What is one thing you do with your personal finances or investments that bucks conventional advice, but it works for you and your family? I'll go first – outside of cash held for EF and house fund, we're 99% allocated to equities.
— Fervent Finance (@ferventfinance) April 27, 2019
There is one problem with conventional personal finance and investing advice – it’s not personalized. Everyone’s personal finance situation is different. Not everyone should have 3 to 6 months of expenses in cash equivalents for an emergency fund. An asset allocation of your age in bonds and the rest in equities isn’t the best asset allocation for everyone.
The above tweet had quite a few responses – I think that’s for a couple reasons. First, financial topics are still taboo in most social circles, so it’s nice to be able to share something personal with regard to your finances with others. Second, we like to share how we’re different and have others confirm they think the same way. It makes us feel like we aren’t out on an island. Third, it’s nice to get other people’s opinions and make sure we aren’t missing something or thinking about something the wrong way. Kind of a gut-check.
I learned a lot by reading the responses. Many responses were things I would never have thought of on my own. Most likely, over 70% of the responses are things that I would never try personally. And that’s okay. They wouldn’t work for my family’s goals, risk tolerance, and overall beliefs when it comes to investing for our future.
This doesn’t mean that all those things are incorrect things to do. Each person has to understand what works best for them, and implement a plan that will allow them to reach their goals in an acceptable time frame, while being able to sleep at night, and limiting the risk of “blowing up.”
99% Allocation to Equities
I shared in my original tweet that we maintain a 99% allocation to equities outside of emergency and house funds. I would obviously not recommend that for a majority of people, but I have been investing since 2007 and I believe that I can handle the volatility that this asset allocation will bring. I’m sure many people are thinking “just wait until the next 40% draw down” and that’s fine, there is nothing wrong with that opinion.
We Don’t Budget
We set pretty high-level spending targets for each year, and as long as we are trending close to that goal on a monthly basis, we don’t care if the money is spent at restaurants or travel or hobbies. The rest is saved. We have monthly “money dates” to quickly go over each month’s spending and savings to make sure we are on track. This works for us because we’re fairly in tune with our regular spending wants and needs. For others it might make sense to have a traditional monthly budget that is reviewed regularly.
Personal finance is personal. As long as you’ve done your research and are comfortable in how you’re deviating from conventional personal finance and investing wisdom – feel free to do you.
1 thought on “Bucking Conventional Personal Finance Advice”
We did not budget and had 100 percent in equities outside of the emergency fund and checking accounts for daily living. I switched that when I left the 9 to 5 but when you are young why have bonds? I think you are doing great, your finances are personal. Good post, people shouldn’t feel bad because they aren’t in lock step with someone else’s plan. There are a lot of paths to financial independence.