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The Best Interest » The Eternal Struggle of Personal Finance

The Eternal Struggle of Personal Finance

Friend-of-the-blog Wilhelm texted me this week:

I’m actually trying to pay off the house in 10 years while simultaneously growing our tax-free account to the equivalent amount of today’s mortgage. It’s a trial run of the “work hard when the baby is young and won’t remember a damn detail about those vacations anyway” double-whammy tactic.


The one problem is that I literally have no money left for today’s fun money, but my adventures can be quite local and free for entertainment while the baby is growing up.


Wilhelm is faced with the eternal struggle of personal finance. Many choices, fewer dollars. How do you balance:

  1. Fulfilling today’s necessities
  2. Enjoying each day you’re given (and spending some money to do so)
  3. Achieving long-term goals

A dollar can only be spent once. Once spent, it cannot be saved. What to do? We struggle with today’s choice only to discover it might not apply tomorrow, dragging us back down the hill to decide all over again.

There are various rules of thumb to give us a starting point. But ultimately, this topic puts the personal into personal finance.

Rules of Thumb

One of the most common “rules of thumb” for balancing your spending is the 50/30/20 rule. It states that:

  • 50% of your income should go toward needs (housing, food, transportation, insurance, bills, utilities, etc.)
  • 30% should go toward wants (travel, entertainment, dining out, hobbies)
  • And 20% should go toward saving (emergency fund, long-term investing)

It sounds like Wilhelm is currently executing a 70/0/30 budget. All needs and saving, zero wants. Surely that can’t be ideal?!

Getting Flexible on the Mile High Club

But the 50/30/20 rule was designed for the faceless masses, not for unique individuals. It’s just like the apocryphal story of the U.S. Air Force’s initial fighter jet designs: when you design for the average, nobody fits. Instead, you need to have flexible designs.

Wilhelm is unique. As are you. There are a few important highlights in Wilhelm’s note:

  1. “It’s a trial run.” He’s experimenting. He’s not locked in forever. He’s being flexible!
  2. “Adventures can be quite local and free.” So true. An alternative to expensive fun is free fun. What a great (and flexible) mindset.

While the 50/30/20 framework is a starting point, it’s not the finish line. My honest feedback for Wilhelm was this:

There’s nothing wrong with budgeting trials, including those that trim your fun money down to zero. The real work is stepping back to examine your life and ask, “Am I happy with this? Or does it suck?”

Each and every one of us could exclusively eat rice and beans for every meal. It’d cost $20 per week. What a financial win! But would we be happy with that? Or would it suck? I know my answer…

That’s the struggle. Step back, review your life, your choices, your happiness…are your financial decisions bringing you some joy?

Are you in the “Valley of Drudgery?” Of floating on the “Sea of Simple Pleasures?”

We need to understand the math, too. For example, Wilhelm wants to pay off his mortgage in 10 years. The mortgage interest rate is a vital component of that “early payoff” calculus.

If Wilhelm has a 7% interest rate (thanks, 2023), his debt payoff makes sense financially. But if he only has a 2.5% rate (hey there, 2021), the math would point him away from early payoffs. The psychological relief of debt payoff exists in either case, but the financial math differs greatly.

Further reading: The Simple Math of the Mortgage vs. Invest Debate

[For example: rather than pay off a 2.5% debt, Wilhelm could instead deposit those additional payments into a money market fund earning close to 5% as of this writing.]

Further reading: An Easy $4600 From Money Market Funds

Every financial decision comes with pros and cons and opportunity costs. The eternal struggle of personal finance is evaluating those many options and choosing a single financial plan to execute…at least for today. The plan can (and should) stay flexible for the future.

Know the math, know thyself, and make a choice you feel is in your best interest.

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