“This is the way I would do it”. The words ring in the ears like a tuning fork that never quite settles down. If only the advisor would realize one simple thing.
Is This Advice Backwards?
Dave Ramsey has made a career out of giving financial advice. From books, to courses, to radio and TV shows, to live events, he’s worked hard to help people erase debt and excel financially.
At the same time he’s often criticized for his get out of debt plan. His plan is simple: sock a small amount away for an emergency fund then pay off your debts, always smallest first.
That doesn’t always make financial sense. If you have a $500 card that is at 0% interest, another $1,000 card at 10%, and another $2,000 card at 15%, your best option from a financial standpoint is to pay off the $2,000 card first, then the $1,000 card, then the $500 card.
The Human Equation
The only problem with this method is it assumes we are robots. It assumes we do exactly as we should do at all times. If that were true, none of us would have ever washed down a double bacon cheeseburger with a large chocolate shake.
The fact of the matter is, despite our hope of being perfect, we are human. That’s what Dave Ramsey understands. As he says, winning with money is about 20 percent head knowledge and 80 percent behavior.
Sure, on paper it’s best to pay off based on interest rate, highest to lowest, but about 3 months in still seeing a huge pile of debt in front of us, we get discouraged. If instead we go for the lowest balance, about 3 months in we see our first card is almost paid off and we get motivated. About 6 months in when we see our first card gone and our second card well on it’s way we get excited. After a year, we have success under our belt and the wind at our back and that last card is going down!
Why Advice Sucks
And that’s why advice sucks. All too often advice isn’t about what works best for us; advice is what works best in a vacuum – if all the stars were aligned and you had made nothing but perfect decisions all your life and food didn’t contain calories, this would work perfectly!
But what works for one person doesn’t work for another. Sure, if you want to succeed in filmmaking it might make sense to head to Hollywood, but you’re a single parent with limited funds. Or it might be best to invest a few thousand dollars in some business courses so you can run your own business, only you don’t have a few thousand dollars lying around, nor the desire to get into debt.
Sure there are ways around these dilemmas, and yes, if you really want it bad enough, you can get very creative. At the same time, sometimes other things are a bigger priority. And that’s the issue. What works for one person works because of their priorities. What works for us will be different, because of our priorities.
We should take advice. We should listen to advice. We might even want to hear advice that sucks. But the thing we need to remember is that it’s okay to disagree. It’s okay to change the advice. It’s okay to mold it to our lives. And it’s okay to chuck it out altogether.
Take My Advice
This is the part where I throw out my own advice, but I throw it out with a caveat: make sure to make this (or any) advice work for you. Don’t take it blindly, but make it yours. Anyone that gives advice should realize one simple thing: we are all different.
Find out what motivates you. Find out how you work. Find out what makes you tick. Then run all the advice you get by that. Make sure you use it in a way that works for you.
The big thing you need to remember is this: it’s your life; no one knows it as well as you. Do what works for you.