The Foolishness of Common Wisdom

some financial non-advice for grad season

College graduation season always reminds me of the generally-dispensed wisdom around being a financially savvy adult in the world. There are universal koans around how much to save, how to invest, what constitutes “good debt”, what are “necessary expenses” – and exactly what percentage of your paycheck each should occupy. This advice, as I’ve learned over time, applies best to people with a singular, straightforward W-2, and a career track that aims them towards a comfortable middle-class category (such as that designation even exists anymore); not too rich, and certainly not too poor.

Common wisdom isn’t always so wise when you have a complicated tangle of 1099s, your own LLC or two, and a financial outlook that doesn’t involve a constant income stream on a predictable cadence.

(One of) the premises of this newsletter revolves around making considered choices, even when those choices are not in lockstep with those around you. For us, that has always extended beyond our platonic partnership, and included our unconventional finances as freelancers. Discovering Dana Miranda’s financial writing for the creative / working class has been a gift to those sensibilities. Recently, she wrote about a taboo topic: her decision NOT to invest for retirement.

I am inspired by this admission to share my own personal (un)common wisdom. It’s taken as natural advice that unless you are wildly risky, or very poor, health insurance coverage should be a top financial priority. As such, many friends and family members were shocked by my choosing not to pay for health insurance after I left the employ of a friendly, part-time job with benefits back in 2018.

When my freelance work began to occupy the majority of my professional life, at first I prioritized maintaining health coverage via COBRA and Obamacare. I quickly learned that when you do the math on these “smart” financial moves, they sometimes do not add up. My disaster insurance cost me $500 per month, with an $8,000 deductible before coverage would kick in. After nearly a year of this, I took a serious look at my choices.

If I freed myself of paying this $6,000 in annual premiums – aside from the additional $8,000 I would need to pony up before coverage took over – I would be taking a gamble. I would be playing the odds that my out-of-pocket, uninsured medical expenses wouldn’t exceed the $14,000 I would otherwise spend before my insurance would step in. If I racked up anywhere less than $14,000, I reasoned, I would be saving money.

As a healthy-ish 30-something, I decided to take that gamble; I let my insurance lapse.

In the years I spent uninsured, this decision paid off for me in spades. I saved thousands of dollars that I was able to spend (or save) in ways that provided a great deal of immediate benefit. I did find myself needing medical care from time to time, and still came out very much in the black. In 2021 I had a dermatological outpatient surgery that I paid for out-of-pocket, uninsured, and was able to negotiate a rate that was roughly the same as I would have paid for a single month of my disaster insurance coverage. Let’s be clear — this is not ideal, and it isn’t right; but it’s a fundamentally broken system, and no individual choice I could make, personally, would change that.

ka-ching!

Another decision I made more recently was to throttle my income in order to qualify for medical coverage for my pregnancy under Medicaid. The year that I became pregnant, I made sure to only accept work projects that would allow me to stay in a low-enough earning category to retain free medical care. This is a decision that I feel even more reluctant to admit, because — even though I followed every rule and legal allowance — it feels a little shameful, as though I’m getting something I don’t “deserve”….even though I qualified fair and square. I was taught to place trust in a system that never served my best interests, and that’s a tough moral imperative to kick.

I recently shared this anecdote with a cousin whose upbringing was extremely financially strained. Her immediate recognition (and lack of judgment) reminded me that this kind of math is not at all foreign to people who grew up poor, and is a key part of the calculus of many American households.

“Exploiting the system” is something that poor people and rich people both understand with clarity. The only difference is: one is considered taboo, and the other is considered smart money management. Who decides which financial decisions are exploitative/lazy/morally compromised, and whose interests do those moral arbiters serve?

The irony of my decision to strategically limit my income: I now operate with greater ease and financial security than ever before in my life. Less worry about money, more intuitive trust that I can manage my financial obligations, and a better understanding of which financials are actually an obligation.

Although I may be far from from being a graduate, I do find myself at a professional crossroads again this summer, in the face of a grim financial outlook for the creative sector in the coming years. As we prepare for what’s ahead, I’m reminded to trust that common wisdom is not always suited for uncommon paths.

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