If your finances suck, you've probably picked up a book or two on how to manage your money. You've probably read, and even tried, to put the advice into practice. But the most important money skill isn't one you'll find in a book. Financial rules are great, but they're completely useless without resourcefulness.
Image by Tara Jacoby
A while back, our own Eric Ravenscraft wrote about how the most fundamental rule of personal finance, spend less than you earn, is pretty useless advice. As someone who writes about money, I was initially defensive. But he's right: the basic rules of personal finance won't change your behaviour. You have to adapt those rules to your situation. Of course, personal finance gurus can't dispense advice for 7 billion people's unique situation, so they tell you the basics of how personal finance works, and it's up to you to make them work.
Don't Be Afraid to Bend the Rules
Rules exist for a reason, but they aren't always hard and fast. As Eric pointed out in his post, spend less than you earn isn't always helpful because sometimes spending more is actually the better financial decision:
I bought a smartphone on credit when I was broke, which is a terrible decision. On the other hand, without it I wouldn't have been able to start writing about Android, which is what kickstarted my career...in virtually all situations, there are cases where buying something can give you a leg up.
There is such thing as being responsible to a fault. One of the cornerstones of personal finance is getting out of debt. It's a financial burden and you lose money in interest, so Personal Finance 101 tells us it makes sense to get rid of debt. So when I was paying back my student loan on a small income, I really took this rule to heart. I figured the more I followed it, the more awesome I'd be at personal finance.
But that rule made me feel guilty for spending money on anything that wasn't a basic necessity. For those two reasons -- guilt and the desire to win at personal finance -- I stretched myself thin and threw all of my money at my loan. It made sense on paper, but in practice, it destroyed my budget. If I spent money on even the tiniest discretionary expense, I was screwed.
Eventually, I learned to tweak the debt rule to my situation. Yes, getting out of debt was a priority, but I knew it would benefit my finances more in the big picture if I made a realistic budget I could actually stick with. That was a more resourceful plan, and in the end, it worked. I made the rule work for me, rather than the other way around.
Learn to Seize Opportunities
Resourceful people look for opportunity in everything they come across. I once knew someone who, in high school, found a huge surplus of free blank novelty pins. I have no idea how he came into them, but instead of passing them up, he drew little designs on the pins, then sold them for 50 cents a pop, making a small fortune (by teenage standards). It's a silly example, but it illustrates the point of resourcefulness.
"Windfalls", a popular topic among personal finance circles, are no different. A windfall is just an unexpected sum of money that finds its way into your lap: an inheritance from a distant relative, perhaps. Our natural inclination is often to spend it. We didn't see it coming anyway, so what's the harm? Nothing, really. But that money could also be an opportunity to reach your financial goals, like paying off debt. There's nothing wrong with treating yourself, but acknowledging the opportunity that exists is resourceful.
Of course, opportunities aren't always fun.
When my mum was working a minimum wage job, she was somehow able to amass ten thousand dollars in a few years. Recently, I asked her how she managed to do this. She cited taking advantage of opportunities -- but for her, "opportunity" was overtime availability at her shitty, minimum wage job. Most of us would scoff at that (I know I did), but even though it sucked, she didn't care. She saw it as a way to support her bottom line, which was to save enough money to move, go to school, and get a better job.
To be clear, the point isn't to stretch yourself thin and make yourself miserable in order to meet your financial goals. There are plenty of "opportunities" we shouldn't take. I tried to follow in my mum's footsteps in college, and I worked three part time jobs at one point. It drove me nuts, and I hated life. For me, that misery wasn't worth my bottom line.
You have to make your own decisions, but searching for and acknowledging the options available to help you reach your goal will go a long way toward being resourceful. And being resourceful will go a long way toward your financial success.
Forget the Word "Should"
One huge obstacle in getting my money in order was the word "should." For example:
- I work hard. I should be able to spend my money however I want to spend it.
- I should not have to ask for a raise. My boss should just give it to me.
- I'm 32. I should have a house by now.
In my early 20s, I went through a period where I absolutely resented not being able to spend my money how I wanted. I did everything I was supposed to: I went to college; I studied hard and made good grades. I got a job. I got out of debt. WHEN DO I GET TO LIVE IT UP?!
I decided I should be able to spend without worrying about it, so I did just that. I went to dinner all the time, boozed it up, bought fancy clothes, and so on. There's nothing inherently wrong with that, but after a couple of years, I realised there were more important things I wanted to do that I couldn't afford. I wanted to travel. I wanted to move. Suddenly, I stopped worrying about what I "should" be able to do with my money and instead focused on what I could do with it to reach those goals.
A lot of times, what we should have is in direct conflict with what we could have. We use status quo as our frame of reference, but it doesn't have to be. For example, owning a home has traditionally been a symbol that you've "made it" financially. However, just because you're old enough to buy a home doesn't mean you should, and in fact, it might keep you from reaching more important goals.
In short, "should" really gets in the way of resourcefulness when it comes to personal finance.
Focus on What You Can Do, Not What You Can't
Here's one very non-resourceful habit all of us are probably guilty of:
Someone gives us solid advice, we see that it doesn't apply to our situation, so we get defensive and shoot the messenger. I know I'm guilty.
When I was struggling with my student loan, my mum told me a story about a friend who sold her car to do get out of debt. I rolled my eyes and immediately wrote it off as useless advice. I lived in Houston: public transportation sucked, and my job was across town from my apartment. Selling my car was a terrible idea. She wasn't suggesting that, though. She was merely pointing out there are outside-the-box ways to get money, and she used the car as an example.
My reaction was not a resourceful one. A resourceful person takes advice and finds a way for it to fit their own situation. Maybe there was something else I could sell. Maybe not. And if not, a more resourceful reaction would be to focus less on what I can't do and more on what I can do. If the advice doesn't apply, move on and find another way. Unfortunately, it's easier to get stuck on what doesn't work and throw out the baby with the bathwater.
It's easy to get stuck on a lot of things, really. It's easier to follow the status quo, tell yourself what should be, and completely give up on advice that doesn't apply to you. It takes a bit more effort to tailor that advice to your own situation, give up what you should have in favour of your overall financial health, and take advantage of opportunities that might not seem like opportunities. But that's what being resourceful is all about, and without resourcefulness, personal finance rules are indeed pretty useless.