Wednesday, April 18, 2012

High or Low Involvement - Which is better?

 After five and a half year of blogging about personal finance, reading other personal finance blogs and working in a seasonal financial services job, I've observed a wide range of  involvement in personal finances.
At one extreme are the high involvement people.  Their personal finances tend to be higher maintenance, requiring a lot of effort. At the other extreme are the low involvement people, who tend to have low maintenance personal finances.  Of course, there are the people who are in between the extremes.

Let me provide some examples for the extremes:
  • High involvement.   People who do high involvement personal finances tend to have lots of different stuff which needs constant managing.  Some examples are rental properties, actively managed stock and bond accounts, maximizing interest on savings and checking accounts, and credit card arbitrage.  Each these elements require effort from the owner on a daily or weekly basis.  Inevitably, the income results in a more complex tax return.

  • Low involvement.  People with low involvement personal finances tend to have one or two sources of income.  For example, having only a job, pension or social security as a source of income and only one savings and checking account would be low involvement.
  • Which is better? To me, there isn't a straight forward answer; it depends on the person and the results.  When I was younger, I liked doing high involvement personal finances.  While I never did credit card arbitrage, I did do many of the other elements. High involvement made me feel I was contributing to improving my personal finances :-)As I've gotten older, I've shifted to preferring low involvement options.  Fewer and simple is better for me.  So I have eliminated some of the higher maintenance items.  At this point,  I am still somewhere in the middle but I will probably continue to move to more low involvement options as I get older.

    For more on  The Practice of Personal Finance, check back every Wednesday or a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2012 Achievement Catalyst, LLC

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