Written by: Aaron Hayslip | Finance

When I was 23 and newly married, I was overwhelmed by the suddenness of adulthood and responsibility. Primarily, this pressure came from the feeling that I suddenly had to “have it all together”, especially in the area of personal finance (which no one taught me anything about).

After ~10 years of marriage and “adulthood” I still have not “figured it all out”. In fact, I’d say I’m right in the middle of the mess. Most of the time our family of 5 is a little bit of a wreck and this includes our finances.

But after trying things out, making mistakes, countless conversations with others and many finance books, I realized that I’ve got a set of counter-cultural principles that guide the way we make financial decisions - and really, life decisions.

As you’ll see, my chief concern here is not that you become rich (as seems the goal of so many finance gurus) but that you become purposeful with how you use your money. Your life is far more valuable than money and therefore I don’t believe that your life should revolve around it, but nonetheless, money plays a vital role in you and your family’s future.

Despite our frequent mistakes, I’m confident in how we’re using our money and hope this exploration of financial principles is helpful for you as you think, dream and plan for you and your family.

Principle 1: Have a Family Vision

Too many people, and families, coast through life without a vision for who they want to be or where they want to go. So they end up adopting the values and goals of the world around them.

Unfortunately, in our consumer-centered culture, this means that we end up spending money that we don’t have on things that we don’t actually value in order to achieve a life which we don’t want.

Instead, take time to think with your spouse about what you want to be about as a family. Business writer, Patrick Lencioni, has an incredibly helpful book geared toward helping families identify their own vision and values in which he asks, “what makes your family unique”?

The values that are unique to your family will drive how you make money decisions. Most of these decisions won’t be right or wrong and they will often look very different from other families around you who have values that are different than yours.

Early on in our marriage, my wife and I had some very close friends who valued many of the same “big picture” things that we did (our beliefs about theology, morality, etc) yet they could not have been more different than us in the unique values they had.

For example, our family values a flavor of hospitality that includes an abundance of good food. Financially, this means that we spend more money on groceries than most and always make too much food for gatherings.

We would notice that our friends were not wired that way. For them, food was fuel and they would make an effort at every meal to not waste food. Therefore, when they hosted a gathering, they would always make “just enough” so everyone could have 1 plate of food.

This may sound like I’m trying to imply that they’re cheap, but they just valued different things than us. For example, this family was keenly aware that much of the world suffers from hunger. And for this reason, they would have a monthly “beans and rice” week where as a family they would eat nothing but beans and rice for dinner so that they would be reminded that much of the world does not live in the abundance that we live in.

So it’s not that they were cheap and didn’t care about hospitality, but rather in the area of food, they valued frugality and being conscious about the needs of the rest of the world. And it’s not like we don’t care about the world’s hunger crisis, it’s just that our value of hospitality doesn’t permit us to not spend generously on food.

The saying goes, you can have an abundance of anything, but you can’t have an abundance of everything - at least without drowning in debt. Decide what your family is about and freely spend your money on those things, while restraining yourself in the areas that are less important to you.

Principle 2: Money is Morally Neutral and Therefore a Tool

This question about whether or not it’s right to spend (or not spend) a bunch of money on food (or anything else), or about money and generosity moves us to this question about morals and money. I’ve come to believe that money is neither good or evil - it’s neutral and is therefore a tool to be used.

Everyone assumes that the bible says that “money is the root of all evil”, but it actually says that, “the love of money is the root of all evil”. The money itself is neutral - it’s we who can be deceived.

In this sense, money can own us (we can spend all of our lives pursuing it) or we can own it. I believe that the money we do have isn’t actually ours, but we are stewards of it. We didn’t have it when we came into this world and we won’t take it with us when we leave. But for now, it’s a tool that we can use to help realize the vision that we create for our family.

All that to say, I do not believe that it’s  wrong to have money or even to pursue wealth. But I do believe that more wealth will only magnify whatever is already inside of me. If it’s greed, then I’ll strive harder to get more and I’ll never be satisfied. If it’s generosity, then my wealth will allow me to increase in my generosity.

So I don’t think wealth is evil, but I say that soberly, realizing that much of our culture is downing in its own pursuit of wealth - we see it as the ultimate goal and key to happiness. And in the process of pursuing money, we risk giving up our lives for it.

Principle 3: Looking “Rich” is Ridiculous

There has been plenty written about “materialism” in American culture and how we all want to appear rich and successful. I’ve written recently about how our habit of appearing busy (and being hopelessly busy) comes from our need to appear rare and successful.

But if I’m honest, this one is tempting for me. I feel self-conscious every time I pull into car-line to drop my kids off at school in our 2008, beat-up, Honda Odyssey (which I paid $7k in cash for).

But the reality is, most people cannot “afford” the nice cars they drive. No one shells out $35k in cash when they buy their brand-new Honda Odyssey - they finance it. A $35k one-time hit would make you throw up.

So the average American has a car payment of $568 for new cars and nearly $400 for used cars. Technically, I too could afford a $500+ payment, but for what? Ultimately, the only thing a brand-new Honda Odyssey could do that my old one can’t do is to sync with my iPhone - they both drive, carry kids, are safe, and have air-conditioning.

After 5 years, someone who finances a new Odyssey will now have an old Odyssey (5 years old) which is fully paid for. They finally have no car payment and an old Odyssey (which is what I have - no car payment and an old Odyssey).

But if instead, they were to take the $10k they likely put down when they purchased the new car, and instead bought a used one, and then put that $568/month toward an index fund, after compounding interest, in 5 years (likely the length of the car loan) they would now have ~$42,164 in index funds. AND this fund will likely yield $3k+ in returns this next year alone. It gives you money instead of taking money from you.

So here’s your choice: 5 year old car and no money, or ~10 year old car with $42k in investments.

That being said, this is a perfect example of why “appearing” rich is absolutely insane, but it doesn’t mean it’s not tempting. I can drive around my beater Honda, while my stock portfolio grows with full knowledge that my crappy car is a symbol of my growing wealth, yet feel ashamed.

This is why personal finance is so difficult. We must be sober-minded and declare war on our insecurities and not find our worth in our appearance of success.

Principle 4: Buy Assets, Not Liabilities

Most good finance books you read will say something to this effect, and it’s what I was getting at with the example of the cars. A car is a liability - it will depreciate in value. When you sell it, it will be worth less than when you bought it.

Juxtapose this to a house, which will ideally be more valuable when you sell it, or stocks and other investments - assets grow in value.

Now obviously not everything you buy will be an asset - in fact, most purchases you make are “liabilities” and at some point, it’s unreasonable to force your family to live in a run-down house, with broken furniture and to drive a car that breaks down every week for sake of buying up index funds.

Again, spend your money in accordance to your family’s vision, but with each purchase, ask the question, “is this an asset or liability?“. Monthly, you’ll spend more on liabilities than assets, but in the grand-scope of your financial picture, it’s ideal to have a pattern of accumulating assets and not accumulating liabilities. This will lead to financial freedom and freedom from materialism.

In terms of what to invest in (which assets to buy), the primary options I see are:

• The Stock Market: Every month, we buy shares of index funds, which track the overall market. We expect to keep these funds for the next couple of decades, at least. It’s possible to invest in something with higher returns, but these investments are fairly low-risk, and absolutely passive.
• Real Estate: It’s popular for folks to buy rental property (amongst a variety of other real estate strategies) but we’ve primarily avoided this as there is a steep learning curve and usually a steep initial investment. I’d rather use my time and resources to invest in my other business (which is also my day job) but for many folks who are not full-time entrepreneurs, real estate makes sense as they’re able to take on these steep learning curves.
• Your Own Business: By far, the greatest returns you’ll see on your investments is your own business. You control so many more levers here than in any other area of investing. As I mentioned, investing in real estate is a business in itself, but since I have another business which generates my full-time income, this is where I devote a majority of my own development (learning new skills) and when necessary, money.

Principle 5: Time is Far More Valuable Than Money

Perhaps my greatest realization over these last 10 years as it relates to money is that time is infinitely more valuable than money.

I recently picked up a business book in which the author (a multi-millionaire - as he should be in order to write a compelling business book) wrote in the dedication section of the book:

“To my elder children, Joshua and Amanda, for all the times I wasn’t there while climbing the corporate ladder.”

I obviously don’t know Joshua and Amanda, but I’m certain that they’d trade daddy’s business book and 1000 lifetimes of wealth for those moments that their father was absent. No amount of money will be able to buy those back, or to replace the relationship that could have been.

In that sense, I believe that money spent in order to save time is money well spent. Recently we paid $1,200 to have the yard weeded and mulched. $1,200 isn’t nothing to us and I could have surely weeded and mulched myself (or I guess we could have let the yard go to hell). But likely it would have taken me an entire weekend away from my family and it’s just not worth it.

Additionally, at some point it may be worth calculating how much your time is worth on paper. If you make $75/hr at work but then go home and do something that you could pay someone else $30/hr to do, then you’re undervaluing your time. Obviously you can’t do this for everything in your life as part of life and being a family is figuring out how to prepare meals, do yard work, etc, but we should take a step back and look at how we spend our time just as much, if not more, than how we spend our money.

Principle 6: Take Risks Early

One unique aspect of life that I’ve stumbled into is that you don’t have to play the same game as everyone else in terms of career and income.

In the early years, when you can afford the most risk, the corporate life is the most appealing as you can quickly climb to a 6-figure income with stability and benefits.

However, the best case scenario of climbing the corporate ladder to the top is lose-lose. You’ll eventually climb as high as you can which means your earning potential has a limit. Not only that, but to get there you’ll have to sacrifice the best years of your life.

But those corporate businesses you work for do not have an earning limit. And neither would your business, if you started one.

There are over 30 million small businesses in the US. It doesn’t have to be your full time gig and you can think outside of the box. I’m not even going to list ideas here - Google that. I’m here to tell you that you 100% do not have to take the same path as everyone else and you can start your own business.

It is possible to earn more than most people who work 9 to 5’s by working less, but you have to put yourself out there and take some risks early on. If you wait until you’re “ready” (smart enough, financially secure, emotionally secure, etc) you’ll never start anything because those things may not happen. Plus, you’ll just have more to lose the older you get - but it’s never too late.

It’s taken many difficult years, but I have my own business, I make good money and I’m more available than most people I know. I’m not rich, but in some ways I feel like I at least have a lottery ticket. I don’t have any desire to sell my business, but it’s absolutely plausible that it could be worth a transformative amount of money in just a few years.

Principle 7:  Keep Your Standard of Living Low

When my wife and I got married, we lived in 1 bedroom, 500 sqft. apartment and now we don’t. As your income increases, so does your standard of living. This isn’t necessarily a bad thing, but it’s very possible to make six figures and feel poor because all of your money is going toward car payments, a high mortgage or Amazon.

For this reason, we’ve tried to make it feel like our income is capped, though at times it has actually grown. We do this by having several different bank accounts at different banks and automating the transfers so that some of the money goes for monthly use and some of it goes to savings and investing, automatically. Here are our accounts:

• Checking: We have an account at Charles Schwab for checking and this is where all of our money goes for the spending we do each month. At any given time, we don’t have much more than 1 months worth of money in this account. All bill payments (including credit cards) come form this account. Each month, a percentage of our income goes to this account. We feel like this is all the money we have each month, even though some of our money (which never touched this account) went to some other accounts that we have more limited access to.
• Savings: We have several savings accounts at Ally Bank, which is an online savings bank. It’s difficult to transfer money from our savings to our checking (which helps keep us from overspending). Here we have an emergency fund (which as a self-employed person, I try to keep fairly hefty), a fund for taxes, a fund for vacations, a fund for general liquid savings (because I confess that we often overspend our monthly budget) and a fund for Christmas gifts (it isn’t huge, but Christmas always sneaks up on us).
• Vanguard: All our investments (IRAs, etc) are at Vanguard. Real simply, we invest money in an index fund each month and don’t touch it. Additionally, we have custodial accounts for our kids, which we’re planning to invest in index funds as well. Since we don’t know yet whether they’ll go to college, we don’t have 529s for them. As they get closer to college, we can convert these funds so they can avoid taxes. For now, they’ll avoid taxes on the gains since they have no other real income (the accounts are in their names). Also, don’t tell our kids about this. We want them to work as if we’ve saved nothing for them, but that’s another article.

Principle 8: Create a New Budget Every Month

We’re still not great at budgeting, but for years we tried and failed completely for one simple reason: our expenses were a little bit different each month.

So we’d have something large and unexpected that didn’t fit into any category, and it would throw the whole month off. Or we’d have irregular, non-monthly or seasonal expenses such as car maintenance, auto insurance (we pay 2 times/year), etc. Of course, everyone says that even for those things you can budget and “save” for it monthly, but unless you have a separate savings account for every line item (sorry, I’m not creating a savings account for oil changes) you usually just spend that money and you’re right back at square one.

So here’s our system, which isn’t perfect, but has been by far the best way we’ve found to budget.

In a spreadsheet, we have a simple monthly finance template which essentially has a box for income and a bunch of boxes for that month’s expenses. The main idea here is to make sure that the difference between the total income and the total expenses is 0 (so that we use every dollar).

The income that’s accounted for in this spreadsheet is only the cash that goes into our checking account, which is after-tax and after savings/investments. As I said before, even if we screw this month up a bit (overspend) it’s not the end of the world because we automated our savings/investing and we’ll never actually see that money in our account.

Next, I make a copy of that spreadsheet for the upcoming month. In our budget we have a few main categories:

• Giving: Self explanatory
• Spending: Things that are not set each month such as groceries, dates, kids fun, gifts, etc. Most of the time these don’t change, but since we create this budget fresh each month we change things around. For example, during the summers when the kids are out of school we won’t spend any money on pre-school tuition but we’ll have more “kids fun” expenses.
• Fixed Expenses: Mortgage, utilities, etc. These are predictable and ideally, a set expense each month.
• Whoops: We try to have a good chunk of money budgeted toward “whoops” just in case something comes up that wasn’t in our budget.
• OOO (out of the ordinary): Finally, we think of anything that is unique to this month and set aside money for it. This might include plane tickets for a trip, extra money for groceries if we’re having a party or birthday gifts for the kids.

Next, I plug all of this into an app called YNAB (You Need a Budget) which is essentially the envelope system, but digital. YNAB gives you an inbox of transactions and enables you to categorize them. So my wife and I take a few minutes, one night each week and categorize our expenses, just to ensure that we’re on the right track. I confess that this can be stressful, but if we do it each week, it’s a very simple task which helps us keep a pulse on our spending.

In a worst case scenario, if we overspend one month, we can just move money over from savings to cover it. Since we’ve automated our savings, we should always have that buffer.