Finance-like Things I Don’t Understand

I have a personal finance confession. *Takes a deep breath* I know this will shock a lot of you because I seem so smart and financially aware, but there is a lot I don’t understand about the personal finance “rules” people have just accepted as common sense. And I am willing to bet I’m not the only one. Or at least I hope I’m not. Please tell me I’m not the only apparently financially illiterate person around here. Anyone? Anyone? Oh well, here are my financial “huh?”s.

Cash hoarding. Some people weren’t thrilled with my comparisons of cash hoarding to stuff hoarding and/or sexual experiences, but whatever, I do what I want! (If you read that in Cartman’s voice, you’re my new best friend. Call me every five minutes.) Cash hoarding is weird. I like my money right where I can see it, hanging in my closet. (Okay, I’m done. Three TV quotes per bullet point is the limit.)

– Checking account cushions. I understand the point of checking account cushions, I just don’t understand how they are realistic in practice. So basically, if I understand this correctly, there is $500-$1000 in your checking account that you aren’t allowed to spend and you are to pretend it’s not there. I just…I can’t. If there is money in my account and my bills are paid, it’s going to wine. Just being honest… This is why I have a savings account, to move my money to a place where I can no longer see it.

– Meal planning. I freaking LOVE the idea of meal planning. I do. I love it. However, excuse me if I don’t know what I’m going to be in the mood for next Tuesday for dinner. What if you planned for chicken but you are really in a pasta mood? Are you supposed to suck it up and eat chicken? Enlighten me, please.

I don't care about food

– Saving more than 15-20% of your income in a retirement account (when you don’t plan on early retirement). I know you want to be nice to your future self, but why does your seventy year old self need baller status when your thirty year old self is eating Ramen and forgoing a social life? Balance, young one. (I say this like “balance” is something I’m remotely good at. I’m not.)

The war against lattes. Why lattes? What did they ever do to deserve the shunning the personal finance blogosphere gives them? They are delicious. I’m very much in the “make more money” camp than “cut out every little expense” camp. Frugality is fine but leave the lattes alone! On a semi-related note: I just discovered chai lattes a few weeks ago. Um, yum.

Don’t leave me hanging, guys! What PF-like things do you not understand?

[Image from Buzzfeed]

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  1. As maybe your newest BFF, here you go….

    1&2 you understand just fine. Keep on keeping on.

    3. You want the pasta, have the pasta. 100 out of 100 chickens interviewed agree with this. We didn’t ask the pastas.

    4. Ah, an actual finance question. Because it might not be your 70 year old self. It might be your 40-year-old self saying “now I’m stuck in this miserable job because silly 30-year-old me figured we’d live fast and drink lattes and die young and the dyeing part didn’t come thru. Even with all those lattes.” Or maybe it’s your unemployed 40-year-old self saying this.

    5. If you want a milkshake, have a milkshake. If you want to drink coffee, learn to drink it black as god, nature and the coffee bean intended. Geez. Kids these days!

    • #4. Ah, my biggest gripe with personal finance, the “what if” factor. It irritates me to no end. *stomps foot and crosses arms dramatically*

      #5. Haha, I actually DO drink my coffee black but I enjoy a nice latte every once in awhile — specifically in the fall when pumpkin lattes come out. I have texture issues with milkshakes, they are essentially melted ice cream. Yuck.

      Thanks for reading :).

  2. I agree that some people save way more than they have to. It’s better to have a balanced way of living throughout life. Plus, you’ll probably get more out of traveling in your 30s than your 70s 😀 Another thing I don’t really understand about personal finance is how some people keep lots of money sitting in the bank and not investing it. I don’t mean emergency funds, but excess cash that they don’t plan to use any time soon. I would suggest at least buying some i bonds or something similar. Minimum purchase is only $50 and you can sell it after a year if you want. You won’t get a lot of interest, but at least your money will be protected from inflation. Individuals can buy bonds directly from the Treasury’s website, thereby bypassing a broker. All transactions and interest payments are done electronically.

    • That’s exactly how I feel about “cash hoarding”. I’m slightly terrified to pay off my debt because then I’m going to have to learn to invest, but I promise here and now I won’t just keep it all in cash. Then again, I don’t have kids or a house or any existing medical conditions and I also have joint finances with a working spouse. Makes things a little easier.

  3. I’ll take a stab at this. I’m not a PF blogger (and I don’t even pretend to play one), but I do a lot of these things.

    1 – I am a natural spender myself, but I do admit that I get a warm glow seeing a large number in my savings account. I never used to – I used to spend it as soon as I got it. Now, I kind of like seeing that number go up. However, I’m older than most PF bloggers and at my age, knowing that I have a large cash reserve is a comfort thing as much as anything.

    2 – I’ve always kept a checking account cushion; from as little as $50 to as much as $500, depending on where I was financially. It’s not that I’m “forbidden” to spend it, but it’s there just in case and I try not to dip into it unless I have to. Think of it as a small, immediately accessible “urgent” fund. Or a cushion if the electric bill accidentally debits twice. Or something like that.

    3 – My last post was on meal planning. Yesterday was supposed to be brisket. Housemate got invited to a last minute birthday party, I didn’t want to cook for one. Brisket got pushed to today, I got a salad from Chipotle last night instead. The world did not end. The meal plan still works.

    4 – See above about my age. 🙂 I wish I’d put more in my retirement account when I was younger instead of just the bare minimum. As I get older I’m realizing that I really really really wish I’d saved more.

    5 – I like lattes, but really every day is a bit much for me. I’ll stick with my plain black coffee. 🙂

    • 1. I have a lot of things working for me that allow me the “luxury” of not needed a large cash reserve. No existing medical conditions, warranty on car, no house, no kids, working spouse, and my age. Perhaps I will feel differently when I get older or situations change.

      2. Hmm, I usually transfer all non bill money to debt/savings with the exception of like $50. Maybe that’s kinda like a buffer. A meager one, but still.

      3. But what if you defrost something like chicken and don’t want it to go bad? Or put food in a crock pot for the day? Cook it anyways but eat something else? Admittedly, I’m not a fabulous cook so I don’t know how real adults deal with these issues.

      4. Do you feel as though there are things you would have gone back and given up in your twenties and thirties to have more in retirement?

      5. I’m a black coffee girl myself, but I do enjoy the occasional latte :). Especially pumpkin (and now chai). And I heard there are lavender lattes so I will definitely get one of those when I come across it!

      • 3 – Defrosted meat will keep in the fridge for a couple of days usually and you actually can refreeze meat. And I have absolutely cooked things and then either decided that I just wasn’t in the mood for it or been invited out to dinner or something and just put it in the fridge and had it the next day.

        4 – 100% yes absolutely for sure. 🙂 There are a lot of things that I did that cost money that I wouldn’t redo for the world, but there are a ton that, if I knew then what I know now, I’d have been smart and stashed that money away. And not just for retirement, but for being the age I am. I wish I’d been smarter about money back then so that I didn’t have to worry as much about it now.

  4. Haha I definitely keep a very large cushion in our checking account. It’s mainly just that I’m afraid that the oddest thing may come up and suck all money out of our lives!

  5. I am with you on the meal planning thing. I kind of loosely meal plan instead – I think of meals that I have the ingredients for so I at least know what’s available to eat for the week, and when I wake up I decide what to take out of the freezer (if necessary).

    I have “hoarded cash” because I grew up with my parents being in debt. My dad lost his job twice, and money was tight. It instilled fear in me that if I didn’t have enough to cover all possible expenses, I might end up that way. I’m slowly learning that as long as I’m prepared, I’ll probably be fine (I’m a worrier). I plan on investing a decent amount this month because I do believe that it’s better being invested than sitting in the bank.

    I am going to try to retire early, even if that means in my 40s, but I’m not going to completely deprive myself of things that make me happy. I would rather sacrifice a little now for a bigger payoff later. Again, that doesn’t mean eating ramen as I’m not that extreme.

    As for lattes, I’ve never had one (gasp), but I appreciate your passion for them! I’m not a huge coffee person, so I can’t really speak to that. I am cutting expenses right now as I try to focus on making more money, but it’s not going to happen for a few more months. If you’re making more to cover additional expenses that make you happy, all the more power to you!

    • You’ve never had a latte? What? How? I’m in shock!

      I’m a huge worrier in general, but weirdly enough I don’t worry too much about a large cash reserve. I worry about more practical things, like getting hit by a bus or speaking in front of a large crowd. Also, being chased by a raccoon…

  6. I save 25-30% of my money for “retirement.” Of course only half of that is in retirement accounts. I live a really good life. I travel several times a year, I buy stupid appliances when they break and then yell at Sears when the delivery guy screws up 3 times. I think I am pretty balanced.

    I also disagree with people who assume you get more out of traveling young that when you are older. I look at my parents are they are traveling basically every month and leaving the country whenever they want. Most 30 year olds can’t do this kind of schedule (oh and my parents are both 69 and extremely active and my grandparents did the same thing until they were about 80ish). Also it is not like they skipped traveling when they were younger, then just didn’t do it as much (or as comfortable) as they do now

    • Hmmm, I never really thought about that. Most of the older people I know never travel (much less out of the country). Balance is still something I have to master, Brian…

    • Oh the travelling when you’re older thing is a good one too. I absolutely hope to travel when I’m older as well. My parents went all over the place in their 50s and 60s (both died in their 60s or I suspect they’d be traveling still), and my former in-laws who are in their 70s (my FIL is nearly 80) still travel a lot. They got back from Australia last year in fact.

  7. I tend to believe that personal finance is fluid and constantly changing. Not to mention that it’s different for everyone. Some PF bloggers bash those who spend the money on an iPhone. Or in your post, lattes. If it’s something that you enjoy and you’re not going into debt, what’s the problem? You only live once, right?

    Meal planning? I don’t do it. My parents do. It’s not as though the meal plans are set in stone. They have the ingredients to make x number of meals and make what they want when they want it. Then again, my mom no longers works so often changes her mind at the last minute.

    Retirement? Balance is the key. If you’re living paycheck to paycheck and just barely getting by? Cut back on retirement. I’ve had a 401K since I was 23, but I haven’t been putting as much as I should away. I’ve only recently started to increase what I put away.

    Keep in mind that I am NOT a PF blogger. I’ve been reading them for the last few years, but only just began putting some of the concepts into use.

    I found your blog a few months ago and have been reading it ever since. You have such a refreshing take on PF. I loathe the bloggers who act as though spending money on something fun is against all PF laws. You can’t save every cent for tomorrow without ever enjoying today. You could die before you even retire.

    • You’re right, J, it is constantly changing. Sometimes it’s just hard for other PFers to see value in the priorities of others. I love good food and travel (and a very minimalist wardrobe of nice clothing), but I would never drop the money on pets that other people do. But that’s because I don’t value pets. Wouldn’t it be nice if we could just all be cool with other priorities? 🙂

      I’m glad you are part of the RDS community, J!

  8. I understand small checking account cushions to make sure you never ever overdraft, but you’re right. That said, there’s little penalty to keeping stuff in checking rather than savings these days.

    I’m finding more and more that if I had to boil my struggle with frugality down to a couple things, those would be making my own food and not drinking non-water drinks.

  9. Bahahaha. I agree with all of these except the retirement one.. I’m definitely over 10% saving for retirement right now but it’s just because I panicked and thought I needed “more”. Also in Canada you’re allowed to use up to $25,000 of your retirement funds for a downpayment on a house, so I have this idea in my head that I need to cross the $25,000 mark and then that’s “house money” and everything after it is “retirement money”.

    I don’t get meal planning either. I can’t do that at all.

    • I haven’t hit that panic level yet, Bridget :). Most people in my life haven’t even started saving yet! Not like that’s an excuse but I don’t feel a sense of urgency to kick it into high gear just yet.

      Meal planning exhausts me. I just cannot wrap my head around it.

  10. If you read my blog, you would know I’m a pf blogger who is rather frugal! I don’t drink coffee, alcohol, tea, sodas,…well actually anything that’s not lemonade and water. Although that’s really related to a health issue. It does save money. I grew up in a low income family, and my parents are still low income. Money was always tight. My parents always saved despite the fact they earned very little. In my head, there are still things I won’t splurge on because face it, I feel guilty. Almost every purchase I make, I think of how much it would cost my parents to buy. Maybe some pf bloggers think I’m crazy, but it works for me. It keeps me sane!
    My goal is to save 50% of our income via retirement accounts, investments, and cash. I do keep a checking cushion. Right now, it ‘s $500. Savvy living! Always trying to find the best deal.
    Don’t get me wrong. I still suck at meal planning and I do hoard cash.

  11. I completely agree (on most) of these! I do love to meal plan but only for a few days or the immediate week I’m in. That way I can figure out receipes to use the ingredients I have on hand and can make meals based on what’s on sale at the grocery store. If I grocery shopped without a plan, most of the store would be in my cart because I’m a fat girl at heart and my eyes are much bigger than my stomach. Also, this saves trips to the grocery store, freeing up time, gas money, and opportunities to splurge on treats. I always leave room for flexibility so if I plan 4-5 meals, I can have them any of the nights I’m in the mood for them.

    Everything else though, amen. I get the concepts and to each his own but I’d much rather buy wine with a checking account cushion too!

    • You sound like a pro meal planner, Katie! Want to cook for me? 🙂

      Wine > Checking Account Cushion. I will never back down on this one!

  12. Checking account cushions confuse me, too! Honestly, after all my bills/savings are taken care of, my checking account is close to $0! I used to be embarrassed by the low balance in there, but then I looked at my retirement/savings accounts and I pat myself on the back.

    Meal planning is something I’m just getting used to. As someone who wants to lose weight, it can come in handy – it saves lots of time and thinking. But once I reach my goal, I think I’m gonna let up a little on the planning, it is a bit too restrictive!

    • If someone asked me to plan my meals for the week, it would look like this –> Chipotle. I could eat it every day (and have gone through periods where I did this) if left to my own devices. Other than that I’ve mastered spaghetti and chicken. Meal planning sucks. I’m glad you are getting better at it, Lisa!

  13. I chuckled all the way through this. I probably take part in almost all those points, especially the meal planning. In fact I had a conversation with a co-worker about it the other day. Basically, I’ve come to the conclusion I’m about as far from a foodie as you can get. I love a huge range of food, don’t get me wrong, but I’ll be as happy with velveeta mac ‘n cheese as an expensive gouda. I also don’t mind repeating meals over and over. So when I cook in bulk over the weekend I’m prepared to have salad for lunch and easy-spicy chicken for dinner multiple times a week. It just doesn’t get terribly off-putting for me.

    As far as the money cushion, I like to have an extra $1,000 in one of my accounts at a given time. Even though I separately have savings and investments, it makes me feel good I can access that money just the swipe of a card (or cash withdraw) if I ever need it quickly. Not sure why I’m wired that way, just am.

    • Oh, responsible Erin! Did you really just compare Velveeta to gouda?

      I can actually repeat meals too, but I’m picky about what I can eat over and over. Basically I can eat rice, salad, or Chipotle every day. Then I get a bit pickier…

  14. Meal planning is not for everyone. My fiancee tells me all the time, when I ask him what he wants for dinner tomorrow (so I can take meat out of the freezer), “I don’t even know what I want to eat now, how am I supposed to know about dinner tomorrow?”. So then I just pull out something we haven’t eaten in a while and tell him to “Deal with it” if he doesn’t like tomorrow’s dinner.

    Some people are pickier about what they want to eat (like my Fiancee, whom I love dearly but poke fun of about his picky eating habits). Some people like me can eat practically anything as long as it’s not the same thing everyday so I can handle the meal planning. I like that meal planning enables me to buy things in bulk (like meat) to save on grocery costs. But if you’re someone who doesn’t know if you’d be up for something a week in advance, the money savings are not worth the time and effort you put into it.

    This all goes back to that anti-Latte thing you refer to. People have priorities and things they MUST spend money on, regardless of how frivolous it might seem to others and are willing to cut corners to ensure they can still have their little luxury. A frugal person can have a daily latte from Starbucks if they cut corners across their budget to compensate for their $5/day habit. I get annoyed with a few PF blogs I’ve come across who judge people’s spending habits. Just because John Doe doesn’t think lattes are what frugal people should be spending money on doesn’t make it a “frugal law”.

    • Your fiance and I would get along. We could just sit around and complain about food all day :).

      I just find it funny that people care. Like really, how does it affect you if I drink a daily latte? Too many people are way too caught up in what other people are doing with their time (and money). Thanks for stopping by, Tara!

  15. Back when I thought about having all of my bills auto drafted each month, I thought a cushion in checking would be good because I’ve heard horror stories of bills being drafted twice by mistake. It just seemed like the easiest way to avoid overdraft fees from an error.

    Now I don’t use my checking account for anything but receiving my direct deposit and paying the bills I can’t set up to be paid by my rewards credit card. I pay those bills, transfer every penny of the remaining money to my savings account, and use my cc for every day purchases. This just makes sense because checking account interest rates are (usually – assuming you don’t have one of those new fangled rewards checking accounts) lower than savings account rates.

    My finance-like thing: I don’t understand the credit score obsession. I think credit scores are the biggest scam ever, and I refuse to get bent out of shape over my score. Do I want my credit report to look great? Yes, but only in the sense that I want it to reflect the responsible financial decisions I make. I have no interest in gaming the credit reporting agencies by trying to figure out what debt to available credit ratio they like best. I just don’t care. The only time a credit score has any chance of coming in handy for me is if I want to buy a home, and I would think my actual report would have more to do with my interest rate (hopefully – if not, that’s okay because we don’t plan to leave this house for a very, very, very long time if ever). In short, I think playing their game of “they like this and they don’t like this blah blah blah” means I’m accepting that the credit score system is a valid measurement of my financial responsibility. I do not accept it as such.

    • The credit score thing is kinda nuts. I used to get really caught up in it. At this point, as long as it’s decent I don’t worry too much. Plus I haven’t missed a bill since I was a teenager! As long as I keep paying my bills on time, it should be fine :).

  16. I was born a spender, and it’s just been in the past few years that I started trying to save and pay off debt. I basically agree with all your points above, though I do “get” meal planning – it’s just not something that works well for me. My husband and I have tried it a few times, and it just doesn’t work for us (I’m the kind that gets irrationally upset if I’m forced to eat chicken when I’m in the mood for pasta).

    Man oh man, you’ll fit right in in Portland 🙂 Don’t worry, there’s no war on lattes in the PNW 😀

  17. The idea of a cushion in the checking account is one that I have followed before, but for some reason, money has just been disappearing from my account. It’s a great idea, but not everyone can do it because if they see the money, it’s gone, and having it in a completely separate account keeps them from spending it. I can definitely respect that.

    Also with meal planning, the bf and I haven’t been really keeping up with it. Especially now that it’s summer, when a nice day comes along where sudden bursts of rain aren’t happening, we will choose to grill instead and there goes that meal. We mostly used to plan meals so we knew what we wanted to buy at the grocery store. At first we would go in and either buy nothing at all and complain the rest of the week there was nothing to eat, or buy half the store and throw most of it out by Friday. Even just having some pasta and sauce in the cupboards is meal planning in my books. You have thought about it ahead of time and have lowered the bar to making a meal and not going out to eat.

    As a fellow 20 something, I completely agree with saving for retirement and living your life. It’s much easier for those who are older to say, I wish I could have saved more in my twenties and lived off of beans and rice. Really??!! It’s great to think that it would all be better, but you will always be wishing you did things differently and seeing those effects in your bank account. Because of a unique situation, I’m able to save about 1/4 of my income and use the rest towards living and student loans and at times think wow, if I wasn’t working this weekend, wouldn’t it be nice to just have a drink with friends? Yes I could use that money for the student loans, but socialization is important!

    And don’t get me started on the latte factor…I’m addicted…

  18. C The Writer says:

    It would seem that overall you don’t understand the importance of putting aside money for emergencies and unforeseen things. Maybe because there was always someone around to take care of your needs and you can’t comprehend what it would be like to be stuck in a situation where you had no money and needed help. Maybe you think things will always be easy for you. Maybe you’re right. But maybe you’re wrong.

    Whatever. I hope that way of thinking works out for you. *shrug*

  19. 2. Checking Account Buffer

    I never used to have a checking account buffer until I started getting paid monthly. Now it makes so much sense. I get paid on the last day of the month. But guess what. None of my other bills are due on the last day of the month. Rent’s due on the first, Cell is on the 15th. Utilities on the 25th. Parking is whenever the heck the company ends up deciding they want my money.

    I have the money to pay these things I swear. I’ve been working for it all month. My company just won’t give it to me until the end of the month. Hence the checking account buffer. Technically I could put it all on my credit card since I have between 1 and 2 months to pay anything I put on there off. Or I could be so on top of things that I budget a month in advance for all my bills. A checking account buffer is just one solution that I prefer.

  20. I will never understand meal planning either. I like the flexibility of deciding what I eat, when I want. I have a decent cash reserve, but not huge. Just a little over covering my bills. I really don’t understand the pf community’s obsession with credit cards. I’ve never had one (which might change soon) and it seems like it works for some people and not for others, simple.

    • The PF community is obsessed with freebies and having impossibly high credit scores! So they spend a lot of time figuring out how to maximize credit card benefits. Gotta love those nerds :).

  21. I’m with you on the account cushion. I’m not feeling it. I could, temporarily, get away with pretending it doesn’t exist. But soon, thoughts of it would start creeping into my mind. Then I would “need” something very badly. Then POOF! Gone. That’s why I have savings accounts.

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