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Personal Finance ‘Keys To Success’ May Not Always Apply

January 4, 2011 · 104 comments

in Personal Finance

I was recently poking around the website for Kiplinger’s magazine when I came across the following article:  8 Keys To Financial Security

This is not a new article, but the 8 keys mentioned are things you hear over and over:

  1. Invest in yourself (your income potential is your greatest asset)
  2. Protect yourself and your loved ones (make sure you have enough life/disability insurance)
  3. Borrow sparingly (just use credit when buying a home or a car)
  4. Pay yourself first (put money into savings, and then pay your bills, with the credit card being last)
  5. Don’t go for a home run (avoid risky investments that may offer huge returns like IPOs and such)
  6. Diversify, diversify, diversify (don’t put all your money in stock)
  7. Live simply for today for a more comfortable tomorrow (don’t spend your money frivolously now or you will be sacrificing your dreams later)
  8. Give generously to create a better world (give money away to help create a stronger economy)

HOWEVER, are all of these ‘keys’ realistic, or even a good idea for everyone?

The exact verbiage for Number 4 is as follows:

Key 4: Pay yourself first
If you feel you never have any money “left over” for investing after you pay all your bills, try reversing the bill-paying process. Make the first check you write each month a deposit to your mutual fund, money market or brokerage account. Then pay all your regular monthly bills, finishing up with the credit card bill. If you’re having trouble paying that last bill, trim your discretionary spending — but keep paying yourself first.

Never, ever, in a million years would I recommend putting your money into a mutual fund/savings account instead of budgeting as much money as possible to be used to reduce credit card debt. Sure, I think building an emergency fund is very important, but outside of that, the credit card debt has got to be paid down.  Why in the world would you want to pay almost 30 percent in interest on your credit card debt and make just 1 percent on a savings account?  I understand the gist of the article- if you don’t have money at the end of the month after ‘paying yourself’, then stop spending so much.  Well, what if you are ‘paying yourself’ too much?  Or, what if you are having a hard time even paying for groceries and rent, does it still make sense to pay yourself first or donate money to improve the economy?  I think it is much smarter to attack that credit card debt like there is no tomorrow once you have a realistic emergency fund built up instead of worrying about a brokerage account.

Overall, I think these articles are great for people that are already in a good financial situation, and may provide good goals for those that are struggling.  However, I don’t think these ‘keys’ are realistic for everyone.  I know if I read this article right after I graduated from college, I would have just laughed and said ‘they must not be talking to me’.  There are so many magazines out there like Forbes, Kiplingers and even Money magazine that have plenty of personal finance articles for people that can actually afford to invest.  However, I don’t know of a publication out there that helps those that are truly struggling and really need some solid advice to help them get out of their situation.

Now that I think about it, what I would like is for Oprah to create a money magazine for lower income people instead of creating new cable networks.  Lower income individuals may not need as much advice about what the best investments for them would be. However, I am sure they could use advice on what resources are available for affordable health care and such, along with tips on how to get out of debt.  I think that educating people can be as beneficial as providing financial assistance, as it can be a longer term solution.

Is there a magazine of some sort that predominantly offers good, solid advice to low wage earners that I am not aware of?  Please let me know if there is and I will become a big supporter of it.

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{ 52 comments… read them below or add one }

101 Centavos January 4, 2011 at 6:56 am

Doubt if such a mainstream magazine exists. Online, the closest thing would be the Yakezie network. You make an excellent point that the content in these magazines (and books) is aimed at people that look much like the writers themselves. On the other hand, chances might be that if you’re in debt up to your ears and worrying about paying this month’s bills, you’re not buying a copy of Smart Money or Kiplinger. By the way, Kiplinger’s is an easy fisk sometimes. Their podcast is equally hilarious.


Kris January 4, 2011 at 10:12 am

Yeah, I do realize that those without much income would have a hard time buying magazines. I just wish their was more easily accessible information to help people out. If you don’t know how to get out of your situation, it can be hard to figure out on their own. Without good examples, it is hard to even know where to start. I am sure that is part of why so many people repeat the poverty cycle.

I think our public education system does a horrible job of teaching personal finance, and I think change needs to start there.


The Biz of Life January 4, 2011 at 7:55 am

The best advice anyone can give low wage earners is to figure out how to move up to the next income category. The #1 piece of advice for wage earners of any level is spend less than you earn and don’t borrow money to buy items that don’t help you produce an income. You can’t live a champagne lifestyle on a beer budget.

I’d say that once people get in a secure financial position with little debt other than a mortgage they should probably start paying themselves first with an automatic pilot type of program so they never see that money and aren’t tempted to spend it frivolously.


Kris January 4, 2011 at 10:15 am

Biz, I do agree that you shouldn’t live a champagne life on a beer budget. But not everyone that is poor lives extravagantly. Some people just make minimum wage, and try to make it on a minimum wage and it is near impossible. I want these people to be able to easily found out if there are programs available that can help educate them in order to get into that next income bracket.

I totally agree that the ‘paying yourself first’ is a great idea once you are somewhat secure financially. (Or make a decent income and figure out how to control spending.)


Renee King January 4, 2011 at 1:53 pm

“don’t borrow money to buy items that don’t help you produce an income” What a profound statement…it definitely gives me pause regarding my spending. I thank you for this.


Kris January 4, 2011 at 4:19 pm

I agree, Biz made a good point with that. (But I do think it is reasonable to borrow for a home or car. You just have to have common sense with how much you borrow.)


Roshawn @ Watson Inc January 4, 2011 at 8:34 am

Kris, this could be a very popular niche or too targeted. The jury is still out. Oprah is being Oprah, and I’m happy she is pursuing her goals. You raise an interesting point, as does the Grouch.
1) one size fits all advice has its limitations. If you are writing for a “middle-class” audience, then it may be useful to state the obvious limitations and 2)the best financial lesson someone who is poor can learn is how not to be poor (this would give him or her freedom)


Kris January 4, 2011 at 10:20 am

Shawn, I agree, teaching the poor how not to be poor would be fantastic. I think lower wage earners would have a totally different keys to success such as:
1. join a mentoring program (if one exists) to find examples of people that have gotten out of poverty
2. spend time researching government programs to see what you may quality for to get further educated and possible health assistance
3. spend as little as possible
4. take care of your health to avoid costly doctor bills (that applies to all, but especially anyone uninsured)
5. do not trust anyone that offers a quick way out of debt or money making schemes
6. do not be tempted to ‘hit the jackpot’ and waste money gambling or on lottery



First Gen American January 4, 2011 at 8:55 am

I totally agree with #4.

I think the fundamental problem is that most people don’t take the time to understand what borrowing costs them. People understand that a car payment is $300/month, but they don’t ever think about how much the car would cost/month if they saved for it first.

I know very bright people who are bad with money because of one of two reasons: They make emotional decisions and/or they don’t spend any time/effort trying to understand the most economical way to do things.

For the people who are really desperate and I’ve spoken with a few, they just don’t plan for emergencies because they just don’t see a viable path to get x amount of extra money to save for it, so they just live day to day and hope for the best…or for a religious person, have faith that god will provide.


Kris January 4, 2011 at 10:25 am

Oh, I love when people just feel things will ‘work out’ while they sit back and wait for it to happen.

As I said in an earlier reply, I think our school systems do an awful job in educating kids about personal finance. If you don’t have good examples, and you are never taught, then it can be hard to know how to manage money. Not everyone is born with a ton of intelligence and drive to go out and find that information on their own unfortunately.

On the flip side, I know I had my days of debt but it was because I paid to get myself educated and I knew it was short term. I bought a car without saving for it first,and I think that is common when people are just starting out. Not to mention that in this economy, many people have spent their reserves just to pay their bills and any savings for a car may just be gone.

It is sad that so many have given up hope. Maybe if the media provided more information on how to get out of financial despair and people understood that there really is a path to the next income level, maybe they wouldn’t give up. There are truly poor people out there that do not have access to the internet and such. Who reaches these people? They don’t need info on investing and paying themselves first. They need info on fixing their situation, and they may not inherently know how to do it.


Jeff @ Sustainable Life Blog January 4, 2011 at 11:45 am

Why wait for the media to provide a course? Why don’t we do it? We (bloggers) are considered the media by some people.


Kris January 4, 2011 at 4:21 pm

Jeff, I agree with that. However, many of the people I envision needing the most help are probably not surfing the internet. I am going to try and keep the lower income individuals in mind when writing posts though. Good point.


Nicole January 4, 2011 at 9:30 am

Not a magazine (the tightwad gazette has closed its doors…), but Dave Ramsey has both a radio show and now a tv show…


Kris January 4, 2011 at 10:26 am

I didn’t know the Tightwad Gazette closed its doors. Interesting, but not surprising I supposed.

I think education is key, but educating middle-age adults is not an easy task if they do not have access to information.


Nicole January 4, 2011 at 5:42 pm

I can tell you that the Social Security Administration just spent a ton of money on researchers trying to get them to come up with products for low income/less educated folks to save.

I’m actually of the school that thinks that education isn’t key (there are two lines of thought on this, and I’m in the Cambridge-school side as opposed to the Wharton-school side). Education is correlated with savings decisions, but there has been very little evidence showing that education increases savings, or increases it much at all. What has been shown to work very well are nudges that get people to do what they rationally want to do but can’t do because they’re lazy or have present-bias (they want things NOW even though they know they want to save for later). So things like making being signed up for the 401(K) up to the match a default rather than having to sign up. Or “save more tomorrow” plans in which people automatically save more each time they get a raise. Of course, the problem with these is they only work for folks who HAVE 401(K) options, which tends to only be middle-class and wealthy folks.

Gee, you would think I’d just been working on a grant proposal…


Kris January 4, 2011 at 11:10 pm

Nicole, I am thinking about things that go beyond saving. I mean education on how to get out from where you are. Showing the benefits of education, or show that it can actually even be done. Some people have no examples in their life to show them that there is a way to live outside of where they live now. It may just seem like an unrealistic dream. I am not talking about the time value of money time teaching, I am talking life. Maybe I am just being idealistic, but if more people had more information and positive role models, I think it would make a difference.


First Gen American January 5, 2011 at 8:47 am

I think that’s where mentoring programs come in. There are quite a few around like big brothers/big sisters. It’s incredibly valuable for people like us, who’ve been really poor but are now middle class to show that it can and is done all the time. I also think it’s good to mix the kids up in different school systems to expose them to families of different income levels. My mom paid for private schools and having exposure to people’s parents who were successful business people really showed me it was possible to make a decent living. It might have been a lot different if I went to the public school that was filled predominantly with kids on welfare. My friends growing up would have been on welfare and I would have gotten a whole different view on life outside of my own household. Growing up, my best friend’s parents had his and hers delorians. They were entrepreneurs, started with nothing but built up a huge real estate empire. I guarantee I wouldn’t have had those role models in my public school.

I’m not sure if I agree on your assessment to access to the internet. You can access the internet at the library and even many poverty level folks have computers in their homes. A lot of times they get old computers from relatives or friends that are better off and partly it’s a priority thing too.


First Gen American January 5, 2011 at 9:00 am

I also realize that my idea of mixing students is probably unpopular. My town is a good example where a few schools were so horrible (my son’s being one of them), that the state mandated that people were given other choices, which I took advantage of. Now the poor performing students are dragging the other school’s test scores down, but I think overall it’s for the better. It’ll give my son some perspective that he’s actually pretty well off compared to a lot of his class and it will hopefully help the low income kids too.


Kris January 5, 2011 at 11:45 am

First Gen, mixing the kids up may bring the test scores down, but oh well. I think diversity is so important that I really don’t care about the test scores. Of course, test scores affect all kinds of things, including even home values. I am glad you are giving your son that experience.


Nicole January 5, 2011 at 9:56 am

My DH really needs to do a big brother program one of these years.

After we’ve gotten DH’s cousin’s kids through college we’re planning on sponsoring poor kids to go to my sister’s Catholic high school, which is a wonderful private school that mixed well-to-do girls from the suburb its in with middle class from the exerbs (like my sister) and poor Catholic mostly Hispanic girls from the inner city (who take the train each morning). My mom loves getting their first generation college students in her classes at the university where she teaches.

I can’t think of any way to do change on a national level, so we do what we can on a smaller level.


Kris January 5, 2011 at 11:41 am

Nicole, I think economic diversity is so important. It benefits everyone, as everyone learns from other’s experiences.

It is great you are making a change. I would love to start a scholarship program for a couple people from my high school. Maybe I will…


Jackie January 4, 2011 at 10:39 am

I suspect there isn’t a magazine like that because it likely wouldn’t have enough subscribers to attract advertisers, and “low income and struggling” isn’t an appealing demographic for most advertisers (except payday loan companies.)

But, there is the Internet, and books like Your Money or Your Life.

I agree that the “keys” don’t always make sense in various situations. I remember seeing things like “save 10% of your income” and just feeling depressed because I was literally struggling to save a single dollar.


Kris January 4, 2011 at 4:25 pm

I totally identify with that frustrating feeling that saving ‘x’ amount of your income just couldn’t be done, and it was depressing.

I know that a magazine tiered toward the lower income individuals would not be a big money maker. That is why I wish Oprah or someone that is somewhat philanthropic would take on such a task. It would have to be someone that was doing it as a charitable contribution, not a cash cow.


MoneyCone January 4, 2011 at 11:33 am

This goes with the advice use your HELOC to invest in the stock market!


Kris January 4, 2011 at 4:36 pm

Can anyone even get a HELOC anymore? Boy I remember those days when you actually had equity in your house and people made such suggestions. That seems like a million years ago.


Jeff @ Sustainable Life Blog January 4, 2011 at 11:40 am

I completely agree – You can make 4% in the market, or you can make 19.99% if you pay down credit cards. Unfortunately, people dont feel like they are earning anything, so they dont look at it like this.


Kris January 4, 2011 at 4:26 pm

Jeff, I got an offer in the mail for a credit card and I believe the interest rate was 29 percent. (It got shredded, so I don’t know the rate for sure.) I give people credit for saving, but you have to use common sense too if you really want to get ahead.


krantcents January 4, 2011 at 1:00 pm

Many times the audience for this advice does not need it, however it is a reminder to many to do something. Low income people require a completely different approach.


Kris January 4, 2011 at 4:30 pm

I think the 8 keys are great for someone who is already fairly established. (Although there is nothing new and exciting in that advice, and anybody who is well off probably already employs most of the suggestions anyway.)

I just wish there was ore advice available out there for the people that really need the help. There are plenty of scammers, and not enough helpers!


Crystal @ BFS January 4, 2011 at 2:18 pm

No magazines pop to mind…of course I haven’t picked up any magazine in years (well, maybe a Redbook at the doctor’s office…). Great idea though to start a publication geared towards education about basic money concepts – I like it!


Kris January 4, 2011 at 4:32 pm

BFS – It is definitely a difficult problem to solve. (The problem being, how to get information to the lower income people that need it, and in an affordable fashion.) I am going to have to think about this.


Money Reasons January 4, 2011 at 3:06 pm

I agree with #4, but not with the way that particular author has presented it.

The best way to pay yourself first in my option, is through a 401K plan that has a company match! If the company has a 401K and is paying a generous match, that’s free money!!! And definitely worth partcipating in.

Writing a check to yourself always struck me as oddly funny. Perhaps this trick would work for the rich and perhaps even the upper middle class, but it would not work for the majority of american (or any other country either).

Perhaps that is Kiplinger’s target audience (the rich)… If that is so, they should explain that somewhere in the article!

Nice writeup!


Kris January 4, 2011 at 4:35 pm

I agree on the 401k. Where else can you get that kind of return than the company match. I am also a fan of employee stock purchase plans if they offer a stock discount. However, not everyone is ready for stock purchase plans.

I did invest in my 401k with my first paycheck, even though I had debt. But we were newly married and we had a plan to get rid of the debt. It all worked out. However, if I didn’t see a light at the end of the tunnel of debt, I don’t know that I would be investing at all. (Especially if I only spent money on the bare bones things needed to survive.)


retirebyforty January 4, 2011 at 4:53 pm

I agree with you on #4. I would pay off credit card debt first, but then I never had any CC debt so I don’t know first hand.

I also disagree with #5 – don’t go for a home run. I think a small portion of your portfolio should be a separate home run account. If you never try, you’ll never hit a home run.


Kris January 4, 2011 at 11:11 pm

RB40- To me, your point about ‘hitting a home run’ almost falls into the diversify category in a way. Meaning, diversify in terms of risk, not just asset vehicles.

It can be fun to be a little risky with a certain percentage of your income. It just can’t be the whole nest egg, as you stated about the small portion.


Buck January 4, 2011 at 7:49 pm

Terrific points and love your passion for the topic. Perhaps you could start something up! 🙂 I agree a lot of advice is aimed at people who have a decent grasp of personal finance. Hmm, you may have uncovered a hidden opportunity. Like a previous comment, the closest thing online is Yakezie. Guess we better all keep things going, if not for ourselves, for everyone who needs personal finance help! 🙂


Kris January 4, 2011 at 11:07 pm

Buck, you are very right. I am going to give this some thought and see if any ideas strike me in the head.


Suba @ Wealth Informatics January 4, 2011 at 8:09 pm

Kris, I am going to disagree with you on this one. YAY! It was boring to agree with you on every single post 😛

Anyway, to the point, There are LOT of government (free) resources that help people provide that information and rightly so. A lot of these factors (I would say everyone of them in fact) does apply to the low income people. For example, pay yourself first. If you had very low income and if you DID pay yourself first and fund your retirement, you can get it back via different government credits and grants which are not available for high income folks. There are plenty of ways the Government helps people to make them start saving, but most of them dismiss it saying all the methods are for high income folks.


Kris January 4, 2011 at 11:05 pm

Sorry Suba, but now I have to disagree with you…

I do not see how anyone at the poverty line can pay themselves first. (note the article did not mention retirement as part of paying yourself first, it talked about savings accounts and mutual funds.) If you are struggling to pay the rent and get bus fare to work, how in the world can you pay yourself instead of paying your bills? There are plenty of people that live not too far from me that get their power turned off and have no heat because they cannot afford it. There is no way they can pay themselves first. Yes, these people may be at the extreme end of the spectrum, but there are plenty of them out there.


Deidre @ TransFormX January 4, 2011 at 8:14 pm

I think those guidelines are geared toward people who have enough disposable income to do all of it & in that order! So #4 really translates to:

“Don’t spend so much money on ‘junk’ and if you still feel the need to do so; pay yourself before you do it then pay your other bills.”


Kris January 4, 2011 at 11:12 pm

Deidre, I think you are right. The suggestion really applies to people that actually CAN curb their spending. If someone is barely feeding the kids and has just enough to keep the utilities on, they can’t cut their spending in order to pay themselves.

Good point.


Deidre @ TransFormX January 5, 2011 at 9:55 pm

I think back to when I was younger and had 3 jobs just to put the lights on, car payment/insurance and rent. One of the jobs I worked was at a restaurant so that I could eat there on Fri/Sat/Sun 🙂 and they allowed me to take home leftovers for the week in-between. Nice! I had no social life because I worked 3 jobs, so I didn’t spend any money in that way and you would think I had plenty of money saved or was in the position to save alot of money. Wrong! I had just enough to pay rent, electric and car payment with gas to get to my 3 jobs. Didn’t need too much for groceries because of that restaurant 🙂 But still, I had no extra spending money because I was working minimum wage jobs.

After a year I had worked my way up the paycheck ladder and had some extra money. By then I was so tired of working 3 jobs, one had to go. Then guess where the extra money went? Yep, to my groceries 🙂

Things are never perfect so we do the best we can with what we have. That’s the bottom line. And really, if you think about it, this is what #4 should be all about. Do the BEST you can with that disposable income. What’s best this month may not be what is best next month. This month it could be paying off credit card debt. Next month (maybe because you shifted your balances to a lower rated card) the best that can be done may be different or MORE of the same.

So, you may be thinking. Ok, if I’m broke what then? When I was completely broke and still working 3 jobs I took my pennies and change I had left over after converting all my tips into paper bills and coins and put it in a jar. That’s it. So there were days where I had 3 cents left – it went into the jar. There were days I had 80 cents left – it went into the jar. It was the BEST I could do at the time.

I think too often we just shrug off the notion of saving a little here and a little there as ‘inconsequential’ so we end up doing nothing anything at all. And of course this snowballs to thinking we can just get ‘one more starbucks’ that won’t hurt….

Instead, maybe we should shift our thinking to doing the BEST that we can in that moment and see what happens.


Kris January 6, 2011 at 7:54 am

Deidre, working 3 jobs must have been exhausting. Hats off to you for working so hard.

I remember in the early days of our marriage when we had a lot of school debt. (Well, I did, and my husband got to share in my debt.) I used to take any spare money that was in my pocket that day into my piggy bank, dollars included. At the end of the month, I might have 50 dollars or something, and it felt like a major windfall. It is all so relative. Now we might spend that going out to a decent dinner with the family. I think they call that lifestyle inflation…

You are so right though, little changes do matter and should not be disregarded!


Deidre @ TransFormX January 6, 2011 at 4:15 pm

I love it!!! Lifestyle Inflation 🙂 🙂


Rusty January 5, 2011 at 4:06 pm

I agree with you somewhat – if a person is going to aggressively pay off debt, then they need some sort of money pillow – an emergency fund that will cover the costs of say, the car breaking down. If there really ISN’T any money left over, then either income needs to go up or spending needs to go down, rinse, and repeat.


Kris January 5, 2011 at 4:36 pm

Very true Rusty. Until you have that spare income though, I think it is hard to donate money or put money in a brokerage account.


Get Happy Life January 6, 2011 at 6:50 am

Obviously, it’s a common sense that one should pay off his debt first before starting to save – saving is usually for money that you find it as a surplus


Kris January 6, 2011 at 7:58 am

Get Happy Life- I don’t think everyone feels that way. Many people I know invest money every month but still carry a credit card balance. It is common sense though to just save what extra you have at the end of the month.


Khaleef @ KNS Financial January 6, 2011 at 7:45 pm

I wish that these types of tips came with disclaimers or at least gave detail as to why these tips work. Then the reader can decide if the tip is right for there particular situation.


Kris January 7, 2011 at 4:39 pm

Khaleef, I agree. I think if you are struggling financially, articles like these may just be depressing and deflating. There were many years in my life where I could not spare a dime for anything other than bills, and I would have wanted to smack the author of this article in the face and asked for some practical advice.


ETF Trading Strategies January 11, 2011 at 3:51 pm

Long term focus, long term plan, and consistent execution are the name of the game. Its a marathon, not a sprint so pace yourself. Good read.


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