Friday, August 24, 2007

Putting the Personal in Finance

Grace over at GRACEful Retirement had this comment recently about my blog.
EMF at Engineering My Finances tends to be a bit more general and way more math-oriented. I read him, but I don't always understand him!
I have to say that I agree with her, and take it as a reminder that I need to improve my writing skills when communicating some of the complex topics I take on.

Unlike many in the Personal Finance Blog-o-sphere, I never had the situation with a financial meltdown to overcome. I've never had to answer the phone worried that a bill collector was on the other end. I've never had to decide which utility bill I might get by without paying that month.

Does that mean that I always had it easy? Or that I inherited money? No, quite the opposite. Growing up in a large family, I never went hungry. But there were few extras, and my parents struggled to pay bills. I did not live in a house with indoor plumbing or a TV until almost a teenager. When a teenager, I did not have an allowance handed to me. Instead I got small amounts for doing chores, and later on I got jobs. I will say that some of the low skilled jobs I had as a teenager were lower paying yet harder than jobs I had later as an adult.

Then as an adult, I was not provided a free education -- I had to earn it. After 4 years in the military, I had the Vietnam Era GI bill. But with a wife and child, the GI bill did not pay enough to get by, so I had to work full time and did not graduate until in my 30's. But with the GI bill I was able to pay my tuition and buy textbooks as I went along and had no student loan debt.

My experiences growing up taught me the value of money, and impressed upon me that I didn't want to be caught without it. So I've always tried to live reasonably but within my means. My wife didn't agree, wanting to spend freely, and ended up divorcing me. Within a year she had spent the entirety of the divorce settlement. Although I didn't think so at the time, in the long run she did me a favor by divorcing me.

As Grace pointed out, I am math oriented. A few years ago, some friends came into a lump sum and were arguing whether to pay off credit cards or pay ahead on their mortgage. When asked, I gave the logical financial answer that it was better to pay off the credit cards because the interest rate was higher and also not tax-deductible. Being a few years older and having reflected a bit, I would now give the personal answer. Which would be along the lines of "Unless you understand why you have this credit card debt, I would pay down the mortgage. Because if your credit limit or the payments is what's keeping you from charging more, that's the better course. Because in 20 years you won't have anything to show for what you've charged except for the debt -- you'll have none of the crap you charged, but at least your house will be paid for. On the other hand, if you have control of your credit card spending and can pay the credit card bill in full each month, then go ahead and pay them off. Then take the money each month you would have been paying on your credit card bills and apply it to your mortgage." Actually, because it is personal and I'd want to keep them as friends I wouldn't put it quite so bluntly.

So I recognize the need to remember the personal as well as the finance. Even though some of my posts have been and will continue to be more on the side of finance.