Dealing with Confusing Personal Finances

Perhaps you have already come across conflicting advice on personal finance. One expert or website says one thing, while others say something else entirely. And personal finance is something you cannot ignore. Yet it becomes quite tough with so much conflicting advice. Who should you believe? Who is the real expert? Why is there so much different advice on emergency funds, debt and homeownership?

One reason why you find so much conflicting advice out there is because personal finance is personal. There is no one-size-fit-all solution.

You may get a lot of data and math, yet when the numbers force you to do something that lies outside your comfort zone; it is not a good solution.

So what can one do? How can one make sense of numbers and align our habits and calculations with the official math? This is something we shall try to answer in this article.

First of all, let’s talk about…

Good Debt and Bad Debt

 There is no such thing as ‘good debt’, no matter what experts say. There is nothing called good debt even if you use it to pay for college or to buy a house. Dave Ramsey, one of the most well-known financial experts, is one who is strictly against this idea that debt can be ‘good’.

At the other end of the spectrum, Robert Kiyosaki, the writer of the well-known book Rich Dad Poor Dad, says that the wealthy use good debt to grow their financial worth. They use it to invest in cash flowing assets and use money from investors and banks.

Debt Elimination

Financial experts don’t just disagree on the question of debt, but also offer different advice on debt elimination and debt management. However, here are two most common debt elimination strategies.

1. Debt Stacking Method: In this strategy, you start paying off your debt that has the highest interest rate first. As you can understand, many experts swear by this strategy as it enables you to free up cash faster. For instance, if you have several credit cards with debt, start paying off the one that has the highest interest rate.

2. Debt Snowball Method: Other financial experts tell you that you tackle that debt first that has the lowest balance. It is believed that a system that is front-loaded with rewards is good for keeping one on track. Small victories keep one going.

Now, paying off those debts that have a high interest rate is certainly a smart move. However, personal finance is not always a math equation. It is also ruled by emotion, in which case the Debt Snowball Method works better. Personal finance is psychological as well.

Should you buy a home or rent a home?

Here’s another field where you’ll see a lot of conflicting personal finance expert advice. Some will say that you are making a big financial mistake if you are not prioritizing your home ownership. 

Others say that buying a home is one of the worst financial decisions you can make, and that it is hardly worth the name of an ‘investment’.

More conflicting personal finance advice

Debt elimination, debt and renting and buying properties are some fields where you’ll get different advice. Experts disagree on these issues. However, they disagree on other issues as well, such as using credit cards, ways to build emergency funds, earning more money, purchasing a car, investing and retirement.

Closing thoughts

When learning about personal finance, you are bound to come across conflicting views. When you do, do not let them discourage you, take the advice that is best during the current situation, decide what works now and what will work in the long term, and be flexible enough to change your plans.