposes: Mustachians certainly live like no one else now, so that they can live like no one else later.  And this doesn’t mean spending lavishly but experiencing financial freedom and early retirement. Which brings Tim Ferris’ lifestyle advice to mind.

Now this is a newfound philosophy and I find myself ready to adopt it immediately.  Jake is more cautious with these things, so time will tell how much we as a couple decide to jump on the Mustashe bandwagon.

But, this is how I see my current financial philosophy looking:

• Never ever debt!!! (except a mortgage)
• Live within one person’s salary
• Give your first-fruits to God
• Budgets allow us to enjoy our money
• Budgets allow us to enjoy our money, but minimizing spend is the new goal
• Accumulate an emergency fund
• Save for retirement, but don’t worry too much about it
• Our home is our greatest asset
• Our home doesn’t earn us passive income, thus it’s a (necessary and good) liability
• Create passive income streams (but how?) to free us from the 9-5
• Invest in retirement accounts and consider real estate and side hustles for passive income
• Pay off our mortgage so I can stop being a corporate slave and work for myself
• Pay off our mortgage ASAP so we can start saving for early retirement!
• Spending on travel is enjoyable… let’s do it some more, since we’re stuck working for it
• Spend AS LITTLE AS POSSIBLE! (still up for debate in our household)
• Leverage credit card sign-on rewards to cover all travel expenses

Now in no way am I suggesting that these are the ‘right’ financial philosophies. I’m merely documenting our personal financial philosophy evolution.

If you have yet to start considering what makes up your financial philosophy or some possible ways to better it, here are some steps you should take:

Developing Your Financial Philosophy

1. Determine your core financial tenants…

The first step towards developing your financial philosophy is determining your core financial tenants.  These are beliefs that you will hold that you are absolutely set on and (probably) won’t be changed based upon new philosophies you discover.

Often these are moral or religious convictions you hold that will trump any other ideas you come across. For us, you can see there were several philosophies that never changed.  Namely, our commitment to tithe and to never go into debt.

Once you recognize these, use them to evaluate each philosophy you encounter and make sure you fit these philosophies around your tenants, not the other way around.

2. Define your dreams…

I believe that your financial philosophy should work for you to help you achieve your dreams and a life-style that you crave. Sometimes, though, we don’t always know what our dreams are or what our ideal lifestyle looks like.  So, we accept society’s suggestions and let them dictate our decisions.

I challenge you explore your dreams. Read some life-style design books (like the 4 hour work week) and start working out your dreaming muscles.  Then come back to this list and pick the three words that most define your lifestyle dream:

[lgc_column grid=”25″ tablet_grid=”25″ mobile_grid=”50″ last=”false”]

• Comfort
• Convenience
• Luxury
• Safety
• Materialism[/lgc_column]

[lgc_column grid=”25″ tablet_grid=”25″ mobile_grid=”50″ last=”false”]

• Independence
• Lifestyle
• Travel
• Freedom
• Experiences[/lgc_column]

[lgc_column grid=”25″ tablet_grid=”25″ mobile_grid=”50″ last=”false”]

• Retirement
• Entrepreneurship
• Minimalism
• Active
• Maximize[/lgc_column]

[lgc_column grid=”25″ tablet_grid=”25″ mobile_grid=”50″ last=”true”]

• Generous
• Wise
• Balance
• Wealth
• Education[/lgc_column]

3. Explore and evolve…

Now that you know your unwavering financial convictions and the dream for your lifestyle, it’s time to start exploring the various financial philosophies out there.  As you read and are inspired, evaluate against your financial tenants and personal goals to adopt the financial philosophy that is suited to you.

And don’t ever think that you’ve figured it all out.. After the Dave Ramsey phase I was rather uninspired. I felt that we were gold star students of his and had nothing left to learn.

Boy, was I wrong! Never stop listening and adjusting.

Best of luck on your journey! I’d love to hear your personal financial philosophies below.

By the way, if you’re looking for a quick and easy way to organize and view your spending and net worth, I would highly recommend PersonalCapital.com.  It’s totally free to use and is a great way to get a handle on your financial situation.  I just started using it and love it already!