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Get Rich Slowly!

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Today’s entry is long and boring. It’s all about the keys to wealth, prosperity, and happiness. Over the past few months, I’ve read over a dozen books on personal finance. Recurring themes have become evident.

These books have embarrassingly bad titles, seemingly designed to appeal to the get-rich-quick crowd: The Richest Man in Babylon, Your Money or Your Life, Rich Dad Poor Dad, Think and Grow Rich, Wealth Without Risk, Creating Wealth, etc.

Some of the books out there — most of them? — really are as bad as their titles. Others, however, offer outstanding, practical advice. The best books seem to have the same goal in mind: not wealth, not riches, but financial independence. According to Your Money or Your Life, which I consider the very best of the financial books I’ve read, “financial independence is the experience of having enough — and then some”. More practically, financial independence occurs when your investment income meets or exceeds your monthly expenses. Financial independence is linked to psychological freedom.

How is financial independence achieved? Again, the best books all basically agree. (To some of you, this will be common sense, stuff you’ve known all your life. To others, like me, this kind of thinking is a sort of revelation.)

Here, then, is my personal summary of the collected wisdom found in these books.

Step One: Prepare the Foundation
The first step is to lay a foundation upon which the secure home of financial independence can be built. To prepare to build wealth, one must first eliminate debt, reduce spending, and increase earnings.

There are many ways to approach debt elimination; the key is to use the one that actually works for you. All the books agree on this: cut up your credit cards. Get rid of them. There is no compelling reason to keep them. Next, pay off your debts. All of them. For years, I tried the oft-touted method whereby you first pay off your highest-interest debt. This never worked for me, because my highest interest debt was also my largest debt, and psychologically I just never seemed to make any progress. What worked for me was the “debt snowball”, as defined in Total Money Makeover. I eliminated my debt by paying off the obligation with the smallest balance first. Then I took the amount that would have been applied to that debt each month and used it to pay off the second-smallest balance. When that was finished, I went to the next, etc. It only took me four months to pay off my debts this way. I was dumbfounded. I’d struggled with this for a decade, and I solved the problem in four months? Good grief.

The next step in preparing the foundation is to reduce spending. First, track your expenditures for a month. Or two. Or three. (Many people — including myself — use Quicken; it’s quick and easy.) After you’ve accumulated enough data, analyze your spending patterns. Are you spending a lot on shoes? Books? Alcohol? Dining out? Try to find expenses you can eliminate or reduce. I cut my comic book spending by a huge amount. Many of the personal finance books encourage you to reduce your auto and homeowner insurance coverage to save money. This is also the point at which some books encourage you to adopt a budget. (I tend to think a budget is unnecessary if you remain aware of your current financial situation.) (Note: it’s in this step that I should note that all of the books I’ve read advise against purchasing a new car; all encourage you to purchase late-model used cars.)

The final phase in laying the foundation is to increase your income. Not all of the books mention this, and I happen to think it’s optional. However, there are a couple of authors who are quite vocal that this is an important step on the road to financial independence. How do you increase your income? Become better educated so that your job skills are more marketable. Work harder, and smarter, at your current job so that you qualify for raises and promotions. Change careers. Find a way to make a hobby profitable. Or, as more than one book suggests, work two jobs.

I can testify first-hand that by following these three steps, you can lay a solid foundation for future financial independence. I’ve only recently finished my foundation, and am amazed at the amount of money I’m suddenly able to save each month. Amazed. And that means I’m now ready for…

Step Two: Build the Framework
The second step toward financial independence is to construct the framework upon which future wealth can be built: establish an emergency fund, maximize your retirement investments, and begin acquiring income-producing assets. This is what I’m preparing to do. (I’ve already done one part, but only by happy coincidence.)

Every book I’ve read stresses that the most important part of the framework, the first part that must be completed, is the establishment of an emergency fund. This emergency fund ought to contain enough money to support you for three to six months in case you find yourself without an income. I have a very hard time grasping this concept, admitting its usefulness. All of the books stress it. Kris, who is always right, insists that it is important. Yet I want to skip this and go to other, more exciting steps. However, having seen the results after “laying my foundation”, I’m willing to suspend my disbelief and just do it. I’ll build the emergency fund.

Next, the books encourage you to maximize your retirement accounts. If you have a retirement account through work, contribute as much as you possibly can, as soon as you can. Establish a personal IRA outside of work, and every year contribute the maximum amount. I already do this, at least in part. Custom Box has a retirement plan, but not one to which the employees can contribute. The company itself contributes approximately ten percent of each employees’ annual salary to a stock plan. One of my goals for when the bathroom is finished is to get a Roth IRA set up.

The final step in building a framework for financial independence is to invest in income-producing assets. For some reason, I’d totally missed this recurring theme until this weekend; on Paul C.’s recommendation, I read Rich Dad, Poor Dad, a book that’s almost solely about this particular portion of the framework. Beyond your retirement investments, the collected financial wisdom is that you ought to participate in further investments, specifically in income-producing assets. For different people, this means different things. Maybe it means bonds, maybe it means stocks, maybe it means investment properties. It does not mean things like cars, or collectibles (coins, comic books, baseball cards), or expensive furniture. These things may be assets of a sort, but they are not income-producing assets.

Step Three: Finish Construction
After you’ve laid the foundation to financial independence, and after you’ve built the framework, you must then spend years (decades!) finishing construction. All that’s required during this time is patience and discipline. Resist temptation. Do not accrue debt. Acquire income-producing assets; avoid non-income producing assets. Faithfully contribute to your retirement plans and your IRAs. Wait.

Step Four: Move Into the House
Some years later, you will wake to find that your financial house is in order. It’s finished. It’s ready for you to move in. How do you know when this is the case? Financial independence is achieved when your investment income equals or exceeds your monthly needs. If the total of your house payment and living expenses is $1000 per month, then you are financially independent when your investment income reaches $1000 per month. Achieving this takes time. It’s a slow, gradual process, but every book emphasizes that it’s not only possible, it’s inevitable if these steps are followed.

That’s it. That’s the combined wisdom of more than a dozen financial self-help books. I haven’t fleshed out the final two steps as much as the first two simply because I haven’t reached those steps yet. There are scores of books on how to best approach each step (even each substep!). I’m sure to obsess over each one in turn.

There seems to be only one major point on which these books disagree. Some argue that your home should be considered your most important investment, that you should carry a thirty-year mortgage and not attempt to accelerate payments. Others declare that a home should be considered a liability, the same as a car or a credit card. (The latter admit that a home will appreciate in value, but they note — rightly so — that a home is a cash drain, not a source of income.) All of the books, with one exception, encourage readers to only purchase modest homes; they smash the commonly held belief that you ought to “buy as much house as you can afford”. Instead, these books say you should only buy as much house as you actually need.

A lot of these books are easy to summarize. Their content lends itself to bullet points. For example:

The Total Money Makeover by Dave Ramsey. This book was the first I read. I want to re-read it. It features lots of practical advice, including the concept of the “debt snowball” I mentioned earlier. Here are Ramsey’s steps to a “total money makeover”:
Step #1: Save $1000 as an emergency fund.
Step #2: Pay off debts, starting with the smallest first (ignore interest rates).
Step #3: Increase the emergency fund so that it will cover three to six months of expenses.
Step #4: Invest 15% of income in growth-stock mutual funds.
Step #5: Pay off the mortgage.
Step #6: Build wealth.
(I’ve left out a “Save money for college” step because it doesn’t apply to me.)

Your Money or Your Life by Joe Dominguez and Vicki Robin is, as I mentioned, the cream of the crop of these financial books. It’s advice is sound. This is an especially great book for those seeking simplicity. It lends itself less to bullet points than some of the others, but I’ve made an attempt to enumerate the steps it advocates for financial independence:
Step #1: Determine how much money you’ve earned in your life. Next, determine your net worth. Compare and contrast the two.
Step #2: Establish the actual cost — in time and money — required to maintain your job. From this derive your actual hourly wage.
Step #3: Keep track of every cent that enters or leaves your possession.
Step #4: Determine which items are actually worth the money you spend on them.
Step #5: Graph your total monthly income and your total monthly expenses.
Step #6: Minimize spending through conscious decisions.
Step #7: Maximize income by doing something you love.
Step #8: Accumulate capital. Track its growth.
Step #9: Invest this capital so that it provides long-term income.

The Richest Man in Babylon by George S. Clason is an aging chestnut. It’s a classic in the field. Many later financial books are based on Clason’s advice, which is framed in King James-style English rules:
Rule #1: Start Thy Purse Fattening — save 10% of everything you earn
Rule #2: Control Thy Expenditures — create a budget to live within your means
Rule #3: Make Thy Gold Multiply — invest the savings from rule one
Rule #4: Guard Thy Treasures From Loss — invest only where the principal is safe
Rule #5: Make of Thy Dwelling a Profitable Investment — own your home
Rule #6: Insure a Future Income — plan for retirement
Rule #7: Increase Thy Ability to Earn — become better educated, more skilled; respect yourself

7 Money Mantras for a Richer Life by Michelle Singletary is a recent all-purpose financial book. I was ready to dismiss it for the absolute stupidity of mantra number one (stupidity in its phrasing, not in its advice), but after reading the book, I have to admit its advice is solid. It features:
Mantra #1: “If it’s on your ass, it’s not an asset.” If you can wear it, it’s not an investment. Also, something is riding your ass (such as a high house payment), it’s not an asset.
Mantra #2: “Is this a need or a want?” This is a question Kris has been trying to get me to ask myself for years.
Mantra #3: “Sweat the small stuff.” Do worry about the small expenses; they add up.
Mantra #4: “Cash is better than credit.” There is almost no reason to carry a credit card.
Mantra #5: “Keep it simple.” With money, avoid anything that seems complicated. If you don’t understand it, avoid it. You’ll probably lose money.
Mantra #6: “Priorities lead to prosperity.” Determine what’s important to you, and pursue that with your time and money.
Mantra #7: “Enough is enough.” Don’t overconsume. Recognize when you have fulfilled your needs and your wants.

Ordinary People, Extraordinary Wealth by Ric Edelman is rather a unique book. It features advice distilled from surveying 5000 people of moderate wealth. Each chapter relates a secret for obtaining financial security. At the end of the each chapter, there are excerpts from the surveys featuring anecdotes and advice from the respondents.
Secret #1: Carry a mortgage even if you can afford to pay it off. — This flies in the face of every other financial book I’ve read, and I do not subscribe to the idea. I’m willing to be that the people surveyed carry a mortgage out of habit, not because they think it’s smart.
Secret #2: Don’t diversify the money you put into your employer retirement plan; instead, put all your contributions into stock mutual funds — I’m okay with this. It may not be appropriate for someone close to retirement, but for younger people, this seems like sound advice.
Secret #3: Make many small investments rather than a few large investments. — The key is to make investing a habit, and to invest the money when you have it.
Secret #4: Rarely move from one investment to another. — Market timing is not something to be treated lightly; it’s not easy for a casual investor. Buy and hold.
Secret #5: Don’t measure success against the Dow or the S&P 500. — Understand what you own and why you own it; don’t compare it to market indicators.
Secret #6: Don’t spend a lot of time paying bills and fretting about personal finances. Don’t bother budgeting. — Many books encourage a budget, though I’ve not adopted one. And my success these past few months has come precisely because I have fretted about my personal finances. Maybe this advice is true for the long run, but I’m not sure it’s applicable to somebody just starting to lay the foundation of financial independence.
Secret #7: Involve your children in family finances. — This is another piece of advice that all of the books offer. I haven’t mentioned it because it’s not appropriate to me, and doesn’t actually fit my metaphor.
Secret #8: Pay attention to the media, particularly financial news. — This seems to go against secret #6, but whatever. I’m not willing to devote a lot of time to reading financial news, but it can be fun from time-to-time.
The rest of this book contains three wonderful chapters entitled: “The Biggest Mistake I Ever Made”, “The Smartest Thing I Ever Did”, and “My Advice to You”. The common threads? Far and away, the number one thing these people recommend is to start investing as soon as possible. As much as possible. (They also recommend getting a financial adviser, something I’ve avoided until now.)

I was going to include a point-by-point summary of Rich Dad, Poor Dad by Robert T. Kiyosaki, but when I went to write it up, I couldn’t put Kiyosaki’s advice into words. I re-read a chapter. Everything seemed generalized. I did a google search, and found that not everyone agrees with the author. I, too, found the book amorphous and vague, full of outlandish claims. I thought it contained some kernels of wisdom, though, and so I’ve taken some of its advice, albeit with a grain of salt. I’ve incorporated advice from Rich Dad, Poor Dad in my general summary at the beginning of this entry, but I cannot recommend the book.

Other books that I plan to read soon include: The Millionaire Next Door by Stanley and Danko, Wealth Without Risk by Charles Givens, and Creating Wealth by Robert Allen.

On the drive to work today, I was remembering another time I was deeply interested in personal finance. When I got out of college, I went to work for Combined Insurance. (I still promise to tell that full story some day.) During training, we were asked to make a poster illustrating our life goals. I cut out a picture of a log cabin in a lush, green woods. My goal was to retire to a peaceful lifestyle within ten years. Ha! Now, fifteen years later, I have the exact same goal. Only this time, there’s a chance that I just might achieve it.

Pre-Crash Comments

On 26 April 2005 (11:40 AM),
paul said:

All these financial planning books seem to forget to tell you one thing. Write a book about financial planning and make a lot of money! Regardless of whether or not they follow their own rules, principles or plans, they are making money off selling their book. The all state that you should make money off of an asset that you don’t sit on. So, JD, get off your ass and write a financial planning book. It appears there is money to be made.

On 26 April 2005 (11:44 AM),
J.D. said:

I should note, because it’s appropriate, that I am proud to have purchased only one of these books. The rest I’ve borrowed from the library.

The one book I’ve purchased was Your Money or Your Life. Michael gave me my first copy. Yesterday, on the trip back from Bend, I found a used copy for $6.95, so I bought it. It’s now available to loan to anyone who might find it useful.

I recommend it highly!

On 26 April 2005 (11:56 AM),
Denise said:

I think this is a great entry. I have always struggled with my personal finance and just recently have gotten it under control.

I have to budget and I have to consciously track what I spend or I will over spend. I have gotten better at this, but it is still a constant battle for me. I think as I start to see the returns from not over-spending it will get easier as it has for you.

I think the getting your children involved in the family finances is very important (if you have children, that is). I wish my parents had done that with me. I had no understanding of financial responsibility and what damage credit cards can do. That was a long, hard lesson I had to learn on my own.

Great post – thanks, J.D.!

On 26 April 2005 (11:58 AM),
Denise said:

Hey – I wouldn’t mind borrowing that book if you don’t have any other requests yet!

On 26 April 2005 (01:00 PM),
tammy said:

My husband and I have no debt! Everything is paid in full including the house. For what it’s worth, here is man who bought his first home spanking new at 22 yers old. He bought his first brand new car at age 40. It was a Ford Expedition. We paid cash for it. Before that he drove only used cars.

His Dad died when he was 13 years old. At 15 he began working at a gas station. By 18 he was living on his own. Nobody helped him or gave him even one penny. He never went to college. He chose the trades instead. He is a steam fitter.

He never uses an ATM card. He doesn’t even own a debit card. He uses a credit card only for things like ordering over the internet or going on vacation. He gets the room and rental car with it. But on a daily basis his slogan is to take only the cash in his pocket to the store. He says people get in trouble when they take checkbooks or debit cards or anything that gives them full access to their bank accounts.

Today he is 47 years old and owes no man anything. We live in house that would sell in todays market for $400,000.00

And this is what this man says about budgets. I quote; “Budgets are for people who dont know how to budget.”

We have been together 19 years and have never lived on a budget.

On 26 April 2005 (03:31 PM),
Denise said:

Tammy, you say that you don’t live on a budget – but doesn’t your husband give you a certain amount of spending money every month? Is that not a budget?

On 26 April 2005 (04:30 PM),
tammy said:

Yes, he gives me 80 bucks a week. To him that’s an expenditure just like paying the electricity or paying the baby sitter or paying the gas bill. That really isnt budgeting. It’s paying a bill.

Budgeting is an itemized account of expected income in any given period. Then one forms a plan of operation from that itemized account. It’s intent is to make sure the money is there for the needed items and at the needed time.

No, when my husband gives me 80 dollars a week that does not mean he’s budgeted that money to go to me. Nor does it mean I’m living on a budget. I carry my credit card all the time. I have access to all of our accounts. I choose not to make use of that access. That’s why we now live debt free.

Neither of us live on a budget. But because we hold ourselves in check financially we have no need for a budget. The money is always there to pay the bills and to put into savings.

On 26 April 2005 (05:16 PM),
Johnny said:

For those of you who are wondering, that’s called a control issue. The only difference between “an itemized account of expected income in any given period…[combined with] a plan of operation from that itemized account” and doling out the cash like that is that the budget has never been committed to paper. My dictionary also includes “the amount of money that is available for, required for, or assigned to a particular purpose”. $80 per month seems like a budget to me.

On the other hand, kudos to prospering within your means. Most folks can’t do it, which is why we’ve such a high bankruptcy rate in this country (that and a lack of truly market driven credit practices that encourage poor credit and lending decisions).

On 26 April 2005 (05:29 PM),
J.D. said:

Though Johnny Doe — how I miss his weblog! — has a point, I agree with Tammy. To me, a budget specifically must be written down somewhere. Maybe that’s just me.

I’m developing certain limits in my head. I don’t want to spend more than $100 on books/comics combined. I’ve bend spending $120/month on restaurants; I want to reduced that to $80, or maybe even less. But I don’t consider this budgeting.

Of course, it’s quite possible we’re all just playing semantic games.

Johnny Doe’s right, though: the key is to live within your means. And, if possible, to live well within your means.

Our culture has been constructed so that it push push pushes us to spend spend spend on anything we want. Remember that I used to say that I lived paycheck-to-paycheck. I always had enough to pay my bills, but I always spent any surplus. I lived within my means, but only barely. I lived at the edge of my means. Why?

I have self-discipline issues, no doubt, but I’m also a willing participant in our society, a knowing victim of the advertising and marketing machines that surround us. The more we expose ourselves to mass media, the more we allow the media to influence our thoughts. We may think this isn’t happening, but it is. It absolutely is. The best-kept secret of advertising is that it works, and so our society descends into debt.

If I could evangelize the first step in achieving financial independence to all my friends, I would. Wait. Maybe I can. That’s what this weblog is for!

You heard it from me, friends! Even if you do nothing else toward financial independence, you can enjoy a happier, wealthier life if you simply eliminate debt, reduce spending, and increase earning potential. (In fact, those first two alone will do a damn good job of setting you right.)

Go read Your Money or Your Life. Read it and think on it.

On 26 April 2005 (05:49 PM),
tammy said:

This thing of semantics is exactly why my hsuband says that budgeting is for those who can’t budget. In esssence he is saying he lives on a budget but nothing is truly budgeted on paper. Whew sorta complicated but I still maintain there’s difference. πŸ™‚

On 27 April 2005 (09:11 AM),
Denise said:

Hmm…I don’t fall in the camp of ‘must be written down to be a budget’. If you are mentally saying we can spend $100 on fill in the blank a month then I consider that budgeting. Even though you have access to credit cards or bank accounts, if you make the conscious decision NOT to spend the money on say, a new pair of jeans or a new fishing pole (or whatever), you are budgeting yourself.

I think people (like me) who like to have it written down are just more anal than those that don’t write it down. Plus, since I know I am really bad at finances, if I have it written down I have a way to track my success.

J.D. – you say that you budget things in your head, but at the same time you track EVERY cent you spend in Quicken. Is this not in some form budgeting? You look and see that you spent $150 on comics and say to yourself, I want to spend less on comics. This in itself is budgeting, it is merely after the fact budgeting.

[Please note I am devil’s advocating here.]

On 27 April 2005 (10:04 AM),
J.D. said:

To me, a budget is a written document, a sort of contract with yourself (and/or with your partner). A monthly budget for my discretionary spending might look like this:

Books $100
Comic Books $100
Dining Out $125
Computer Stuff $50
Cable $50
Cell Phone $40
Groceries $200

These aren’t actual numbers, though they might be based on them. These are targets. Firm targets. In my mind, a person tries not to spend more than the budgeted amount. If I budget $100 for books, and I’ve spent $95, I forgo the new Stephen King novel until next month.

My parents worked with a budget for a while when I was a kid, and I know some couples who do so now. I’m not imposing these sorts of written limitations on myself. Yet.

Instead, I’m trying to change my actual behavior. (Budgets don’t change behavior; they simply provide external stops.) I’m trying to change the way I think about money. I’m trying to change my relationship with it.

On 27 April 2005 (10:22 AM),
Denise said:

Yes, but you are almost arguing my point. A budget is setting limits – whether it is written down or in your head.

Behavioral change is a good goal, but wouldn’t you say that your changing your behavior from ignoring your budget (or not having one) to remembering your limits? For example – when I didn’t budget, I would pay all my bills and then just spend whatever cash I had left over. In addition, if I ran out of cash and wanted something I would just use my plastic.

Yes, I know – that is very stupid and believe me, I paid dearly.

I guess I just look at budgeting as imposing limits to personal spending (not bills such as electricity) and sticking by it. It is interesting to me that you make the link of it having to be written down. I mean – Nick and I have a budget that we created in Excel – $90 for this, $250 for that, blah, blah, blah. That doesn’t mean that sometimes the $90 isn’t $100 or even $75 – it is just what we shoot for so we know how much to save, how much spending money is reasonable per week, whatever. To me, even though we write it down we are doing exactly what you are doing.

Do you not think you are budgeting because you feel there is a stigma to budgeting?

I find it interesting how peoples minds work so differently when dealing with personal finance.

On 27 April 2005 (11:11 AM),
Courtney said:

Uh, J.D., I still have your “Your Money or Your Life.” Sorry. I’ll return it next time I see you.

We are definitely on a budget (in writing). We have been for over a year now. The first year was training for this year, now that we have a baby and only one income. It helps us live within our means, which is mandatory at this stage in our lives.

Great post! Thanks for summing it all up!

On 02 May 2005 (06:57 AM),
Darcy said:

After reading dozens of “wealth creation” books I’m amazed that none of the authors has strongly suggested that luck has anything to do with the creation of wealth. It clearly does.
Person “A” buys a “fixer-upper” investment property, pours hours of work and a small bundle of cash into the property and after 5 years it’s worth no more extra than the investment of time, effort and cash.

Person “B” on the other hand buys an almost identical investment property, spends the same effort and cash and is rewarded with a windfall courtesy of real estate market madness ie the timing was perfect.

The trick, as a great competitor knows, is to minimize the bad luck.

Luck is a very real commodity that enhances any wealth

On 02 May 2005 (07:32 AM),
J.D. said:

Though the above comment borders on spam (Darcy apparently runs the web site for Kiyosaki (of “Rich Dad, Poor Dad”) and his organization), I’m going to leave it. It’s informative enough, and there’s a good chance that people who find this page will want her information.

However, I must take issue with the “I’m amazed that none of the authors has strongly suggested that luck has anything to do with the creation of wealth” bit.

Yes, luck is a large factor in determining whether or not one can create wealth in the short term. It’s nearly impossible to get rich quick without luck; there’s no question of that. But getting rich quick is a sucker’s bet. There’s only slim chance that you’ll have the sort of luck that’s required. You might as well play the lottery.

It is possible to get rich slowly, however, with no risk, and with no luck. All that’s required is patience and discipline. To argue that some sort of luck factor is involved is specious.

(One of the books I recommend — 7 Money Mantras For a Richer Life — even describes how a poor black woman raising several grandchildren on her own was able to build wealth slowly by using common sense techniques, the techniques that the sensible books each emphasize, the techniques I’ve enumerated above.)

Patience and discipline are the sure keys to wealth.

On 13 May 2005 (01:47 AM),
mefite said:

Hi there, I followed this link from metafilter. This is really interesting advice – thanks for posting it!
I’m currently on Step 3, trying to build some income-producing assets. But this is something that always has me wondering: how does one account for inflation/cost of living increases when it comes to income production? It seems to me that the assets’ income never grows fast enough to keep up with what your spending will be, say in 10-20 years. Admittedly, I’m only investing in stocks/mutual funds (with dividends as the “income”) right now, and should probably look at other kinds of investments (if you have any suggestions, I’d like to hear them!) Thanks again, JD.

On 13 May 2005 (06:01 PM),
schmod said:

Although it’s not exactly related to the subject of personal finance, I would HIGHLY reccommend the book “Naked Economics” by Charles Wheelan. It really puts a different (more logical) perspective on money and the economy for most people.

Despite the fact that I typically find econ quite boring, the book’s a really fascinating (and easy) read.

ISBN: 0393049825

On 14 May 2005 (03:47 AM),
Debt said:

Kudos for writing the blog article, also kudos to all the comments. Personal finance, especially debt is such a huge problem. I myself have just recently gotten debt free. It inspired me to pick up a domain and start creating a site to help people get out of debt.

Budgeting is the cornerstone for getting out of debt. The main reason is that it requires discipline. The discipline then helps build your confidence in other parts of personal finance such as saving and paying down prior debts.

Great article.

On 14 May 2005 (03:14 PM),
Leon said:

Great article! I have link this article on this blog.

On 16 May 2005 (07:39 AM),
gregor said:

Here is a great site that has a lot of understandable essays in its Financial Sense University listings.

Buying mutual funds may not be such a great idea in all cases.

On 18 May 2005 (09:28 AM),
Juliana Atkinson said:

This is an awesome list. I read 7 Mantras–there is no way I could live as frugal as her. I think the best one I’ve read is Millionaire Next Door.

On 18 May 2005 (01:27 PM),
Nivi said:

A Random Walk Down Wall Street is the classic money management book for individuals. Read my article on it

On 25 May 2005 (09:30 AM),
brett said:

You can skip the Millionaire Next Door.. I just read it, and it can be summed up in one sentence: Spend less, save more. That’s it. The basic point of the book is that millionaires don’t look like they’re rich — they don’t spend a lot, and they save their money. Those who look rich, drive flashy cars, etc, are probably up to their ass in debt.

On 25 May 2005 (10:17 AM),
kuz said:

Re: Budgeting

A budget has helped us substantially. Here’s what we do:
1) At the beginning of the year, or when we change jobs or pick up new freelancing gigs, I project our monthly take-home pay and subtract out our agreed upon savings and involuntary expenses (loans, car, utilities, subscriptions, etc.)

Whatever is left is voluntary spending money we can buy anything with: groceries, shoes, beer, whatever.

For example, if:
-take home (after taxes) pay is $2500/month
-savings goal is $250/month
-car payment and insurance, utilities, Netflix, student loans = $750/month

That leaves $1500/month = $350/week to pull out of the ATM or spend with the debit card. Use a markerboard and update the total all week (We use Monday morning-Sunday night), and you’ll be surprised how it will help you make smarter decisions. When you have only $25 left to spend on Sunday, you’ll think twice before blowing $40 on chicken and beerrr.

One more thing. Transfer that savings to a savings account at the same time you pay your rent or mortgage. When you have to pay the man, you might as well pay yourself at the same time. If your cash flow is too low to take it out at that time, then reduce your savings goal to the amount you can actually swing without worrying about it.

On 25 May 2005 (10:32 AM),
Jamie said:

Great article. Thanks!

One point on which I will controversially disagree: Credit cards.

I use a dividend paying credit card for everything. Why? I get at least 1% back and because I use Quicken to track everything, I ensure that I never carry a balance. The result: In the last two years, I’ve earned about $750 extra dollars and have not paid the credit card companies a cent. Plus, I get the benefit of an extra month of cash flow sitting in an interest-bearing savings account (ING direct in my case).

I agree that credit cards can be used foolishly, but they can be used well too.

On 25 May 2005 (10:48 AM),
Dave said:

Nice summary. I have been following these general tips for 15 years. It came about because I was nearly bankrupt. I had debt, little savings, lost my job, and divorsed. Now, I have a 7 figure net worth.

I would say the best tips beginning with the first step are:

1. Save a minimum of 10% pretax earnings every month as soon as you begin earning income. I save 30% pretax every month. I don’t care what you have to give up to save 10%. Sell your car, find a cheap apt, etc… Don’t believe that you need to keep up with your friends and neighbors. Housing and auto costs are the top 2 discressionary expenses for most people. Spend what YOU can afford.

2. Save for emergencies. Put 2 mos in savings regardless of your current debt.

3. Pay off credit card debt. At 18-25% interest, this will kill you long term. Be very cautious if considering rolling over your credit cards for lower rates. There are almost always catches. Once your credit card debt is paid off, use your cards but, pay them off EVERY month. No excuses. Your credit card company will hate you but, you will become slowly rich. 2 credit cards are necessacary for car rental, short term emergencies, consumer protection and a good FICA credit score (this can save you 10’s of thousands long term in morgage interest).

4. Save for retirement. You will eventually want to stop working. You will become mentally or physically unable to work at some point. Trust me, you do not want to become a charity case. If your employer offers a 401K, max it out. This is pretax money. It is tax defered and often companies add matching funds. This is worth 100’s of thousands of dollars long term. If you do not have a 401K, get a SEP IRA, Roth IRA, or other IRAs. Contribute every month. Do not touch this money until retirement.

5. Invest. Buy highly diversified, low cost mutual funds. Buy world wide mutual funds. Don’t bother with individual stocks. Don’t bother trying to time the market by buying and selling short term. There are genius’s out there who do this full time and don’t succeed. Ther is no formula. If it was that easy, everyone would know the secret. Invest every month. Dollar cost averaging forces you to buy more shares when the price is low and fewer when the price is high. Re-invest the dividends. When you get to this point, seek the help of a fee only financial planner If a financial planner tells you to buy life insurance as an investment, run away.

On 25 May 2005 (10:58 AM),
Dave said:

6. Insurance. Choose the least amount of insurance with the highest deductables you can afford in the event of an accident or loss. You likely will also want a umbrella liability policy. You do not want to loose your nest egg because someone trips in your home and becomes permanently disabled.

7. Home morgage. If you are in a low tax bracket, less than 20%, pay off your home morgage early with additional contributions. But, do not become cash poor and home equity rich. It can be expensive to tap that wealth if you need it. If you are in a high tax bracket, do not pay off your home morgage early. Morgage interest is tax deductable and rates are low. In this case, increase your investing. If you think the market is overpriced, OK, pay more on your morgage. Generally, do NOT choose an ARM morgage. Interest rates can increase rapidly. You can always refinance when rates drop. Worst case, you may have to sell your house if rates rise because you can’t make the payment. At that point your house value may drop because the interest rates have risen, Yikes. If you are looking into an ARM, determine what the maximum payment will be if interest rates rise 10 points. If you can afford THAT payment, OK.

On 25 May 2005 (11:00 AM),
tiffany said:

I read “The Millionaire Next Door” and I can sum it up thusly:

“Live not just within your means, but below your means. Clip coupons. Buy a used car. Live in a smaller, less expensive house. Save and invest the rest wisely. No one gets rich by giving to charity. Manage your assets.”

On 25 May 2005 (11:01 AM),
tiffany said:

Oh.. I forgot one point: “Own your own business.” The book noted that entrepreneurs earn more and are worth more than employees.

On 25 May 2005 (11:53 AM),
Duane said:

There are just some absolutes that these books tout that I never was sure how to take. For instance, I have one credit card that I pay off every month. I just use it as a convenience, and the loyalty points don’t hurt. Should I tear that one up? Why?

Or how about my wife’s car? I’ve got a 4 year loan on that (late model used, thank you very much). I’m not sure that I could easily pay that off in 4 months just by adding some more to the principal. After that, my only debt is the mortgage. But lawdy what a mortgage it is.

I have a savings fund. Several, actually, in the form of cash on hand, index funds, and stock. Should I dip into those to pay off the car now?

On 25 May 2005 (12:38 PM),
Dean said:

One other thing is to make your saving automatic. Have 10% of your pay come right off your cheque and go right into an investment account automatically, without you ever having to remember to do it.

You will ajdust to living on what’s left over and you won’t even notice it.

See “The Automatic Millionaire”.

On 25 May 2005 (02:04 PM),
HF said:

One additional book I *highly* recommend (I’ve been working on this issue, too), is “How to Get Out of Debt, Stay Out of Debt, and Live Prosperously.” (Jerrold Mundis)

Based on the practices of Debtors Anonymous, but presented as a memoir/how-to, this book gets into *how* to convert tracking your expenses into a spending plan. He talks about budgets versus spending plans (a nuance of deprivation versus one of choice), and shows how to free up money for larger goals by “tweaking” spending categories.

One of my favorite things about this book is its advice that, no matter how broke or in debt, you *never* deprive yourself of any needs or at least a few wants. Severe deprivation can lead to resentment binging, joyless hoarding, etc. You pay current expenses, yourself, and old debt, in that order, and you don’t incur any new debt, ever, at all.

He gets into creating space for the new by paring down unwanted possessions and habits, and there’s also a nice touch of magic or kismet. Often, unexpected financial grace moments come when you take good care of yourself and focus on your true path.

This, by far, is my favorite financial health book, because it shows that it’s possible to go from *hopeless* debt to solvency, and even gravy. No pie-in-the-sky windfalls, but some heart-wrenching examples of people who were so deep in debt they were considering drastic, self-destructive actions, and how, step by step, they came out of crisis.

Also highly recommended, Sanaya Roman’s “Creating Money.” This allegedly “channeled” book may be too new-agey for some, but the tone and writing are spot-on. This is about seeing what you have already, cultivating an openness to all sources of wealth, practicing gratitude and generosity, and honoring your real talents. One of my favorite reminders from this book is that there are multiple ways to satisfy a particular desire, and focusing on just one form of satisfaction can make one blind to alternatives. So you look for the core desire; what does that “cabin in the woods” mean to you? Are there other sources available to you for creating such peace, privacy, coziness, time among nature, etc.

Along this same line, the one book I look forward to reading (and I’ve read dozens), that comes recommended by someone I trust a great deal, is “Spiritual Economics” by Eric Butterworth.

I do own Suze Orman’s 9 Steps to Financial Freedom. It’s a geat resource for information when making very specific investment, home-buying, retirement, will, etc choices.

However, for getting motivated & looking at the big picture, you can’t go wrong with Your Money or Your Life, Get Out of Debt.., and Creating Money.

For women, a SUPER resource is The Money Club, a peer-to-peer netowrk of local groups in which women help one another reach financial goals. (Not an investment club)

They have a website with good resources, but it’s the meetings, which include a combination of a financial topic and personal sharing, that ae the core of this program.

Another great online resource for women are the printable essays and missions at

Flylady is a seriously generous web-based community of (mainly) women who are working on moving from chaos (whether financial, social, in the home..) to clarity. Once a year, they have a pay-down-your-debt month, and members pay off astonishing hundreds of millions in debt.

Here are the archived essays and missions:

Flylady even offers a downloadable .pdf “Financial Control Journal,” with advice, worksheets, and money-saving tips.

On 25 May 2005 (02:15 PM),
Eliot said:

Great summary, J.D! I’ve been reading a lot of these books lately, too, and want to get a good footing before I find a wife and settle into normal adulthood. So far I’ve read “The Richest Man in Babylon”, “The Automatic Millionare”, “The Millionare Next Door”, and “Rich Dad, Poor Dad”.

After reading a couple of books by Kiyosaki, I decided he was trying to pull a scam with the books. He has a few good points, but most of it could be summed up in a paragraph or so. He always refers to his other books and makes you think that you’ll find the real answers if you just read enough of his material (or play his ridiculously expensive “game”).

The best advice was from “The Automatic Millionare” and “The Richest Man in Babylon” (both say about the same thing): pay yourself first (save), make your savings work for you, and reduce your lifestyle.

Anyway, I guess I don’t really have anything intelligent to add. It is amazing that there are so many money books and they all basically say the same thing but yet Americans are still in severe debt. I hope I actually turn some of this advice into practice. I think a big key is to keep marinating my brain with this type of material and be around other people who are trying to get out of debt and save properly.

On 25 May 2005 (02:21 PM),
HF said:

Forgot one great resource.

I went to a women’s financial workshop with several speakers from different perspectives, and one was M.P. Dunleavey, a columnist with the Microsoft network Money channel.

I looked her articles up online, and found a real cache of excellent advice & practices.

For those daunted by budgeting, this one article gives a totally do-able system (in a nutshell, allocate 60% of income for fixed expenses, and 10 each for short-term & long-term savings, investments, and discretionary spending):

Here’s a convenient article index with topic and author:

On 26 May 2005 (06:37 AM),
MrE said:

Nice article.

I think that Personal Finance should be required course in High School and college! Two of my favorite books were Andrew Tobias’ “The Only Investment Guide You’ll Ever Need” and Peter Lynch’s “One up on Wall Street” I also used to subscribe to Money and Kiplinger’s Personal Finance magazines (am a I dating myself?) back when they offered advice for the average person.

Anyways, the “snowball” method for reducing credit card debt works great. There’s an excellent free program (“Credit Card Math”) offered by that explains why credit card debt is so hard to pay off and demonstrates how using “snowball” greatly reduces payoff time.

The program does promote their other Debt Reduction Software, but the advice is sound. I actually purchased their software back when it was being distributed on floppy disk – you can use it do diff payoff scenarios. I’m sure the popular finance software available nowadays can do similar, but I haven’t used programs like Quicken and Money in years.

On 26 May 2005 (02:20 PM),
Mike Duffy said:

Since no one has mentioned it, I would add The Wealthy Barber, which tackles personal financial planning in the style of The One Minute Manager, i.e. a story. It’s definitely a “get rich slowly” approach, but the story makes it easy to get through.

On 26 May 2005 (05:55 PM),
Christine said:

My folks have been talking to me about money since I was a wee one. That means explaining to me and my sister that we could either go to the movies every week or go on a family vacation (we chose vacation and I still rarely go to the movies). They also talked a lot about mutual funds, savings, doubling rules, universal life insurance etc etc. When I was 18, they opened an IRA for me. Not exciting, but now I’m looking at buying a first home, I have good savings and no debt, and at least three credit cards that I have never carried a balance on.

So there’s the argument for sharing with your kids.

As for not paying off your morgtage… if you’re paying 4% interest (it’s a great market!) and that’s tax-deductible anyway and you can make a conervative 6% on your investments, you’re making that 2% for yourself, courtesy of a loan from the bank. I don’t think it’s a trick at all. On the other hand, it’s also not guaranteed.

Nice conversation here… thanks!

On 26 May 2005 (07:37 PM),
Karen said:

If you are a woman, I would suggest David Bach’s ‘Smart Women Finish Rich’ or any of his other Finish Rich books. I received my last raise by reading this book. It gives you the courage to speak up for yourself and not be scared to ask for what you deserve. Many studies have shown that a woman makes less than a man performing the same job, plus women live longer than men. We need to earn more money and know how to manage our money. Someone has mentioned ‘The Wealthy Barber’, that’s a good resource, too. I really liked ‘One Minute Millionaire’ and like some others I wasn’t that impressed with ‘Rich Dad, Poor Dad’.

Good post, J.D.

On 27 May 2005 (07:09 AM),
Xavier said:

“Involve your kids in the family finance”

This is important. I speak as a child of a family who is now bearing the fruits of they type of wealth accumulation advocated in these books. I can’t thank them enough.

“The Barefoot Investor” is a great read for students or those just starting out. It offers good advice for those who aren’t currently entrenched in a career or nursing morgages.

On 27 May 2005 (07:23 AM),
Keith said:

Thanks for taking the time to consolidate all of this great info and post it for us!

On 27 May 2005 (07:28 AM),
Avi Solomon said:

Thanks for the great summary. FYI ‘Your Money or your Life’ has a great grassroot community here:

On 27 May 2005 (11:42 AM),
Chrees said:

JD, thanks for summarizing so I don’t have to read those books!

This may be mentioned or just implied in the books, but making sure you and your spouse are on the same page when it comes to money is very important. As is making damn sure when you get married it is for good (not trying to get into the morality or necessity of divorce, just the economic impact)–divorce can be economically devestating to both parties. I was fortunate in my divorce that both my ex and me had an easy division and were on equal footing at the time of the divorce, but in some aspects it was like starting over on some of the mentioned steps.

Regarding the Edelman book and the seeming contradiction between #8 and #6–I agree with him. Keeping up with financial news is important for your investments–if you left your money in stocks during 2000 and 2001, you would probably have considerably less worth now than if you temporarily cashed out (even after paying the taxes). While the saying “Invest in what you know” is true, I think it’s equally important to understand the market forces going on around you.

Again, a great discussion. Thanks to all.

On 27 May 2005 (02:39 PM),
Darren said:

I’ve seen a few people here talk about buying a car for cash as though this is a good thing or good accomplishment.

In most cases, this is one of the worst things you can do from a financial standpoint, especially if the dealership is willing to finance the purchase at 0%-3.9% like many do. Cars are a depreciating asset. By purchasing a car with cash, you are locking your money up in something that is *guaranteed* to decrease in value.

Most cars are $20,000+. That’s a sizeable chunk of cash that could easily be invested at 6% or more. If the dealership will finance your purchase at a reduced rate, you are much better off taking the financing and investing your money elsewhere.

Sure, you’d pay more for the car over the term of the loan because of the interest, but your invested cash will completely negate that difference plus generate a profit for you.

On 28 May 2005 (03:41 AM),
Alazka said:

A friend recently pointed out to me that, thanks to insanely spiralling property values around DC, I could theoretically sell the house I only signed a mortgage on six months ago and live on the interest alone back in Lesotho (a nation I’m quite fond of), effectively retiring at 38. One factor to bear in mind in seeking that financial independence is: there are many delightful places in the world where one can live quite comfortably on less than a thousand a month, so anyone who actually owns a significant piece of a house on either coast of the USA is probably already set for life if s/he’s willing to travel.

On 28 May 2005 (01:19 PM),
Scott said:

Re: Darren’s comment about zero or low-rate financing.

The cost of borrowing the money is actually substantially higher – the incremental financing costs are just buried in the acquisition cost of the car. If you can get 6% investing elsewhere, so can the financing company giving you the loan. So why would anyone loan money at zero percent? They don’t.

If you’re paying cash you should demand a sizeable discount over the price you pay if you’re financing.

On 28 May 2005 (08:27 PM),
Jim said:

Re: Budgeting

Here’s what we’ve been doing for two years now, and it’s worked very well:

1. Have your bank open a new checking account, and get a debit card attached to it.

2. Have your employer (if you have direct deposit) split some portion of your pay into the new checking account. You’ll have to figure out what’s appropriate for you though.

3. Use the new checking account for all the junk expenses — movies, dinner out, a new CD, etc. Essentially you budget a single lineitem for “miscellaneous expenses.”

I track every penny in and out of our primary checking account (to which all bills are paid from), but I completely ignore — except for the balance — the money in the junk account.

On 29 May 2005 (03:14 PM),
Betsys said:

My advice is very simple: save at least 10% of your income, ALL the time.

If you have direct deposit, arrange for your bank to take 10% off the top before you ever see your money. Do your budget as if the remaining income was all you had. If you don’t have a regular paycheck you have to discipline yourself. You can either accumulate the money in savings and move it to investments in chunks, or if you can, arrange for automatic mutual fund purchases.

I know this sounds inane: many people will say that they don’t make enough to save. My answer: if you were laid off, or if your paycheck was cut 10%, you would figure out a way to survive. So, just pretend. You can do it.

On 31 May 2005 (11:55 PM),
Ian Gilman said:

Also worth reading: ‘The Soul of Money‘, by Lynne Twist.

It’s not about financial independence, but about understanding and directing your relationship with money. A good complement to the other books.

Here’s what Vicki Robin (co-author of ‘Your Money or Your Life’) has to say about it:

“Lynne Twist, with great grace, beauty and conviction, is about to take away from you some precious and utterly failed illusions so you can claim, now and forever, truths that will set you free. She has earned these truths through years of meeting – soul to soul – some of the most and the least advantaged peoples of this earth. Let her speak to your heart and then test her suggestions… and see.”

And yes, I got my copy from the library.

On 02 June 2005 (08:34 AM),
Dimitri said:

Thanks for a great article. This is something I’ve been meaning to do myself as I have also read a handful of similar books.

I just wanted to mention one thing which seems to be missing: Tithe.

In the majority of books I read (including some of the abovementioned titles) there is a common thread of investing ~10% of your income and giving another 10% away to the needy (charities, communities, schools, etc.)

There seems to be consensus that although it doesn’t make financial sense, giving away a tenth actually brings in more wealth in the long run. This may have to do with karma – if you believe in that sort of thing – or maybe it’s just a psychological phenomenon … where, by willingly and happily giving money away, you lessen the chance of getting too uptight about the whole thing.

Some believe that money is a force that needs to flow (similar to water, air, chi…) when you hold on to all of it, it goes stale and is not productive. Give it away and it will come back to you hundredfold.

and that was my 2 cents (a very appropriate phrase, I think πŸ˜‰

On 02 June 2005 (11:21 PM),
Emmanuel kinobe Mugerwa said:

i really appreciate yo work.

i really appreciate your work.

On 02 June 2005 (11:22 PM),
Emmanuel kinobe Mugerwa said:

i really appreciate yo work.

i really appreciate your work.

On 05 June 2005 (06:00 AM),
Lance said:

One small item that seems mostly overlooked…

Getting rich slowly doesn’t mean giving up every comfort or luxury. Reducing your expenditures doesn’t mean you can’t spend $100 on a concert ticket or $2000 on a beach trip. When you can afford it.

Yes, during the get-out-of-debt phase it makes a lot of sense to trim all your expenses and get the interest monkey off your back. Once you’ve got a plan established, make a little room for some unnecessary necessities so you don’t go insane. It’s just as neurotic to reject buying anything as it is to be an obsessive consumer. Whether that is $150 a month or $5 will depend on your own situation.

If you can’t enjoy your life while you’re saving, you’ll have forgotten how by the time you’re “rich”.

On 07 June 2005 (08:38 PM),
The team said:

You know, wow! Thanks for taking the time to share this information.

This is truly a wealth of knowledge you’ve put together here. Everyone could benefit from investing some attention in building their financial literacy.

I think they now have a catalyst available to them for beginning that process.

Say, any other interest you’d be willing to share?

On 09 June 2005 (06:11 AM),
Stefan said:

Nice article. I wanted to point out, why the an emergency fund is of such importance, and also, why I think that $1000 may not be enough:

Imagine you put your money into some long-term contract. Now imagine, your car breaks down (lose you job, whatever) and you need a new one. And you need it today. What will happen, if you don’t have an emergency fund? You will have to dissolve the long-term contract to get enough money to buy a new (our used πŸ™‚ car, because you can’t wait to save enough to buy one.

Why is this bad? Because you will have to pay some kind “fine” for getting out of the contract early. Often you will also loose all the interest that you have been building up over the years. So basically you will start from zero (or less, because you will also buy that car). Without an emergency fund you would jeopardize your whole financial foundation that you are trying to build.

Instead, if you had an emergency fund things would have worked out differently. You would take the money for your new car out of that fund. That’s it. You don’t lose any insterest and don’t have to pay any fines.

Just remember to fill up that fund again after you bought your car!

So why is $1000 not enough for this? It depends. If you can live of off $1000 for half a year (not three month, that won’t do in my opinion — better save than sorry) then $1000 is fine. But just remeber: “Living of off” here means food, rent, gas, whatever PLUS any monthly payments for retirement accounts or basically anything that you cannot afford to NOT pay for (because that would cost you extra money).

On 09 June 2005 (03:43 PM),
Paul said:

With all these wonderfull words of wisdom, I don’t really know what to say. However I will give it a shot. I just began “Step 1”. I am now down to $1555 from $6000 in revolving debt. It took me 2 months starting with getting back almost $3,200 from the IRS, from 2004 and 2003 (I never filed the prior year…oops). With that kind of money, I decided to start paying my debt off and start saving again. At about the same time I landed a $20.00 per hour part time job and started becoming obsessed with my whole finacial situation. At this point, I am almost debt free and I started a savings acount with Capitalone at 3.15% APR…even better than Stage one is actually fun =)

On 13 June 2005 (07:20 AM),
serenity said:

J.D Thank you so much for breaking it down for me. It is so happen today I return home with a book “finance for dummies”. It’s a bit dissapointing because many of those doesn’t apply here since it is meant for someone living in the state (I live in Indonesia), but your points are so simple to follow.
Thank you so much. I just spent my first point last month, but it’s ok, now that I got the picture I can build my frame.

When we’re both rich, you’ll hear from me.

Good luck with the bathroom, and you know what they say, borrowing comic books meant more friends as long as you returned them (and it is quite tempting I may say πŸ˜€ )

Again thank you.. mmuuach

On 23 June 2005 (08:16 PM),
barkah said:

On the credit cards, i happen not to agree with the statement that they’re bad. They’re sometimes usefull if you are wise in using it. I collected the tips based on my experience here:

too long if i put it right here.

The main point is: credit card is not extra money.

On 26 June 2005 (08:46 PM),
Don said:

Great article. Thanks. I have The Millionaire Next Door and find it bland. However, Reading Rich Dad, Poor Dad helped me see the importance of everything you shared in your piece. I would highly recommend it to anyone who normally finds personal finance boring or difficult to grasp. It changed my whole attitude about my needs and possibilities. Keep up the good work.

On 21 July 2005 (09:16 PM),
jbelkin said:

Not disagreeing with you on the overall but you do need at least 1 if not 2 credit cards. If you travel or plan to travel, you are labeled as undesirable without a card. You cannot rent a car without one (a debit card generally has a limit of $1,000 a day and rental card companies put a hold on your overall rental + up to 100%). If you buy a ticket with cash, you are labeled a security risk and you will get the full wanding and pat down.

There are lots of cards with no fees and rebates so the they key is not to have no credit cards but to PAY THEM OFF at the next month. There are also lots of deals now where you can transfer your card to a new one with no interest for up to a year … and ironically, the more cards you have and DO NOT use or have a low % balance versus your limit, they will offer you more cards.

On 22 July 2005 (07:48 AM),
Allan Kochis said:

Check out
“Common Sense Economics” by
James Gwartney, Richard L. Stroup and Dwight R. Lee
In the section on personal finance they summarize their point for you!

PS. in my opinion a book worth owning.

On 22 July 2005 (07:52 AM),
Robert said:

linked from boingboing…

anyway, I am getting into the financial thing myself, going into my sophomore year of college one of my “adult friends” is trying to pass on the wisdom…so far I’ve read “The Richest Man in Babylon” and “The Millionaire Next Door” — I personally appreciated how while their styles were completely different (babylon == king james, TMND = info about today’s people) and yet their advice seemed to be the same (within reason, the babylonians didn’t seem to have problems with economic outpatient care nor saving for college)

But anyway, I dig this post, and you’re totally right, their wisdom is sufficiently boiled down to a number of points — but I do appreciate reading their books, the examples are great πŸ™‚ Oh, and they don’t profit off of me — I buy my books at half-priced books πŸ™‚

On 22 July 2005 (08:44 AM),
ChΓ© said:

An excellent post. I won’t go into my personal background, but I feel very strongly these types of books need to be read in every household.

A quick comment on one of your points:

“Secret #1: Carry a mortgage even if you can afford to pay it off. β€” This flies in the face of every other financial book I’ve read, and I do not subscribe to the idea. I’m willing to be that the people surveyed carry a mortgage out of habit, not because they think it’s smart.”

You spend your money on investments, not liabilities. Paying, say, $150,000 dollars to eliminate a $1400 dollar a month debt is a bad investment. Let’s say your house is 150k, and you owe all of it. The national average for appreciation is somewhere around 10%. That means your house is appreciating $15,000 a year, and costing you $16,800. Take into account equity buy-down of roughly $150 a month on your $1400 payment, and you have $16,800 worth of equity gain a year. Basically a wash, and that’s FINE. If you pay off your house, you now spent $150k to eliminate a $16,800 a year cost. You now have $150k in a bank account you can’t touch (equity in your house).

Take that 150k and put it into something that gives you a 20% ROI (not unreasonable), and you end up with a 30k a year cash flow, which pays off your mortgage AND gives you $13,200 to invest. So now your total ROI is better than 20%, because you still benefit from the equity buy down that is occuring as a result of your home loan ($1,680/yr).

Mortgages are -goooooood-. Collect as many as you can!

On 22 July 2005 (08:46 AM),
John S. said:

Nice post. I came over here from BoingBoing. I have one comment on a previous comment: although I haven’t read all of it by any means, I think you should be very cautious about the site. Just reading a few articles at random it became apparent that it is “tinfoil hat” territory. I would take what they say with a huge grain of salt.

On 22 July 2005 (08:59 AM),
ChΓ© said:

Morning typos. That last number should have read $1800 a year

On 22 July 2005 (08:59 AM),
Kenneth Greenlee said:

Dear FoldedSpace,

First of all, great post. I don’t think we can ever talk about financial planning too much. Why? Because it must be realized by everyone that financial planning is not just for rich people! Becoming rich (aside from the trillion to lottery chance) requires financial planning.

Some points. FoldedSpace says he is not sure about housing: buy all you can afford? or only what you need? Is it a liability or an asset. The one thing that all the planners agree on (I believe) is that you should own rather than rent. I have read most of the books above and I happen to disagree mostly with Kiyosaki regarding a house as a liability. The reason is that no matter what we have to house ourselves and that costs money. My view of housing is that if an acceptable (but not lavish) apartment would cost me $700, then my task is to find housing that costs me $700 a month to own. Anything above that is a true liability. I found and purchased a 4 unit building (in which I live in one of the units) in New Orleans which costs me around $2000 a month and which brings in around $2000 a month in income. I don’t regard this as a breakeven situation. I regard it as being $700 a month ahead, as I would have to bear the housing costs anyway.

Final point. Paul said in the very first comment:

“All these financial planning books seem to forget to tell you one thing. Write a book about financial planning and make a lot of money! Regardless of whether or not they follow their own rules, principles or plans, they are making money off selling their book. The all state that you should make money off of an asset that you don’t sit on. So, JD, get off your ass and write a financial planning book. It appears there is money to be made.”

Actually there is a book out there which says just that! It is called “Multiple Streams of Income” by Robert Allen, author of the famous “Nothing Down” book on real estate. in it he says (from memory): “everyone has a book in them. I (Robert Allen) calculate that I have made around $20 per word per year from the book that I have published.” Not a bad return.

“Multiple Streams of Income” is very good. One of its strengths is that it gives very concrete recommendations. Of course there is a lot of handwaving, but it not a book of only handwaving.

That’s it!

On 22 July 2005 (09:02 AM),
Jeremy said:

Two Additional Notes:

1. As several people have already pointed out, use direct deposit to make your savings automatic. I have a hunk of every paycheck redirected to a savings account at a different bank. I can’t stress enough how much of an impact this will have on your savings. The best piece of mail I get each month is the statement for the savings account. I do nothing and the number just keeps getting bigger!

2. Eliminate as many of your monthly recurring fees as possible. Cable? Gym membership? Storage space rental? Netflix? Trash or minimize as many as possible, then add up how much you will save per year.

On 22 July 2005 (09:21 AM),
Mark K. said:

For anyone looking for an easy way of keeping track of expenses, I’ve been using the Dome Simplified Home Budget Book. It’s just a book of simple, blank Excel-like charts in which you write the money you spend in a certain category per day. (In case you have more than one expense in a category, you can keep a small calculator handy). Then when you do your monthly totals you compare them with your budget in the last column.

IMHO, this doesn’t have the flair of Quicken, but it CAN be taken with you out and about–which is where I do most of my purchasing. I also have a small accordion file for receipts (so now I know exactly where they go when people give them to me). Anyway, I’ve found it very useful.

The total cost of the book, a small calculator, and the accordion file is probably less than $15.

On 22 July 2005 (10:48 AM),
Mike said:

I am a bachelor and I save 75% of my net income. I really don’t understand why so many people accumulate so much debt. How do they sleep at night? I am 35 and plan to be partially retired (only doing part time fun jobs) in my early 40s. You credit card debt guys should try it. It’s fun to be responsible.

On 22 July 2005 (11:06 AM),
chele said:

Just wanted to repeat; great thread! Thanks for taking the time to write it out. I have read some of the books and noticed the similarities and wondered if they all sounded so much the same. Now I know they do indeed!
Thanks again…

On 22 July 2005 (12:40 PM),
Jeffrey Allen said:

Why is it easier to find investors/lender then it is to find eligible companies wanting capital?
[email protected]
Las Vegas

On 22 July 2005 (01:42 PM),
Steve said:


Bravo! Bravo! Bravo! That is exactly it! We do it too, similar ages to you. The best thing you can do for yourself is get rid of your debit card, they are for idiots. If you aren’t scared that your life can be completely compiled nicely for an irs goon, then you are just to stupid to really understand how this works and why. Good luck!

On 22 July 2005 (03:42 PM),
Sue said:

Great article

On 22 July 2005 (04:29 PM),
shwonline said:

Great thread!

We carry only one major credit card, which is tied to a specific major airline’s frequent flyer program. $1 spent = 1 mile. We use it a lot, but only to buy what we would have bought anyway. If I have a choice of cash, check or credit card, I use the card. We pay it off in full every month.

I also use this same airline whenever I have a choice in my business travel, as does my wife for her business travel.

We use the accumulated miles to buy airfare and other incidentals during family vacations. We have been able to afford vacations to Hawaii and London this way. It costs us no more, and saves us thousands.

The only other time we ever acquire credit cards is during shopping for back-to-school clothes. If we are buying hundreds of dollars worth of clothes, and the store will give us an extra 15% off for signing up for a card that day, we’ll do it. As soon as the bill arrives, we pay it, and cancel the account. This takes caution and discipline, and I would not recommend it as a regular strategy for most people. However, it has saved us a bundle on occasions.

One other seemingly small thing we do is to order only water at restaurants, including for the kids. We’ve done this all their lives, so they don’t know the difference, and they recognize that it’s a special treat to get something more. For a family of four, this adds up to hundreds of dollars a year.

On 22 July 2005 (06:02 PM),
greg said:

Interesting sight France, thanks for turning me on to it, Greg

On 24 July 2005 (12:12 PM),
Sebrina said:

It was not until I was separated/divorced from my financially-illiterate husband that I really was able to start building my personal finances in a positive way. NO NO NO…I am not advocating divorce, but I am saying to you single folks BE CAREFUL who you marry if one day you want to become financially independent. Both need to be of the same mind to make it work.

One more comment…i agree about the credit cards. Get rid of them. if you are like me and find it mentally excruciating to commit to paying off the balance each month or to stay away from the limit, credit cards are not for you. I keep one just for car rentals and stuff, but it would be better if I had none.

On 24 July 2005 (12:49 PM),
sennoma said:

Nice one, JD. Picked up by Rebecca Blood now. I second Paul’s advice: write a book. There’s enough material in this post alone. Ethical reason: it’s good to have the same ideas presented in a lot of different ways, because different presentations “click” for different people, and because comparison among different presentations yields bedrock principles. Slightly less ethical reason: I bet you’d make a ton of money.

On 24 July 2005 (09:37 PM),
Marina said:

I have read many of the books mentioned and agree with most of them. I would suggest two others that I liked: “Live Rich” and “Die Broke” by Stephen M. Pollan. Good luck!

On 25 July 2005 (02:58 AM),
Fazzy said:

Thank you.

On 27 July 2005 (08:15 AM),
Ganesh said:

Nice discussions!

I dont think credit cards are that bad if you use it wisely. I have a major credit card which gives me upto 5% cashback. So for all my necessities I am using my credit card and each cycle I am paying it off fully. As a result at the end of the year I am getting whopping 2 to 3% adjusted interest on my expenditure approx as a free money.I take it as my gift for being self disciplined.

What do you have to say about it?


On 03 August 2005 (01:19 AM),
Gerard said:

Dear JD,

Thank you for this post.
I was not sure which books to purchase, but now know that the one I purchased was enough. And you summary of all the books will help me greatly.
Keep up the good work.

With regards,


On 16 August 2005 (02:06 PM),
Michael said:

Thanks for a GREAT summary of financial books. I have been looking through some of the books, hesitating pulling the trigger on any of them.

My wife and I only have two “big” debts…my student loan from college, and our new mortgage from building a house….no credit cards and no car pymts. I have been looking at way to move retirement money into some better money making investments.

Thanks for a great post, I will stick it in del.icio.ous and refer to it often.

On 19 August 2005 (05:31 PM),
Holly said:

Of course, someone writes a fantastic article and along comes the spammers. :-p

On 27 August 2005 (10:58 AM),
Andrius said:

Great article! Worth tens of books about personal finance, but totally free. Thanks!

On 16 September 2005 (05:17 AM),
Glyn Simpson said:

Good read. Although not explicity named, ‘pay yourself first’ from The Richest Man in Babylon is a philosophy I believe in, and have successfully used.

On 08 October 2005 (12:07 PM),
emma said:


this is my first post. i can’t say that i agree with all that you have stated but do with most of it.

first, i have read some of the books that you mentioned, all of which i own. the main reason i purchased the books was to develop a library of financial wisdom for myself and my children.

second, i agree with much of what you said about kiyosaki and his book rich dad poor dad. to me it seems more of a compilation of ideas influenced from think and grow rich, the richest man in babylon and who knows what else. like you, i was unable to narrow down his keypoints and therefore lacks clear and practical application. i am a believer in reading, so this book is recommended. i don’t find it crucial for wealth building however.

i am a huge fan of dave ramsey and own 2 of his books, total money makeover and financial peace university revisited. he is one of the few financial experts that offer practical application of financial ideas and goals. i highly recommend both of his books.

i absolutely enjoyed richest man in babylon. the manner at which clason presented practical ideas was done so creatively and memorably. i personally recommend this book and am happy to have it in my library.

think and grow rich is a much more difficult reading book but has great insight into harnessing the power of the mind to generate wealth.

thanks for your input.


  1. “I dont think credit cards are that bad if you use it wisely. I have a major credit card which gives me upto 5% cashback. So for all my necessities I am using my credit card and each cycle I am paying it off fully. As a result at the end of the year I am getting whopping 2 to 3% adjusted interest on my expenditure approx as a free money.I take it as my gift for being self disciplined.

    What do you have to say about it?”

    I understand the positive point about credit card purchase rewards, like the percentage cash back. It sounds like a good deal for the credit card holder to be rewarded by spending money. But there are some problems with these programs that I’ve learned through experience and encourage me to use other forms of payment (cash, debit card).

    1. Events happen to disciplined credit card users. I agree completely if you use a credit card you should pay the balance off at the end of the billing cycle. If you do not pay off the balance, you risk paying the interest rate of the balance, accrued on a daily basis, and any fees. But, mistakes (forgetting you had a balance) and emergencies (brake lines in your car bust resulting in an accident) happen causing you to miss a payment. I know people whose emergency plan is to use a credit card because they don’t have an emergency fund (cash) to fall back on. What happens is debt accumulates ( this months payment + mistake and/or emergency spending + interest + fees – cash back ) until you fully recover and pay the balance in full.

    2. Credit card companies and businesses attach hidden fees to credit cards. When you sign up for a credit card you agree to the terms of service outlined in the credit card contract. Some of these include payment of a late payment fee, inactivity fee, monthly maintenance fee, balance transfer fee, cash advance fee and sending in less than minimum monthy payment fee. In addition, businesses are charged for each transaction on a credit card terminal. We are seeing an increased number of businesses handing this fee to the consumer.
    For example, at my university I was charged approximately 2% on all credit card/debit card transations made on campus. If I had used cash or a check I would save the 2%. If I spend $3000 on tuition and $300 on books the total cost comes to $3300. If I use the credit card I spend $3300 + ( .02 * $3300 ) – ( .01 * $3300 ), or $3333. I use .02 for the credit card fee and .01 for cash back on credit card. I am loosing $33 ($3300 vs. $3333) by using the credit card instead of cash/check.
    It’s not just the university that passes the fee on to me, fast food restaurants charge fees on credit/debit card purchases (I’ve heard this is true but I haven’t verified it personally). If I am smart then I will use cash, but if I habitually use cards it is EASIER for me to pull out the card than it is to carry cash or the check book. For me, being disciplined is carrying cash/check book in anticipation of upcoming costs and avoiding credit cards as a matter of convenience.

    3. Spending money with credit cards is encouraged. Credit card companies make it easier to spend money on essential and non-essential goods by introducing various mechanisms ( spend now pay later, rewards, contactless credit cards ). The idea of spend now pay later encourages spontaneous spending for instant gratification. Most people will succumb because instant gratification is emotions based not logic based. I’m guilty of this. I can buy product A because I have a credit card and no cash but if I don’t have a credit card and I don’t have cash then I’m forced to delay gratification. And I don’t really need product A in my life. This is the crux of spend less save more.

  2. It was not until I was separated/divorced from my financially-illiterate husband that I really was able to start building my personal finances in a positive way. NO NO NO…I am not advocating divorce, but I am saying to you single folks BE CAREFUL who you marry if one day you want to become financially independent. Both need to be of the same mind to make it work.
    One more comment…i agree about the credit cards. Get rid of them. if you are like me and find it mentally excruciating to commit to paying off the balance each month or to stay away from the limit, credit cards are not for you. I keep one just for car rentals and stuff, but it would be better if I had none.

  3. great site!
    2. Credit card companies and businesses attach hidden fees to credit cards. When you sign up for a credit card you agree to the terms of service outlined in the credit card contract. Some of these include payment of a late payment fee, inactivity fee, monthly maintenance fee, balance transfer fee, cash advance fee and sending in less than minimum monthy payment fee. In addition, businesses are charged for each transaction on a credit card terminal. We are seeing an increased number of businesses handing this fee to the consumer.
    For example, at my university I was charged approximately 2% on all credit card/debit card transations made on campus. If I had used cash or a check I would save the 2%. If I spend $3000 on tuition and $300 on books the total cost comes to $3300. If I use the credit card I spend $3300 + ( .02 * $3300 ) – ( .01 * $3300 ), or $3333. I use .02 for the credit card fee and .01 for cash back on credit card. I am loosing $33 ($3300 vs. $3333) by using the credit card instead of cash/check.
    It’s not just the university that passes the fee on to me, fast food restaurants charge fees on credit/debit card purchases (I’ve heard this is true but I haven’t verified it personally). If I am smart then I will use cash, but if I habitually use cards it is EASIER for me to pull out the card than it is to carry cash or the check book. For me, being disciplined is carrying cash/check book in anticipation of upcoming costs and avoiding credit cards as a matter of convenience.

    3. Spending money with credit cards is encouraged. Credit card companies make it easier to spend money on Bang Bus essential and non-essential goods by introducing various mechanisms ( spend now pay later, rewards, contactless credit cards ). The idea of spend now pay later encourages spontaneous spending for instant gratification. Most people will succumb because instant gratification is emotions based not logic based. I’m guilty of this. I can buy product A because I have a credit card and no cash but if I don’t have a credit card and I don’t have cash then I’m forced to delay gratification. And I don’t really need product A in my life. This is the crux of spend less save more.

  4. dear sir/mad
    i am hear to know the real thing of what u can do more than this also where your location is .
    i also want to thank u for sending me ur mail so please explain me as soon as u can .

    samuel g

  5. Thanks for all the advice now I’mm going to apply it. I want to be financial free. The credit cards are going away maybe even the debit card. I’m going to reread my copy of Your Money or Your Life! Good Luck to all who try!

  6. Great summary and follow up comentary i would like to add that its a good idea to keep cash on hand as well. Even having your emergency fund in cash is a good idea. Rember the tragic events in New Orleans the people that had cash on hand had choices. Credit is good and bank accounts are great but Cash is King.

  7. Well, I have scrolled through this page and yes most of it is the same thing. Yes. Trends do occur in society, but from proven practicallity some of these trends and systems work. I say do what works for you.
    Example: My father is 55 years old, worked for someone for 20 years until the last 8 to open his own business. Why? Because it has helped him acquire 7 homes he now rents out. And he is currently living in a 1.2 million dollar home. He comes from 7 kids and his family was poor. Granted my Dad may have things but he has never given me anything I did not work for. The most important thing he has done for me is give me knowledge and know how on investing and credit. People say that credit cards are bad. I disagree. I am 21 years old and I bought my first home a little over a year ago. Not solely relying on equity I know that people will always need a place to live. So therefore in my opinion is a sound investment. Knowledge of credit cards:
    – use it like its cash (don’t spend more than you can afford)
    – pay them off every month (this build’s up credit faster)
    – don’t let unused cards stay open (this is a liability)
    – be smart about how much you spend…remember you are the one responsible to paying the bill each month.
    – open up online banking, it’s the only way to fly, and it is so much easier than sending bills in. No more late payments!
    * this system I have used for the past 3 years and my credit is excellent (745) and I am on the way to purchasing a condo that I plan on living in.
    Do have a reserve fund. 6 months is good, but a year is better. Always buy new cars with cash. Know what you will do with a property before you buy it. That way you can get the best rates. Read, read, read. This is key upon knowing laws with taxes, loans, and credit.
    Great site, it’s not what you know…it’s how you use what you know. Remember the phrase – “knowledge is power!”

  8. All of this has been extremely informative. I’m an 18 year old, still in high school, and my parents havn’t been very open with their financial business. I’ve heard from everyone lately that you should start as early as possible, and what better time then now? I’m going to start investing in some sort of mutual fund as soon as possible, partly in thanks to this blog. Thanks fellas!

  9. I bought a house in a major city and still have same renters for 7 years. When I moved, i kept that rental house as a rental house. Next city, I bought 2 houses and Bush got elected. Prices shot up as oil went up. My net worth is $700,000. We have simple office jobs and are able to spend more on kids – parties, private schools. Happy? Well no. Wife wants lengthy and better vacations, more going out for dinners… etc. people who made money take risks. People who lose money take risks. Roll the dice of life.

  10. I’ve been in the habit for about 20 years now of amassing as much cash as possible in a regular savings account. Then in about 6 months or so, take some of it and re-invest in stocks or bonds. (once, in some property near a duck pond).

    I also avoid credit cards and debt and I paid off my mortgage early by paying extra every month.

    I have no interest in cable/satellite t.v., although I admit being a little lost without access to all the great sports matches.

    I drink cheap beer, except around the holidays, when I indulge in a little robust stout and some good whiskey.

    Occasionally I’ll work overtime and invest about 2/3 of the extra earnings.

    I learned most of this from my grandparents, who were children during the Great Depression and always impressed upon me to save…save…save….

    I now have $1.5 million saved and I’m ten years away from retirement. I’ve always worked a blue collar job. I’ve raised a small family. I’m pretty certain you can all do this.


  11. In 1993, October, I was on my way back from Barbados and overnight in Miami. I browsed a bookshop before I went to My Hotel That was when I Bought the book “your Money or your Life” and another book ” the Magic of thinking $uccess” by Dr. David Shwartz. I Can tell you these books changed my financial Life. For spending $25 I Now own 3 mutual funds and 10 individual stocks worth$385,000 plus I,m 3 months from paying off my Mortgage ( house valued $350,000). May I add that I’ no top notch Employer with top notch salary. I wil say it makes sense to carry a mortgage but don’t make it longer than 15 years and pay one or two extra payments per year. Invest the rest of your money in no load mutual funds. Seek out the N.A.I.C, ie the National Association Of Investors Corporation, in Royal Oaks Michigan and learn about Direct investment in individual stocks. Yes its possible for a guy wit below average earning to get a little financial success.

  12. Pretty cool strategy, Fred. I’ll have to check out those books.

    I really think getting out of the mortgage as soon as realistically possible is a key part of a strategy. I paid an extra few hundred per month and got out of my debt almost 15 years ahead of schedule. I still managed to sock away some savings and investments.

    It ain’t easy, in this day and age of false necessities: cable tv., computers, broad band connections, multiple vehicles, vacation packages and premium coffee.

    A fine-tuned will leads to wealth…

    [email protected]

  13. Hi, I didn`t finish grade 10 at high school and I smoked drugs everyday as well as doing other bad things, until I was 20 I had never had money in my life. Anyway I have moved to Japan and using my charisma which isn`t that good have landed 3 jobs and am working my ass off. I`m now 23 and in 3 years I have managed to save 200 000 dollars and things are looking to improve even more from here . How`s that for budgeting πŸ™‚

  14. Hi, I didn`t finish grade 10 at high school and I smoked drugs everyday as well as doing other bad things, until I was 20 I had never had money in my life. Anyway I have moved to Japan and using my charisma which isn`t that good have landed 3 jobs and am working my ass off. I`m now 23 and in 3 years I have managed to save 200 000 dollars and things are looking to improve even more from here . How`s that for budgeting πŸ™‚

  15. They say it`s not how much you earn but how much you save is what counts. I totally agree with this but the former is definitely important to. Anyway we are never going to be happy unless we strike it rich quickly. Like you saw in my previous posting I`ve never had money until now but my first goal was $5,000, I reached it, my next was $10,000, got there too and then it was $100 000 and guess what I made it. Like I said now I`ve got a bit over 200 000 and who am I kidding now that I`ve felt what it is like to have a bit of money I`m not going to be happy until I`ve 5 000 000 plus and that`s gonna take and awful long time. So my point is no matter how much you`ve got, you`re always gonna want more. Any opinions on what I`ve just written? Now I look back on it, it does look a little stupid but hey just tryin to express myself πŸ™‚

  16. help other to live better.Thats the true way to get rich-to help other.E-gold:Account 2815743 (paskalev)

  17. this is an amazing thread, its certainly making me think about what i can do with the rest of my life

  18. Hi ‘I’ve got it going’.

    Yes, I’m talking to you, and to anyone, and to myself. (happens a lot nowadays)

    You know, I wouldn’t recommend this for most people. But here’s the thing:

    I have a friend, someone who has been well off now for 20 years or so. He got an offer for one of those low interest $30,000 loans that credit card companies will grant customers in good stead. 5.9% for eight years or something like that. And he applied for the loan, and got the cash, and re-invested that cash in some of those so-called ‘penny stocks’. He then made the minimum payment on the loan each month, and sat back, and bided his time.

    In eighteen months, the average return on these stocks was 350%. One clocked in about 600%. I guess they were biotech, pharma, alternative energy – stuff like that.

    Anyway, he paid off his loan and made a big ROI, then sent me a bottle of Jameson’s and disappeared to Switzerland or Italy or some blasted place…

    Like I said, I don’t advocate this type of investing. But for him, it worked.


  19. Yeah I know what you mean Bill πŸ™‚ The investments that your friend has made sounds so good that it`s almost unbelievable!! Are you going to give it a try? But we don`t need to get that initial loan because we`ve already got that type of cash on hand, right? Do you think it`s worth doing? Let me know? And if anyone out there has a good idea for starting a business in any field, preferably from Japan. Let me know if you want to go into business. I`ve got a typhoon friend who is willing to invest a lot of money in me, I`m talking a lot if I can start my own business. I`m dead serious about this and who ever would like to help will become partners but of course I will get a slightly bigger cut because I`m supplying the money. Anyway I`m thinking about it a lot, it`s an uphill struggle.

  20. I was just reading what I write and I mad a bit of a mistake there, I meant to say TYCOON not typhoon. Anyway there has been no replies so far? Is everyone in the same boat as me? no ideas (0_0)

  21. AHHH another mistake…..I was just reading what I wrote and i made…. Anyway mail me back this could be the biggest chance you`ll ever lose man sincerely yours this CAM

  22. I`m losing it (>_I`m losing it (>_<) another mistake, this IS CAM

  23. As a young man, I spent a lot of time shoveling dung on my uncle’s pig farm. Problem is, I never realized what a wasted effort I was putting forth, until a big ole hog named Bessy knocked me right into a thick pile of the fresh stinking stuff…

    I quit, and made my way out into the world, and got moderately rich, realizing from that point that too much sweat on this Earth comes from shoveling dung, and not picking for riches…


  24. Well Bill. I`ve got to hand it to you, you`ve got some nice proverbs up your sleave. I kind of agree with what you say but I`m also thinking that the man of tomorrow is forged by his battles today. If people make a go of it now, give it their best think of the riches there will be in the future!!

  25. Imagine where you would have been now if you weren’t shovelling that dung on your uncles’s farm, it gave you time to think and realize that shovelling dung is not the best career option in the world but hey someone’s gotta do it

  26. Anyway what are people’s thoughts on China at the moment, that country is a big fat gold mine!! If some of us financially minded people can get together and start a business there now than in the future we will be among the wealthiest. I’ve got a few ideas about starting an English school there and I’ve been to Shanghai about 5 times now and checked it out, it’s a wonderful place and it’s starting to take off but I need help making plans and getting teachers, these people don’t have to be qualified, just able to speak English fluently. Chinese employees are a dime a dozen so getting counselors and sales staff is a small problem. What do you good people think?


  27. Since this is a forum about financial advice I thought I would put im my 2 cents. Get off your ass and look for a decent paying job, even if you have to work long hours, the more over time the better. Secondly if you don’t need it than don’t buy it. Screw this world of fashion and expensive brands, depending on where you are it can be really bad!! Living in Japan for the past 3 years shown me how extravagant people can actually be, I’m talking 1000 to 2000 thousand dollars for a hand bag and that considered cheap. These people are crazy!! Anyways another thing is to cherish the small things in life and don’t have big days and big nights I mean when it comes down to it we are going to wake up tomorrow and life is going to be the same what food and drinks and fun activities we did yesterday is only going to affect our pocket today unless it is sport or exercise of some type, I’m all for it. One of my colleagues has got to use this computer so I’ll continue later. By the way you’re probably better off doing what you think is best anyway, what makes my style better than yours? I have no idea πŸ™‚

  28. It’d be nice to get some comments from your Japanese colleagues, i’ve got it going. Think they might weigh in?


  29. i’m a filipino and im 22 year old and everyday i earn 2 dollar. to me eduaction is not really that important as what i’ve seen to my friends.
    and its really unfair coz some of my classmates had graduated suma-cum-laude yet they dont have job (cuz its really hard to find job here in philippines).
    they all ended up like ordinary employee their salary is like more or less 57 dollar a month. the 4 year course they had taken is useless. my parent taught me that i must earn good grades so that my future is clear. but according to my observance mostly rich people came from poor family and why is that?the middle class still middle class never get improve their social career. and can you please tell me what is the key of this poor people,how come they get rich?

  30. my parents is not open to me about money,i dnt knw why…all i know is save money and limiting my expenses, everyday i spent only 50% of my earnings,the other 50% i save it.i do this every day and every sunday the 10% from my savings i give tithes.i do this every week.and i’m planning to invest on something small (business)like store or buy and sell that atleast that’ll be my financial support…
    anyway what im afraid of most people here in philippines cannot be trusted in terms of if ever 1 day i invest on something,to whom i trust?i dnt want to be like my dad who invested lots of money for the project yet at the end these people are scums.all the hardwork for saving money in 5 years just gone in 1 second.

  31. Damn man, you’re in a bad situation over there Kukut. I’m from Australia and I suppose it’s pretty good but I found that if I wanted to get ahead I had to go to another country and it worked out OK. My advice to you is to leave the Philippines, judging by your writing I can tell that your English isn’t perfect so please study Englsih as much as possible and once you’re fluent than the worl is your oyster. If you don’t want to do this than I suggest you move to Australia for a while because you can easily get a labouring job there even if your English isn’t perfect, I can arrange it for you if you’re interested and the salary is about $1700 AU dollars a month. You’ll get where you’re going a bit faster. Good luck!! And send another post if you’re interested in greener pasters.

  32. HI, Great job summarizing those books.
    I know how hard it is to get the time to read, extract all the information you need, but then to also have them all bulletpointed, on a webpage, fantastic.
    Keep up the good work…

  33. I can’t believe it, my co-worker just bought a car for $82756. Isn’t that crazy!

  34. I’ve got it going on…..thanks!!!!i take your offer.I will graduate this coming November….this is my e-mail [email protected] thanks!!!!!

  35. my friends’ parents who work as businessman and will open up a company tv production they are hiring me as a 3d artist (part time), a programmer and a network administrator for their company . they said they will pay me 20000usd when i graduate,as of now they pay me monthly 10000usd because i’m not graduate yet….hows that??…3 years from now i can make my own business and it will cover all my expenses for 1 year.and i will retire as soon as possible.jst now i signed the contract.hehehehehe!!!!!

  36. i heve been reading this comments and i know now that “knolege is power “thanks guys

  37. I don’t agree the fact that some of you recommend not to use credit card. I use it even for a <$1 expense. There are millage point that you earn, ie. some cards offer 5% for drugs and grocery. I pay off my credit card bills ontime.

  38. Nice work Kukut. You’ve gone from earning 2 dollars a day to 10 000 dollars a month???

  39. Thank you so much for posting this. I came across it by googling “get rich slowly.” It’s good, practical advice that needs to be embedded into our minds and our habits.

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