Evaluating Our Own Financial Habits: Do We Follow Our Own Advice?

Many of our articles discuss the best ways to manage your finances, but just because you know what you should do doesn’t mean you actually do it. Do as I say, not as I do. In this article, I assess whether our own financial habits match up with experts’ advice.

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Advice #1: Save up an emergency fund of 3-6 months’ worth of expenses

Most experts agree that it is essential to build up an emergency fund. This allows you to stop living paycheck to paycheck and have a safety net to fall back on in case of a large unexpected expense.

Our Situation

I am personally a big believer in having a large emergency fund. It prevents you from worrying about money on a regular basis and can give you the freedom to take more risks because you’re not entirely reliant on your everyday job. My wife and I currently have over a year’s worth of expenses in cash, which amounts to about 11% of our total portfolio. Although I do think it’s a good idea to have a large emergency fund, ours is particularly big because we are also saving for a down payment on a house in the near future.

Verdict: Following the advice!

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Advice #2: Pay off high interest debt

High interest debt can be a huge weight dragging down your finances. Not only do you have to pay money every month towards your debt, the amount you owe is significantly higher than the amount you borrowed due to the interest. It can also prevent you from feeling financially comfortable. Debt can make you feel like your financial situation is controlling you, rather than the other way around. Paying it off is generally a huge relief to both your finances and your mental well-being.

Our Situation

We are currently debt free! Neither my wife nor I had any student loans. I had a scholarship and my wife went to college in China, where it’s cheaper. Though we both attended/currently attend graduate school, we received stipends for teaching and/or research. We also don’t currently have car loans. I bought a cheap car in cash in 2015, and though my wife did take out a loan to pay for a used car in order to improve her credit, she paid it back quickly. Neither of us have credit card debt. We will be taking out a mortgage to purchase a house soon, though, but that won’t be high interest debt. I don’t currently intend to pay off our future mortgage any faster than necessary, assuming we do end up with a low interest rate; however, I can understand the appeal of quickly paying it off.

Verdict: Following the advice/Not applicable!

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Advice #3: Track your net worth and expenses and keep a budget

The best way to assess your financial health is to track your net worth and expenses. Your net worth is equal to your assets minus your liabilities. Essentially, it measures the size of your wealth. You can read more about net worth and how it varies by age, income, and homeownership here. Experts generally recommend tracking your net worth annually to make sure you are on the right track. Your expenses should be tracked more frequently, ideally monthly. This allows you to make sure you are spending money appropriately and helps you to find ways to save. Tracking your expenses is also vital to make sure you stick to a budget. A budget is a way to prevent overspending by allocating a certain amount of your income to different categories. The first article I wrote for this site was actually about how to create a budget.

Our Situation

We do track our net worth annually and expenses monthly. We have been doing both for about three to four years. We use an Excel spreadsheet similar to the one provided in the budgeting article linked to above to keep track of expenses. Ironically, we don’t actually use a budget. We do have some general estimates of what certain categories usually cost us (mostly food), which allows us to take a closer look if spending in a month is markedly different for those categories, but otherwise we don’t have strict spending limits. This is because we try to save as much as possible across the board without being minimalists. Our only expensive categories are rent, food, utilities, and insurance (you can see where we spend our money here). These are all relatively fixed expenses, so there is little a budget could do to help. Otherwise, any large expense merits a second look. Generally, these are due to an unexpected car repair or paying taxes, which again, a budget would not really help with.

Verdict: Track net worth and expenses, but don’t have a budget. ✔-

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Advice #4: Invest monthly to dollar-cost average

Trying to time the market is a good way to lose money. People tend to buy when the market is high and sell when it’s dropping. This is often known as emotional investing. It’s generally better to invest a little bit at a time, no matter whether the market is up or down. This is known as dollar-cost averaging. It allows you to continually invest without worrying about emotions playing a role. The more frequently you invest, the better, because you won’t miss out on market dips or invest too much at market highs. Generally, experts recommend investing monthly.

Our Situation

Our monthly income is not very stable. I work part-time as a graduate student, which has just barely paid the bills for our family of three for the past year in combination with side hustle income. However, our side hustle income is quite variable and has primarily relied on my wife’s Fiverr work editing personal statements for graduate school. Her biggest customers have been people applying to UX design programs, which mostly occurs from December to February. For that reason, our monthly income has tended to be quite high at that time of year, while during other months, it may not even cover all our expenses. Although we do have the money to invest monthly (out of our emergency fund rather than a monthly paycheck), we feel more comfortable totaling up our savings at the end of the year and investing then rather than monthly. However, my wife recently got a part-time job, so we have started investing the extra money more frequently. We plan to continue that throughout the year to do a better job of dollar-cost averaging.

Verdict: Yearly so far, working on monthly! ✔-

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Advice #5: Invest in low-cost index funds

Most experts recommend holding mutual funds or ETFs rather than individual stocks. This is because funds provide broad exposure to a collection of stocks or other assets and allow you to diversify, reducing risk. Index mutual funds or ETFs are designed to track a particular set of assets rather than beat the market. Interestingly, most index funds outperform actively managed funds. They also provide peace of mind for their holders because you don’t have to worry about management or underperforming a benchmark. In addition, they tend to be cheaper than actively managed funds and more tax-efficient. Fees can have a large impact on portfolio performance because they eat up your returns. There is a huge difference between an actively managed fund charging 1.5% and an index fund charging 0.03%.

Our Situation

Prior to this year, both my wife and I held mostly individual stocks in our taxable brokerage accounts and actively managed mutual funds in our retirement accounts. This was before we started devoting our time to learning the ins and outs of investing and personal finance. More recently, I have begun to sell my individual stocks and purchase ETFs in my taxable account, but I am waiting to sell some of them until they have passed the 1-year mark so they will be taxed as long-term capital gains. I also plan to switch some of my high-fee actively managed mutual funds to low-cost index ETFs.

Verdict: Not following the advice yet, but starting on that path. x

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Advice #6: Diversify your portfolio

It’s common investing advice to diversify your portfolio to reduce risk. This means that your portfolio should be spread over different asset classes (such as stocks, bonds, real estate, gold, and cryptocurrencies), sectors (such as technology, utilities, and healthcare), and countries (in general, domestic vs. international). The biggest way most investors diversify is through their stock/bond allocation. Stocks and bonds tend to be negatively correlated, so holding a combination of the two can reduce the volatility of your portfolio. Generally, experts suggest holding mostly stocks at a young age and increasing your bond allocation as you get closer to retirement.

Our Situation

Our current portfolio allocation is as follows:

As you can see, our portfolio is more conservative than you might expect for people our age, but as I mentioned earlier, we currently have a lot in cash because we’re saving for a down payment on a house. Within the stock portion, we have a pretty good mix of sectors but are a little heavy in technology stocks. We’re also weighted more towards growth than value. In terms of domestic vs. international stocks, our portfolio is currently mostly domestic, although I am in the process of branching out to international index ETFs.

Verdict: Mostly following the advice! ✔-

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Advice #7: Reinvest dividends

Reinvesting dividends keeps your money in the stock market and helps you to dollar-cost average. For more information about dividend reinvestment, see this article.

Our Situation

We didn’t use to reinvest dividends from individual stocks, just mutual funds and ETFs, but after conducting the research for the article above, we decided to reinvest dividends everywhere we could.

Verdict: Following the advice!


Overall, we do follow most of the advice we discuss in our articles and hear from experts. We know that this information is reliable and can improve our finances, so it makes sense to act on it. Whenever we find out that we are approaching some aspect of our finances in a less-than-desirable way, we make an effort to fix our mistakes. Every day is a chance to learn something new and change our lives for the better!


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