Creative Personal Finance

Over the years of writing this blog I’ve struggled to explain why personal finance is so difficult for some people to get. Some people know what the right thing to do is but often can’t seem to do it or get frustrated with the huge volume of choices.  Then I read a quote the other day that I think helps explain my problem.  I won’t give you an exact quote, but the gist was economics is not a science, but rather an art since it lacks one of the basic science requirements: predictable outcomes.  Personal finance therefore is perhaps better described as a form of art.

In most forms of art there are some general rules to follow.  Plays usually have acts and novels have beginnings, middles and ends while paintings have certain classes like landscapes or abstracts.  In personal finance we have rules of thumb such as spend less than you earn, but like all art itself even the general rules can be broken at times.  For example, a novel starts at the end and then flash back to the beginning or using the Smith Maneuver may result in you spending more than you earn.  Granted with a Smith you are spending money on investments, but you could still be breaking the general rule.

Yet in the past people have been treating personal finance as a science by focusing on the numbers which would imply there are only a certain number of ways to achieve a particular outcome.  Yet the truth is there are no limits in art, you can do just about anything you can come up with.    So you might know that you are better off to invest than pay down your mortgage, but still choose to pay down the mortgage.

Thus we have a problem of we have been teaching personal finance the wrong way.  Learning any art is not typically done from just one teacher but rather several, since each teacher will treat things differently and teach you different things.  Personal finance should be much the same way.  Each writer will typically have their particular views on the world and methods on dealing with it and will teach you different things.  For example, I’ve never had a problem with credit card debt and as such don’t have much to say on it.  On the other hand I do fairly well on eating well on a limited budget so I’ve written a fair bit about that.

Perhaps the issue is people are not accepting the fact that we need to get creative with our finances and find a method or system that works for you even if it appears to break the rules.  It might be odd, awkward or even a bit silly, but if it works for you to help achieve your goals then DO IT!

In the end, there is not ‘right’ way to achieve your goals, but rather just some guidelines that have been developed over the years from trial and error.  So take what you need from others and get creative with solutions for you.  You will make some mistakes, but that happens in all art.  Keep trying and keep working to your goal and you will find a way to get there.

How do you see personal finance: art or science and why?

5 thoughts on “Creative Personal Finance”

  1. Interesting. I do this weird little dance around personal finance. I try to make myself read up on things and learn more . . .and then I get fed up. I think it’s for a couple of reasons. 1. I do not find calculating and counting beans to be fun in and of itself. 2. You’re right, it does appear like a set of rules. . .I don’t want to follow the rules, the rules look like a pain in the rear end.

    Still begrudgingly I’m learning as much as I can about PF in the hopes that one day I’ll be a smarter investor. But I think you’re right to point out that perhaps there are alternative ways of doing things that will work just as well. If I can find something like that, I will definitely go down that road. When I hear words like “dividends” my eyes gloss over.

  2. I definitely agree that finance, and even economics, is more art than science. Reading the above comment made me think that some people also confuse personal finance with investing. Investing is also more art than science, but I suspect people confuse the complexity and risk of investment with the various simple actions of personal finance.

    I don’t use a budget. I know how much I earn (as most people do) and I’ve developed some spending habits that keep me spending (well) below my earnings. I spend 15 minutes twice a year double-checking how much we’ve spent in the previous six months. I have set our credit card (just one!) to auto-pay, so it takes no effort to pay it off entirely each month. All our bills are also set to auto-pay. I have a Manulife One account* so any “excess” cash immediately reduces our mortgage balance (earning more than a savings account). Just these simple things constitute our approach to personal finance. These are not rules, they’re just our style. They are simple and take little effort or risk.

    After getting all the above set up, I opened investment accounts and learned to invest. Granted, it’s taken years (bought my first stock seven years ago) and I learned very slowly (only transitioned to all stocks last year). Trading stock can be an expensive education, when you make mistakes. Here again, I have my own style, which doesn’t even fit with all accepted rules of thumb. It is more complex and time-consuming than personal finances and there is greater risk of losing money.


    *I believe National Bank and HSBC have a setup with an offset account which works similarly to Manulife’s One account. Manulife’s account is not for everyone.

  3. Excellent post.

    I agree with the core idea…it is in large part…an art. There is also an element of gambling that influences our market related investments and how does one quantify that aspect of investing? And as in art, different people like sometimes very different things. There is no one correct answer.

  4. I never heard that science must have predictable outcomes to be labelled as such.

    Yes, scientific theories should – because a key to theory is proving or disproving a hypothesis. And experimental science is based on a possibility to repeat experiments. Predictable outcomes based on a clear theory may be the goal – but there could be centuries of wandering in the dark and failing to reach them in the meantime.

    Just look at any social sciences – psychology, economics, etc. Or what about ecology – studying complex interactions in uncontrolled environment? There are no easily predictable outcomes there. And don’t expect to get them for a while. But it doesn’t make them any less of a scientific study.

    I see the difference between science and art as that of a systematic study – and intuitive approach to creation. And in this regard, personal finance, like any part of your life, should probably be a mix of both.

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