When to follow the rules — and when to break them

Last night’s HelloFresh recipe was Bulgogi Pork Tenderloin. As always, the instructions were clear and easy to follow. As always, it took me about twice as long to prep things as the recipe card said they would.

HelloFresh instructionsI chopped the vegetables, boiled the rice, seared the meat, made the sauce. But when I reached the final step — “finish and serve” — I hit a wall of sorts.

“Ugh,” I said to Kim, who was playing with our three cats and one dog simultaneously. “The recipe calls for a tablespoon of butter in the rice. I hate adding butter to rice. It makes it gummy and gross. But HelloFresh always wants me to do it.”

“I like butter in my rice,” Kim said, throwing a bacon ball for the dog while kicking a catnip toy for the cats. “But if you don’t like it, don’t add it.”

I sighed. Of course, she was right: Just don’t add the butter! Such an obvious solution, right? Yes — and no.

You see, I am fundamentally a Rule Follower. When I’m cooking, I follow the recipe exactly. When I’m building an IKEA desk for my new office, I follow the instructions exactly. On the road, I generally stick to the speed limit (which sometimes drives Kim nuts). I used to take pride that never once did I cheat on my homework or tests in high school and college — and I never helped anyone else cheat either.

As I said: I am, fundamentally, a Rule Follower.

This has been true when it comes to managing my money too. Since beginning my quest to become the CFO of my own life fifteen years ago, I’ve surrendered to wiser minds than mine. I tend to heed the time-tested “rules of money”, rules like:

  • When average people like me are wondering how to invest, the best answer is usually “set up automatic contributions to an index fund”.
  • When setting up a budget, it’s more important to pay attention to the Big Picture than it is to fret over details. Follow the balanced money formula and you should do okay.
  • When you want to get out of debt, use the debt snowball method. If possible, pay high-interest debts first. Many folks (including me) have more success, though, if they pay off low-balance debts first. And still others use a debt snowball approach in which they start by tackling the debts with the greatest emotional weight.
  • If you’re going to use them, know how to use credit cards wisely. If you’re unable to use credit without digging yourself into debt, then throw away the “shovel”.
  • And so on.

Following these rules has proved profitable. These “rules” are rules for a reason. Because they work. They allow folks to get out of debt and build wealth. Crazy, right?

Here’s the thing, though. As effective as these financial rules have been for me, as much as I like strictly following a recipe, I’ve also come to realize that sometimes it makes sense to (gasp!) break the rules.

The challenge, then, is determining when to follow the rules — and when to break them. Continue reading

I’m Retiring from Get Rich Slowly

This post from J.D. Roth is part of the reader stories feature at Get Rich Slowly. J.D. founded this site and acted as editor for six-and-a-half years. He now writes at More Than Money.

First, the short version: I’m officially retiring from Get Rich Slowly. I may write an occasional guest post here, but from today forward, my online home is at More Than Money, where I’ll write about personal finance, yes, but also travel and fitness and books and philosophy and dating. Plus, of course, my old standbys: cats, computers, and comic books.

This news probably shocks nobody. Before I leave, here’s a longer version of my history here, the story of Get Rich Slowly from Day One.

In the Beginning
I never set out to be a personal-finance blogger. Though I always wanted to be a writer, I always thought I’d write poetry. Or science fiction. Throughout high school and college, I took whatever writing class I could. I edited the school literary magazines. I wrote for the school papers.

During college, I made some dumb decisions. I came from a poor family, but was a at a school with a lot of wealthy kids. (Or kids who seemed wealthy, anyhow.) I desperately wanted to fit in, but couldn’t afford to do so. But then I discovered credit cards.

I started with store credit cards, which allowed me to purchase clothes and cologne. Soon, however, I had signed up for a Visa with a $300 limit. I maxed that out in no time. And so my credit habit started. By the time I graduated from college, I had no student debt but I had plenty of consumer debt.

From there, matters got worse. When I graduated, I had no job and no prospects, so I took a miserable job selling insurance door to door to little old ladies in eastern Oregon. I bought a new car and a new wardrobe. I was essentially paying for three different places to live. In other words, I was digging the hole deeper.

In desperation, I took a job at the family business, a small box manufacturing company in rural Oregon. I was the salesman, but I wasn’t any good at it. I made a meager income, with which I made minimum payments on all my credit cards. I never paid the balances down, though. Any time my credit limit was raised, I simply spent more. I was dumb.

Robbing Peter to Pay Paul
In 1998, I had more than $16,000 in credit card debt. I applied for — and was granted — a home equity loan. I used this money to pay off my outstanding debt. I cut up my credit cards. When I was certain that my balances were paid in full, I cancelled the accounts.

I paid faithfully on this loan for five years (it had a ten-year term). But when my wife and I bought our new home in 2004, the intricacies of the transaction (read: my lack of savings) forced me to fold my previous home loan into a new HELOC: $21,000 at 6%.

Couple this with a car loan, a computer loan, and loans from assorted friends and family, and I had accumulated over $35,000 in consumer debt. I was in bad shape. I felt as if I were drowning.

Seeing the Light
Fortunately, a couple of friends threw me life savers. They’d been watching me struggle, and were waiting until I seemed like I finally might be ready to listen. This was the time.

One friend loaned me Dave Ramsey’s The Total Money Makeover. Another steered me toward the classic Your Money or Your Life. I read them both, and then went to the public library to borrow more books about money. I devoured personal finance manuals. As I read, I began to notice a stark pattern. “It’s impossible to get rich quickly,” these books seemed to say, “but it is possible to get rich slowly.”

Spurred by what I’d learned, I wrote an article for my personal blog that summarized the information in these books. It was a braindump about money. I called this article “Get Rich Slowly”. I had no idea where this would lead.

Getting Rich Quickly
A year later, in early 2006, I was well on my way to paying off my debt. I’d cut my spending in many areas, and was looking for ways to earn more money. “What if I started a personal finance blog?” I thought. “It could be the first personal finance blog on the internet!” Little did I know that there were already dozens — or hundreds — of other personal finance blogs.

On 15 April 2006, I started Get Rich Slowly — this blog. My goals were to:

  • Share what I was learning about personal finance.
  • Help others improve their financial lives.
  • Improve my own financial life.

I wanted to make money from the blog. And I did.

At the start, I made a few pennies every day. Before long, those pennies grew into dollars. And as my audience grew, so did my income. Within a year, I was making as much from Get Rich Slowly as I was from day job, selling boxes for the family business. After about eighteen months, I had eliminated my debt. After two years, I was able to quit my job to blog full time. And within three years, I had sold the blog for more than money than I thought possible.

Sticking Around
When I sold Get Rich Slowly, I thought I was done with the site. Because of turmoil in my personal life, I wanted to quit the blog. I wanted to walk away. To do something else. Anything else. In fact, I turned down a bigger offer that required me to stick around the site for three years. I wasn’t willing to make that commitment.

Turns out, that was a mistake.

The thing is, I loved Get Rich Slowly. I loved writing for the site, and I loved the community. I felt a responsibility to the readers. Get Rich Slowly was my baby, and I wasn’t ready to leave. So, I stuck around for three-and-a-half years, writing and editing and performing PR.

I always knew, however, that the day would come when I had to step away. To that end, I worked with the new owners to create a smooth transition. We hired new writers. We tackled new topics. Gradually — very gradually — I stepped back. I wrote Your Money: The Missing Manual. I began to speak at various conferences. I met with GRS readers and began to help them pursue their dreams.

By the beginning of this year, it became clear it was time for me to leave the site completely. All year long, I’ve been working to make that happen.

Moving On
Now, the time has come. There’s a solid core of staff writers here. There’s a new editor. The audience no longer expects this to be a blog about me and my journey. (And, in fact, when I do write about myself, I get plenty of cranky comments. That’s a good thing! It means the shift has been made.)

Note: Again, I want to stress that although I’m leaving Get Rich Slowly, I’m not done writing for the web. If you’re one of those who likes my voice, and you’re willing to read about a variety of non-financial topics, go check out More Than Money, the site I started six weeks ago. I suspect many of you would enjoy both that blog and this one.

It feels liberating to have made this decision. Get Rich Slowly has been an awesome gig, the best work anyone could ask for. I love you, the readers, and I love the work I’ve done. I feel as if I’ve done something good for the world, you know? But I think there’s more good in me. I want to continue helping others. Doing what? I’m not sure. But I’ll noodle that out in time.

For now, I’m happy to learn Spanish, build muscle at Crossfit, and travel the world. I’m also eager to continue meeting GRS readers in person. It’s a blast to exchange ideas and to help others follow your dreams. If you’re ever in Portland, let me know.

Finally, I should note that although I’m done writing and editing here (except for an occasional guest post), I’m not completely done with the site. I’ll continue to act as the site’s face. If a newspaper needs a quote, I’ll give them one. If a conference wants a speaker, I’ll be that guy. I’m proud of the site that I created and helped to build. I want its success to continue in the years ahead.

More than that, I want your success to continue in the years ahead. Be well, my friends, and always remember: The fundamental rule of personal finance is to spend less than you earn.

Planning for My Financial Future

I’ve been fortunate over the past few years. I’ve managed to get out of debt, quit my day job to write full time, build substantial savings, and am now able to do what I want when I want. I still work hard, of course, but I do so on my own terms. I’m a lucky man.

Next year, though, is going to be a year of changes. For one thing, my income might actually decrease. (And if it doesn’t do so in 2012, it will almost certainly do so in 2013.) At the same time, for a variety of reasons, my expenses are going to increase. I’m in no danger of deficit spending — I refuse to live beyond my means! — but this does mean I’m going to have to be more conscientious about budgeting.

Practicing what I preach
Because I’ve done relatively well over the past few years, and because my expenses have stayed low, I’ve been able to buy the things I want without much worry. There’s a reason I preach the virtues of conscious spending. If I don’t, I often find myself making spur-of-the-moment buying decisions. Well, I feel like it’s once again very important that I weigh every purchase before I make it. I’ve created a fine lifestyle; I don’t want to jeopardize this lifestyle through silly spending.

As a result — and this comes as a shock even to me — I’m swearing off comic books. (Mostly.) The thing is, it doesn’t even really feel like a sacrifice. Right now, there are other things in my life that I value more highly. Most of you know about my expensive gym membership and how important that is to me. But there are also my Spanish lessons, which I’ve been taking since June. I’d rather pay for one-on-one meetings with my tutor than to buy comics. I get more enjoyment from learning the language. (The truth is, I’d even forego my Portland Timbers tickets to continue with Crossfit and/or Spanish. Fortunately, that’s not yet necessary.)

Soon, I’ll probably also give up my office. It’s been nearly three years since I worked from home, and I think my work habits have changed. If I can find the discipline and focus to write from the living room, that’ll free up $335 a month that I can use for other things. (I won’t know if this is do-able until the middle of the year, but it’s something I definitely want to try.)

But perhaps the biggest change in my future is that I’m finally becoming interested in non-profits and charities.

Thinking of others
For years, I’ve taken a lot of crap here at Get Rich Slowly (and deservedly so) because I donate very little to charity, and I rarely volunteer my time. I was raised in a family that didn’t value charity, and as an adult I’ve been unable to find any cause I feel passionate about.

Lately, though, that’s changing and in a variety of ways. We’re hard at work planning next year’s World Domination Summit, for instance, and we’d like to tie a service theme to this leadership conference. I wasn’t that interested at first, but now I’m on fire for the idea. I think it would be awesome to recruit the power of 1000 attendees to do some good for Portland — and the world.

But on a more personal level, I’ve discovered there are causes I’m passionate about. My trips to southern Africa and to Latin America have helped me understand better the important role education plays in improving people’s lives (and especially in improving the lives of women). I find that I’m willing to donate both time and money to improve education around the world. (I’d love to find the time to work with an organization like Edge of Seven, for instance.)

In fact, I’ve realized that it’s possible for me to tie my passion for learning Spanish directly to this goal. There are several Portland-area organizations that work to provide educational opportunities for low-income Spanish-speakers in the community. In March (after I return from next trip to South America), I plan to volunteer with one of these groups, such as Adelante Mujeres. In the meantime, I’ve offered my services to one of my friends. She teaches a Spanish/English blended second-grade class, and she says she can use my help twice a week for two hours at a time. I’m both excited and nervous about this new adventure — the second-graders are going to mock me for my miserable Spanish!

Other plans
I have other smaller financial goals, as well. After my upcoming trip to Chile and Argentina, my travel fund is going to be completely empty and will need to be replenished. And since I’ve borrowed from my new-car savings to make these trips happen, I’ll need to boost account too. Plus, I’d like to find one or more small sources of recurring income — another magazine column perhaps?

My financial life continues to be rosy, largely because I follow my own advice. (Especially my own advice about finding ways to make more money.) But I don’t want to rest on my laurels. I don’t want to become complacent. I want to continue striving toward a brighter financial future — and I want to bring you along for the ride.

What about you? How was your 2011? Did you improve your financial situation? Did you earn more? Spend less? Or were you less successful than you’d hoped? And what are your plans and goals for 2012? What do you hope to do with your money?

Seven Years of Fiscal Responsibility

It’s mid-September as I write this, and I’ve been spending the past few days scrambling to prepare for my trip to Peru. I’ve been packing, of course, but I’ve also been editing reader stories and writing blog posts for my absence. While bustling around, I stumbled across an old document. I’ve shared this before, but it’s been a while. Since it’s an important part of my financial history, I’m going to share it again today.

In the beginning
As most of you know, I struggled with debt for more than a decade. When I graduated from college in 1991, I had the start of a credit card problem. By the time my father died in the summer of 1995, I’d managed to accumulate over $20,000 in credit card debt, most of which came from spending on computers and comic books and other frivolous things.

In 1998, I transferred my credit card debt to a home equity loan. I destroyed the cards and closed the accounts. This was a smart move in one respect (because it helped me kick the credit card habit), but it didn’t prevent me from finding other ways to take on debt; I took out personal loans, and I borrowed from family members. By the summer of 2004, I had accumulated over $35,000 in consumer debt. And when we bought a hundred-year-old house, I finally felt stretch past the point of bursting.

It was at this time that I decided to get serious about money. Instead of paying lip service to getting out of debt, I started to read about how to really do it. Friends loaned me books; I read them. Slowly, I put the ideas from these books into practice.

The debt snowball
One of the first books I read was Dave Ramsey’s Total Money Makeover. In this book, Ramsey advocates a different approach to debt repayment. While most experts recommend repaying debt from highest interest rate to lowest interest rate (because, of course, this minimizes the total amount of interest paid), Ramsey ignores interest rates completely.

“Forget math,” Ramsey seems to say. “If you were a math whiz, you wouldn’t be in debt in the first place. Math isn’t the problem. Psychology is the problem.” He recommends starting with the smallest balance first and working up from there. He calls this method the debt snowball.

I took this advice to heart. Mostly. Based on the debt snowball, I sat down and drafted a plan for paying off my debt. Here’s what it looked like:

This is the actual spending plan that I drafted at the beginning of my quest for financial responsibility.

As you can see, I didn’t follow a strict debt snowball. Instead, I tweaked the order of repayment to consider interest rates a little bit. (I put off the 3% loan from the box factory and prioritized business-related debt.) Adam Baker at Man vs. Debt would call this method a debt tsunami. I don’t care what it’s called. All I know is it worked.

Finding financial stability
After drafting this spending plan, I continued to read personal finance books. I subscribed to personal finance magazines. And I started sharing my progress on this blog. There were ups and downs — no doubt! — but from the point I drafted this, I made progress.

In fact, I consider this one text document to be the key to my entire financial turnaround. Its forecast proved surprisingly accurate. “In December of 2007,” I wrote, “after fifteen years of debt, I could be debt-free.” And I was. On 02 December 2007, I said good-bye to nearly 20 years of debt. It felt amazing.

So, today is a sort of personal holiday. It’s a time to remember where I used to be, and to be grateful for how far I’ve come. In a way, it’s fitting that I’m far from home now. (If all has gone well, I’m on Lake Titicaca at the border of Bolivia and Peru. If all has gone very well, there are updates on my trip at Far Away Places.) My travel is physical manifestation of the financial journey I’ve made. And it makes me happy.

It’s my hope that you, too, have made (or will make) a similar journey.

Can you point to a similar turning point in your own financial life? Was there a time you hit rock bottom? Did you create a written plan? What did it take to make you become fiscally responsible? (Or were you born that way?)

Drama in real life: A place for mom

In my ideal world, you’d now be reading an article about the freelancing or entrepreneurship or extreme couponing or one of the half dozen other topics I’ve started to write about. In my ideal world, I’d go to the gym this morning, and then to Spanish lessons this afternoon. In my ideal world, Kris and I would go see the Portland Timbers play this evening. Unfortunately, I don’t live in my ideal world.

Instead, I live a world where my mother’s descent into mental illness has once again reached a crisis. And although my family is better prepared for it this time — we have the power of attorney in place, we have a list of Mom’s medications and phone numbers for her doctors, we’ve been researching live-in care and assisted-living facilities — we’re still not as prepared as we should be.

The difference this time is that everyone, including the doctors, is taking this seriously, and we’re devoting all our time and energy to finding a solution.

A Little Background

My mother has struggled with mental health problems for over a decade. Three years ago, she took a turn for the worse and spent three weeks in the psych ward of a local hospital. When she was released, she was fine. In fact, she was better than I’d seen her in years.

Since then, she’s had a handful of relapses. After the most recent crisis in January, I wrote about the difficulties of caring for aging parents, and I asked GRS readers for advice. I acted on some of it. We had a power of attorney drafted and Mom drew up a basic living will. We started to discuss what might happen in the future. But we never finished the process completely. When Mom’s health improves, we tend to become complacent. It’s tough to push her to prepare for when she’s non-functional when, at that moment, she seems fairly cognizant.

Lately, though, Mom has become more and more disoriented. She’s confused. She doesn’t know what the date is, and often can’t remember things we’ve told her just hours before. (Or seconds before.) When we noticed that she wasn’t taking her medication properly (she was taking it mostly at random, often days in advance of when she ought to), we took her to the doctor. The doctor agreed there was cause for concern, but couldn’t find anything medically wrong with her. As a family, we began to check on her daily.

Over the past few weeks, Mom’s condition has continued to decline. She hasn’t been taking care of basic hygiene. She hasn’t been eating. She still can’t take her medication at the right time. It had just occurred to us that perhaps she shouldn’t be driving when Mom called to let us know she’d driven through the back wall of her garage. We took away her keys.

Mom's garage

Final Crisis

Last Thursday, I flew to Colorado for the first of two weekend conferences. Before I left, I made plans to research ways to help Mom upon my return.

But on Friday, as the first conference was beginning, I learned that Mom’s doctor had ordered her to be admitted to the hospital. My wife and my brother were with her. I debated flying home, but Kris told me everything was under control.

Throughout the weekend, my family sat with Mom as the doctors tried to figure out what was wrong with her. But neither the internist nor the psychiatrist nor the neurologist could find anything specific that was the matter. “They’ve given her a diagnosis of ‘altered mental state’,” Kris told me by phone. “Which is code for, ‘we don’t know what the hell’s wrong with her’.”

On Monday, as I was preparing to speak on a panel at a conference in Seattle, Mom’s internist called to give me a run-down of her condition. After talking with him and talking with Kris, I decided to cut my trip short. I had planned to stay another day, but instead I finished my talk, hopped on a train, and went to the airport to ask to fly home to Portland immediately. (On a lighter note, it turns out my good friend Chris Guillebeau was on the same flight, returning from his latest round-the-world jaunt.)

On Tuesday, I joined my brother Jeff at the hospital. We sat with Mom for four hours, talking to her and talking to the nurses and doctors. Still they couldn’t give us a diagnosis. What they could tell us, however, was that there was no medical reason for her to remain in the hospital, so she was going to be discharged within a day. And after discharge, she was going to require round-the-clock care.

Mom is only 63, but her short-term memory is essentially non-existent. She can tell you what happened 20 years ago, but not what happened 20 minutes ago. Or 20 seconds ago. Perhaps worse, she has trouble articulating the thoughts in her head. It’s clear her mental faculties haven’t completely vanished, but she’s unable to convey what she’s thinking. She has aphasia. And, as of Tuesday afternoon, the doctors have decided to label her condition as dementia. (Though, again, this seems to be a catch-all for things they can’t define.)

Armed with this knowledge, and feeling the pressure to find a solution fast, we spent most of Tuesday researching options such as live-in care and assisted living facilities.

Happy Acres

One by one, our top choices fell away. There’s really no way for Mom to live with any of her three sons. It’s cost prohibitive to hire full-time care fo her, and even if we did, the caregiver might not be able to do some of the things we’d like. We can’t place her in a lot of programs because she doesn’t qualify. She makes too much from the box factory, or she’s too young, or she lacks the required diagnosis.

After some research, my brother discovered an assisted living facility just ten minutes from his house. Best of all, this place specializes in “memory care”.

So, Jeff and I gave Happy Acres a tour. Having nothing to compare it to, it seems fine. The memory unit is isolated from the rest of the building, and the patients given special care. Happy Acres is nice — but sad. These folks, who were once vibrant and interesting, are now shells of themselves. Also, they’re all 75. Or 85. Mom is 63. Sill, this seemed like a great place to watch her while we see if she improves. Here, she’s close to us. Here, she’ll have folks dispensing her medicine and helping her eat healthy food.

After weighing the options, we decided Happy Acres was the best bet, even if it is expensive.

A Handful of Stuff

Last night, my brothers and I (and our wives and kids) met at Panera Bread near the hospital in order to plan Mom’s future. Where will she live? For how long? What will she take? Who will pay for the service? Who will pay her existing bills? What will happen to her cats?

During this most recent crisis, Mom’s financial skills have vanished. She’s been sending two checks for a single bill. Or sometimes she doesn’t send them at all. When she does write a check, the numbers are sometimes random. Here’s a glimpse at the gibberish she wrote in her checkbook register last month:

Mom's checkbook register
The gibberish in Mom’s checkbook register.

After our mediocre (but costly) dinner, the family headed into the nearby mall to buy some basic things Mom will need when moving to Happy Acres this morning. We bought her bedding, a mattress set, towels, and more. This morning, instead of going to Crossfit, and instead of writing or studying Spanish, I’m helping my brothers set up her new living space in a small room very much like a college dorm. Her entire life (or the physical aspect of it) is being reduced to the bare necessities.

Note: We’re now very glad we had a power of attorney drafted after Mom’s last crisis. It allows us to use her funds to buy the mattress, etc. In fact, all of the various legal documents we assembled will make this process easier.

Meanwhile, the entire family plans to work together to sort through the remains of Mom’s normal life. I think the women plan to purge her house and clean it from top to bottom. Jeff and Tony are talking about repairing the garage. I’ll figure out how much money she has in her checking account (almost certainly not the $200,000 she has noted in the checkbook register), and I’ll cancel accounts and services she no longer needs.

All of this is complicated by our existing plans. Kris and I leave for Alberta in a matter of days. Jeff and his family are headed to British Columbia upon our return. Tony has plans of his own. How do we juggle what we want to do with what we ought to do? So far, we’re working together to make things right. But there’s a good chance I’ll have to cancel my trip to England in August. I’ll try to see it through, but if my family needs me here, I’ll stay in the States.

So, I have some great posts in the works for Get Rich Slowly, but they’re going to be late. And there may be some blanks spots in the posting schedule over the next week. I’m spending most of my time with Mom, not on the computer. (My goal is to do both, if possible.) Take care!

Fantasy vs. Reality: Paving a Path to a Promising Future

On Saturday night, I had dinner with Wendy and Dennis, two Get Rich Slowly readers who recently moved from Phoenix to Portland. We talked about a lot of things — most of them nerdy. We also chatted about the ever-evolving nature of Get Rich Slowly.

“I’ve noticed you’re writing more about credit cards lately,” Wendy said. “Is that because you’re using them more often?”

“Well, maybe,” I said. I thought about it for a moment. “My stance on credit has certainly changed in the past five years, so that might be part of it. But it’s probably just an accident. I seem to cover subjects in phases. I might write a lot about frugality for a while, then write a lot about investing, then about making more money. I guess I’ve just had more to say about credit cards recently.”

Wendy confessed that the credit card information doesn’t do much for her. “I’m phobic about credit cards,” she said.

“That’s okay!” I said. “There’s nothing wrong with being phobic about credit cards. I used to be scared of them too. I’ll never argue that you’re making a bad choice by avoiding credit cards.

“I’m open to the possibility of using credit cards when I know I’ll use them to spend only the money I have,” Wendy said, “but I’m not ready yet. For a while, Dennis and I had a prepaid card, and even with that, we had control issues.”

Numbers versus emotions
We talked about how our money problems didn’t happen because we were bad at math, but because we were unable to separate money from emotions.

The first tenet of the Get Rich Slowly philosophy is that financial success is more about mastering the mental game of money than about understanding the numbers. Wendy summarized this perfectly when describing her past spending habits: “When I bought things, I didn’t buy them with numbers; I bought them with emotions.” She’s trying to do better now, but it’s still a challenge.

You always think the Future You will have more money,” Wendy said. “It’s okay to spend today because you’ll find some way to pay for it tomorrow. But you never think that the Future You might drop out of college or have kids or get into a car accident. The Present You doesn’t really know the Future You.

I loved this insight. I’ve thought often about how the Future Me always seems to be vastly different than the Present Me — and different than I would have predicted. Yet I used to make dumb decisions in the present as if my future self would somehow develop the superpowers to save me. Instead, Future Me simply ended up cursing my past choices.

Fantasy versus reality
How tough is it to predict your future path? Here’s a simple test: Think about where you were five years ago — where you lived, who you spent time with, what you did. How does that compare with where you live today, who you spend time with, and what you do with your time? Chances are your life today is much different than it used to be — and much different than you might have predicted it would be.

Here are two examples from my own life:

    • When I was a junior in college, I expected to graduate, settle in a big city, get a job as a counselor or therapist, get married, have kids, and live happily ever after. I had no inkling that five years later I’d own a house in my hometown, work at the family business (something I swore I’d never do!) in a job I hated, and have over $20,000 in consumer debt. No inkling. (Only the “get married” part of my expectations proved to be correct.)


  • Five years ago, I was buried under more than $35,000 in consumer debt, still worked at the family business in a job I hated, and hadn’t even conceived of Get Rich Slowly. (I was just beginning to read personal-finance books.) I could never have imagined that today I’d not only be out of debt, but also have substantial savings and be a full-time writer.

Sometimes your future life fails to live up to your expectations, and sometimes it exceeds them. But in nearly every instance, you cannot predict where life will take you. In fact, you can’t even predict what will make you happy! No wonder Present You often does such a poor job of setting things up for Future You.

Present You versus Future You
When I speak to college students, I warn them to not spend based on their expectations for the future. It’s tempting to believe your future self will be richer, smarter, stronger, and more successful — but that doesn’t always happen.

What can you do about it? How can you strike a balance between today and tomorrow? There’s no mystery. You can fund your future by making smart choices in the present, including:

    • Have a plan. Based on who you are today and what you know about life, set goals for the future. Sure, these goals may change. That’s okay. Use these goals to create a budget or financial plan in the here and now.


    • Practice conscious spending. Stop spending on the small, unimportant stuff so that you can afford the things that matter to you. This requires long-term thinking, but it’s worth it.


    • Avoid debt. Don’t expect your future self to be able to cope with the financial mistakes you make today. Don’t make things tougher for yourself than you have to.



Before our dinner conversation returned again to dorky topics, Wendy made a final observation: “Once I stopped thinking about the Future Me as being different than the Present Me, my whole perspective changed. I started making decisions on what I needed and could afford today instead of what might happen tomorrow.Exactly!

To stop making poor decisions with money, it’s often necessary to ignore fantasy and deal with reality. Instead of counting on Future You to save the day, do the hard work now. Your future self will thank you for it.

What is Retirement?

I just returned from my annual weekend trip to Oregon’s Opal Creek Wilderness area. Every year, I join five other friends to hike into the forest, pitch our tents on the banks of the creek, and sit around the fire talking about life. We drank a lot of whiskey this year, and spent a lot of time at the swimming hole.

Paul and Tim at rest above the Opal Creek swimming hole
Paul and Tim at rest above the Opal Creek swimming hole


This year, we also talked a lot about where we’re going in life. All six of us are about 40 years old, and we’re all dealing with career transitions of some sort. We chatted about “talkers and doers” (a topic I hope to write about soon), about building social capital, and about retirement. I mentioned that my wife hopes to retire when she’s 52, and that caused a lot of envy. It also prompted an interesting discussion on Sunday afternoon.

Paul, Tim, and Andrew chatting around the campfire
Paul, Tim, and Andrew chatting around the campfire


“How do you define retirement?” Paul asked as he and I climbed into his truck to start the long drive home. “And when do you plan to retire?”

I thought for a moment. “Are those rhetorical questions?” I asked. “Or are you really asking me when I plan to retire?”

“I’m asking you when you plan to retire,” Paul said. “Because in a lot of ways, you already seem retired. You do what you want when you want. You have time to travel and to pursue your hobbies and that sort of thing. Yet when I think of you, I don’t think of you as retired — I think of you as working.”

I had to think about this some more. “I don’t know,” I said at last. “I’m not sure I know what retirement is, and I don’t know when I plan to retire.”

“The thing is,” I said, “none of my family ever retired. Well, that’s not true — my mother’s father retired, but I didn’t know him well. On my dad’s side of the family, the side I really know, nobody retired. Part of that was because so many of them died young. They never got a chance to retire. But I remember that when my grandpa — who worked as a janitor at the high school — when he ‘retired’, he still worked. He didn’t work for money, but he ran a working farm until he was 75 or 80 years old.”

Then I realized I could be clever. If I couldn’t define retirement, if I couldn’t say when I wanted to retire, maybe Paul could. So I asked him. “What does retirement mean to you?” I said.

“Well, to me retirement is not having to do something for money,” Paul said. “If I was working at one thing and wanted to do something else, I could do it and not have to worry.”

“That sounds like Financial Independence,” I said (though I couldn’t capitalize the “F” and the “I” while speaking). “Actually, that’s a good way to look at retirement. In many ways, Financial Independence and retirement are the same thing. They both mean that you have enough money that you can afford to do what you want, right?”

Paul nodded. “Sometimes I think that retirement isn’t about the money,” he said. “The thing I wish I had is more time. I spend too much time doing things I don’t want to do for money. I guess I could have time to do the stuff I want, but to do so would require more sacrifices than I’m willing to make. I’m frugal, but I have limits. If I could make money doing something I enjoy, I wouldn’t have to retire. And that’s what it seems like you do.”

Ahhh…” I said. Now I could see why Paul had asked the original question, why he wanted to know my definition of retirement and when I planned to retire. To him, I was already living the sort of life that he wants when he retires.

Paul continued: “I’ve been talking with Tiffany” — his girlfriend, and my wife’s sister — “and I’ve been wondering: What if I got to a point where yes, I had to work, but I could choose any job I wanted, even if it paid minimum wage? Maybe I could work in a music store.”

“Right,” I said. “I know what you mean. And actually, you’ve sort of hit on something that’s in one of my favorite books. It’s called Work Less, Live More by Bob Clyatt. It’s all about what he calls ‘semi-retirement’. Semi-retirement is like early retirement except that you’d continue to earn money from sort of work. I think it’s much more realistic for most people than a traditional retirement.”

“I’ll have to check it out,” Paul said.

“You know, I’m going to have to write about this conversation,” I said. “And when I do, I’ll add a bit of detail about semi-retirement from the book.”

A bit of detailIn Work Less, Live More, Bob Clyatt explains the advantages of semi-retirement:


“With a modest income from part-time work, early semi-retirees may not have to face the dramatic downshifting in spending and lifestyle that so often confronts those who live only on savings or pensions. And semi-retirees learn that a reasonable amount of work, even unpaid work, keeps them energized, contributing, and sharp.”


Though semi-retirement is more realistic than early retirement for most people, it’s still not for the faint of heart. You have to be dedicated and work hard to make it happen. Semi-retirement usually requires ample savings, frugal living, ongoing work, exploration, and a sense of purpose.


“I don’t know when I want to retire,” I said. “But I don’t think of myself as retired now, though I can see why it might look that way. To be honest, I don’t want to retire. I have purpose now, and I like it. For so long, my life had no purpose, and I think that’s why I struggled with depression. Having purpose has changed my life, has giving me a sense of meaning.”

Paul quickly noted my flawed logic. “Wait a minute,” he said. “That pre-supposes that retirement has no purpose.”

“Good point,” I said. “You’re right. And actually, I think it’s very important for everyone to find some sort of purpose, whether they’re retired or not.”

Just then, we reached the Gingerbread House, our pit stop for lunch. We went inside and ordered our burgers and malted milkshakes (Paul ordered double malt), and as the rest of the group arrived our conversation turned from retirement to more mundane things. Plus, we all hunched over our iPhones, catching up on 48 hours of e-mail and text messages.

Later in the day, I thought more about our conversation. The more I think about it, the more it seems that the traditional notion of retirement is something like a mirage. It’s not real. When I think about the people I know who have “retired”, I see that they’ve really just gently transitioned into some other phase of life, usually pursuing something they’re passionate about.

Ultimately, deciding when and how to leave the workforce isn’t about some number in a retirement account. It’s important for each of us to think about our goals and what makes us happy. So, when will I retire? Maybe if I’m lucky, I never will. I’ll just keep doing what I’m doing because it makes me happy and gives me a sense of purpose.

Coping with Life’s Little Setbacks

I had a lousy weekend. It was one of those weekends where anything that could go wrong did go wrong. The individual problems were minor enough, but taken as a whole, it was all rather overwhelming. Some examples:

  • When I left the house to go on my marathon training run Saturday morning, the cover to porch light fell to the ground and shattered into a million little pieces.
  • Our internet connection died. And, of course, the only way I know how to contact my provider is over the internet. (Fortunately I now have an office just up the street with a working internet connection.)
  • I mowed the lawn on Sunday. For five minutes. Then the lawnmower died. The blade just sort of seized up and now will not turn at all. I have no idea what’s wrong, and I won’t have time to diagnose the problem until I return from Orlando.
  • On Sunday evening, we went swimming with a group of friends. Naturally I left my suit and towel at the aquatic center. I didn’t have time to retrieve it before my flight yesterday.

This is but a sampling of the avalanche of small setbacks that have befallen me over the past few days. As I say, no individual problem is particularly dire, but when encountered in a clump like this, they make me cranky. For each one, I imagine how much money it’s going to cost me to fix. I see dollar signs floating over the broken light fixture. I see dollar signs crawling over the lawnmower. I see dollar signs next to the DSL modem.

The Olden Days
In the Olden Days, back when I struggled with debt, a series of setbacks like this would have been more than just frustrating. Because I had no emergency savings, I would have been forced to resort to my credit cards. I would have found myself drawn deeper into debt.

There’s no question that these mishaps bug me. But I know that I’m financially prepared for them, and when I’ve taken care of each problem, I’ll be able to build up my savings and return to life as it was.

If this had happened five or ten years ago, however, it would have been a different story. These setbacks wouldn’t just bug me — they would have made me depressed. I would have felt like life was conspiring against me, dragging me down. I would have felt unlucky. And as I charged each repair on my credit card, I would have felt like I was sinking deeper and deeper underwater.

This has been one of the great revelations of fiscal responsibility. A broken lawnmower is still a pain in the neck, and it’s still going to cost me money, but it will cost me money that I have saved. While the money has waited to be used, it’s been earning me 2% or 3% or 4% in interest. Previously, I wouldn’t have earned interest at all, but would have charged repairs to a credit card, which would cost me 12% or 18% or 21%. By saving, I am in control of my money.

Even Steven
“You know what this is, don’t you?” Kris said when we realized I had left my swimsuit at the pool. “It’s karma.”

“Karma?” I asked. I didn’t feel like joking around. In fact, I was in a foul foul mood. I was imagining all of the dollar signs floating above my broken world.

“Yeah,” she said. “Karma. Things have been going so well for you for so long that they were bound to balance out. Just think: The site is producing income and you’re saving and investing. You’re doing awesome. These things don’t matter. They’re inconsequential. You can afford to fix them, and you will.”

My wife is a smart woman. She’s right. I shouldn’t let small problems like these bother me. I’ve put myself in a financial position where I can handle small setbacks — even when they come in waves. I’m going to fly to Orlando, have a good time, and when I return home I’ll tap a bit of my savings to make things right again.

Update: Just as I’m ready to leave for Orlando, the bathroom sink clogs. I pull out the drain plug, but when I do, the long “stem” to which it attaches comes loose and falls down the drain. Another minor annoyance, and probably another few dollars literally “down the drain”. What is going on? It’s as if I have a hex on me!

Financial Independence: The Final Stage of Money Management

This is the last of a five-part series about the “stages” of personal finance. These stories have intentionally been less polished than most articles at Get Rich Slowly. This is a chance for me to think out loud, to explore an idea with you in an informal way.

In February, I wrote that I was entering the third stage of personal finance. As I made my way out of debt and began to save, I had noticed that many people passed through similar phases of financial development. We took similar steps along the way. In my own journey, the progress looked like this:

  • Initially, I was fumbling in the dark, spending compulsively and accumulating debt.
  • Eventually I saw the light and began to repay my debt.
  • After a hard slog, I reached the light at the end of the tunnel: my debt was gone and I began to save.
  • Now I’ve entered new territory. I have a plan, and I’m sticking to it as I reach for my eventual destination: Financial Independence.

Financial Independence is my ultimate goal. It’s the state in which I will no longer have to worry about money. I would have enough saved so that I could do whatever I pleased. But what exactly does this mean?

Defining Financial Independence
One of the underlying philosophies of this site is that different things work for different people. We each have different goals, different strengths, and different weaknesses. Though Financial Independence is the goal for many Get Rich Slowly readers, we each mean something different by it.

In Yes, You Can…Achieve Financial Independence [my review], James Stowers states: “No person is free, in an economic sense, who does not have adequate investment income entirely unrelated to work.” In other words, Financial Independence means that you earn enough from non-work income to fund your current lifestyle. I think this is the traditional definition of the term.

But the classic Your Money or Your Life offers a little more nuance:

When you are financially independent, the way money functions in your life is determined by you, not by your circumstances. In this way money isn’t something that happens to you, it’s something you include in your life in a purposeful way…Financial Independence is being free of the fog, fear, and fanaticism so many of us feel about money.

If this sounds like peace of mind, it is. Financial bliss. And if this sounds as unattainable as being rich, it isn’t.


Financial Independence has nothing to do with rich. Financial Independence is the experience of having enough — and then some…The old notion of Financial Independence as being rich forever is not achievable. Enough is. Enough for you may be different from enough for your neighbor — but it will be a figure that is real for you and within your reach.

Another view of Financial Independence is presented by George Kinder in The Seven Stages of Money Maturity. Kinder argues that when you understand what you want to do with your life, you can make financial choices that reflect your values. In his view, the final two stages of money management are what he calls Vision and Aloha. (Note that Kinder’s approach contains a spiritual element. He uses language in his definitions that some may find odd.)

With Vision we understand further that money is a conduit through which our souls flow into the world. We have produced as much as we personally need. We discover within us a capacity to reach out farther than we have ever imagined toward meeting the needs of our families and communities. We find no obstacle between what we want to accomplish and what we do.


Aloha conveys kindness, generosity, at-one-ness, and compassion…We give without expectation of return, understanding that living is giving. We know both the limitations and the power of money, yet money no longer agitates us. We rest calm before it. In that calmness we can serve one another from the natural generosity that lies within and waits to be offered tot he world.

In some ways, Financial Independence is just another term for retirement. Think about it. Most people retire at 60 or 65 because that’s when they have enough saved to last the rest of their lives. If they don’t have enough saved, they continue working. If they manage to save the money earlier, then they retire earlier. When you retire, you’re essentially declaring that you are financially independent.

Moving forward
What will Financial Independence, the fourth stage of money management, mean to me? Will it be a purely monetary state in which I have enough investment income to do whatever I like? Will it be the point at which I have “enough”? Or will it be something deeper, more spiritual, as suggested by George Kinder?

I don’t know. In fact, I don’t know if I’ll ever actually reach this goal. But I intend to stick to the path, working my way through this third stage of personal finance, hoping one day to reach that destination.

Your turn: What does Financial Independence mean to you? If you were financially independent, what would you do? How would it change your life? Is this one of your goals? Why? If not, why not?

“What next?” The third stage of personal finance

I earned more money in 2008 than I’ve ever made in my life. Get Rich Slowly isn’t just a personal success — it’s a financial success, as well. Combine this income with an ongoing campaign of frugality — my spending last year was the lowest it’s been since I started tracking it — and my financial position is rosy. My plan to get rich slowly is succeeding.

Financial Security

Yet despite my increased wealth, I am not happy. I love what I do — I love writing every day and interacting with readers — but I do too much of it. I spend about 60 hours each week working on this site. I’m neglecting other parts of my life.

I’ve reached a place of financial security. My income is good. I save and invest. I don’t spend frivolously. Now I find myself in the enviable position of having to decide: Should I decrease my workload, or should I use some of my income to invest in the things that make me happy?

Eight years ago, before I started Get Rich Slowly and while I was still deep in debt, I wrote on my personal blog that my goal was “to live a pastoral lifestyle”. What I meant was that I wanted to live simply, with few obligations. I wanted to work from home, to bike on errands, to squash my obsession with Stuff. I wanted to read Dickens and Proust, to spend time with my friends, to enjoy life with Kris.

This is still my ideal.

The entire reason I paid off my debt, increased savings, quit my job, and built a business was so that I could live this pastoral lifestyle. But I’m not living it. In fact, I’m working harder than I ever have before.

I love this job. It’s a joy and a privilege to do what I do. But I wonder: Am I burning myself out? Am I sacrificing time for money? Maybe there’s some middle ground. Or maybe it’s time to move to a new stage of personal finance.

The Stages of Money

Last month, I had an interesting conversation with three GRS readers: John, Tyler, and Victoria. Via comments and e-mail, we discussed an important question: “What next?” Each of us, in our own way, has mastered the basics of money management. We’re ready to move from personal-finance goals to the next step. Tyler suggested that we’re at the “third stage” of financial maturity.

  • The first stage of personal finance involves learning the basics: understanding compound interest, reducing debt, beginning to save.
  • The second stage is putting the basics into practice: choosing to live frugally, saving in earnest, and pursuing financial goals.
  • The third stage — the “what next?” stage — comes after we’ve mastered the fundamentals. It’s at this point that we begin to ask “why?” Why are we continuing to save? All of our debts are paid, so what’s the point? (There certainly is a point, but what is it?)

The four of us exchanged e-mail about what this third stage looks like, what it means to us. For example, Victoria wrote:

I, too, am beyond the first stages of personal finance. I’m focusing on self-education in entrepreneurship and philanthropy this year. I believe that every individual should have a progressive plan for when they move beyond debt, have maxed out their retirement plans, have all they need and have prioritized wants. “What next?” is a question that should be planned for.

John noted that once the basics become habit, there’s a change in mindset that needs to occur. Just as we had to shift our thinking in order to reduce our debt and to establish the habit of saving, so too must we learn that there are different types of spending:

What we’re doing now is investing. Maybe I’m investing in myself, maybe in other people, or maybe in causes or ideas that I want to help grow, but it is an investment. I am taking value that I have worked hard to build and develop and I am investing it in someone or something else. It’s not wasteful spending — I am expecting a return, not necessarily monetary, but for something positive to come out of it. Spending is more of a gut reaction. You buy something to feel better or to make up for something you are lacking. When you are investing, it is a conscious act done with a purpose. There is thought behind it.

Most of the financial information on the internet — and in magazines and books — is directed toward those in the first two stages. There’s a reason for this. The fundamentals are essential. But there’s more to smart personal finance than just practicing the basics. Where’s the information for those who are ready for the third stage? Are subsequent steps entirely self-directed? Is this where a financial planner comes in? And how many stages are there?

Victoria and Tyler and John wrote a lot more; I wish I had room to share it all. (I’ll be publishing a guest-post from John on this subject during the next month.) Suffice it to say that our conversation — and recent events — have forced me to think about what money actually means to me.

What Next?

The death of my friend Sparky caused a seismic shift in my value system. I’m seeing fault lines I never knew existed. I still believe in the importance of smart personal finance, and I’m as passionate as ever about getting rich slowly. But I’m ready to explore new aspects of this philosophy.

Over the next few months, I hope to begin learning — and sharing — about other stages of personal finance. I’m going to start adding new flavors to the mix. I’m still going to write mostly about the fundamentals — debt reduction and frugality are important — but I want to write more about the Big Picture. I’ll spend time exploring the nature of social capital. I’ll try to discover the answer to the question “What next? What’s the next step after you’ve built a solid foundation?” I’m going to write about those times it makes sense to spend — or to invest — for things that make you happy.

Last summer, one GRS reader submitted a guest article about how his friend had bought a new boat. This friend had wanted the boat for a long time, and he could afford it. He knew it would make him happy. So he bought it.

I didn’t publish the story. I was worried that it would send the wrong message. I believed it might encourage reckless spending. In retrospect, I was wrong.

The boat story is about that “what next?” step I’m seeking. It’s about the third stage of money maturity. It’s an example of what is possible if we learn smart personal finance. It’s an example of the reason we work hard and practice frugality in the first place. It’s an example of the goal.

I’m not going to publish the boat story yet — I’ll save it until after Memorial Day so that it makes sense — but I’m going to publish stories like it. I see now that money is not the goal. The goal is to live a life in which we can do and have the things we want — by making conscious choices. Money is a tool for reaching that goal.

I’m going to have fun learning about the third stage of personal finance — and beyond. As always, I hope you’ll join me on the journey.