My dad had a pretty interesting way of teaching us kids right from wrong. He used to say that we could do anything we wanted, as long as we were willing to pay the price. Usually, he was talking about things like staying up past curfew, getting drunk and making the mistake of coming home either drunk or hung-over, or getting bad grades. As far as the price, it was usually, but not always, more than we were willing to pay. Now that I am an adult, and something of a role-model to young people, I kind of take his approach to morality. I think that there are circumstances when one will want to do something so badly that they are willing to face any consequences to accomplish their goal.
I can hear it now, “But Wil, what does this have to do with personal finance?” Actually, I think it has a lot to deal with finance.
Bob wants to buy a new car. Not just any new car, but a new Honda Ridgeline RTL (MSRP $33,090) . Bob can afford the payment, if he extends the term to 84 months, and if he clears out his ‘emergency’ fund to use as a down payment. PF bloggers everywhere are screaming at Bob to not do this. Should Bob do it?
1. Bob gets a new car
2. Bob gets the satisfaction of driving a really cool truck
3. Bob gets the advantages of a warranty
4. Bob can stop taking the bus to work, allowing more time for Bob to spend with his family.
5. I’m sure there are others, but you get the point.
1. Bob has a HUGE payment for the next seven years of his life.
2. Bob’s insurance is going to skyrocket.
3. Bob will be spending a lot more on gas (since he has been used to taking the bus) than he’s used to.
4. Bob’s girlfriend is afraid of trucks.
5. See #5 above.
The responsible answer for someone to give Bob is, “It depends.” This is where I depart from many ‘professionals’. Too many of them will tell Bob that he’s fallen out of his tree if he thinks this is a good idea. They won’t even get to the point of listing pros or cons. The answer is black or white, and that’s the end of it. What’s worse, is that is exactly what many people who seek the advice of a professional believe they want. They want to be told what to do, and how to do it. Unfortunately, personal finance just doesn’t work that way. Sure, there are many instances where the answer is exactly that cut-and-dried, but more often than not, there are a lot more variables that need to be discussed, and even after that, the answer rests on the shoulders of the person seeking advice. The most important part of personal finance is the PERSON. The most important thing to remember about advice is that it’s only advice, not the law.
In my parochial high school, there was a portion of one of the religion classes where the teacher would try to structure your thought to match the church’s teachings on a subject. I used to get in a lot of trouble back then. It would go a little something like this:
Teacher: “It is wrong to kill someone.”
Me: “What if that’s the only way to stop them from hurting someone in your family?”
Teacher: “Okay, it’s less wrong if you are defending your life, or the life of your family. But other than that, it’s wrong.”
Me: “What if that’s the only way to stop them from killing an innocent?”
Teacher: “Go to the office, you’re being disruptive.”
I never understood how asking questions was disruptive, but my wife has since confirmed that I can be disruptive for no reason. Okay, whatever.
In all seriousness, young people are so conditioned to being told what to do, what to think, and when that it becomes disruptive when they ask questions. The problem with this in personal finance is that nobody cares about your personal finance as much as you do. When somebody tells you something is absolute, question it. Even if you agree, question it. There are few things out there that are absolute, and those things will easily stand up to being questioned. When a salesperson tells you something is absolute, challenge it. Try to find times when absolute won’t cut it. Even if you think the possibility is remote, and even if the only alternatives to make something not absolute are outlandish, question it. One thing that is absolute is that you will absolutely run into the ONE instance when absolute just doesn’t make it.