A retraction

Earlier this week, I published a guest article from Financial Samurai. I’ve decided to do something I’ve only twice before in fifteen years at Get Rich Slowly — I’m retracting that article.

Sam’s article, while new, rehashed a piece he’d previously written for his own site. I was unaware of that original article until I published this new version. In principle, I’m fine posting this sort of thing — an article that covers existing material in a new way — because that’s what we writers do: We cover the same topics again and again and again.

In this case, however, not only was I unaware that Sam had already written about this material, but I was unaware that the original piece had generated a ton of controversy, and that many of Sam’s assertions had been called into question and/or disproven. (What can I say? I read a lot of personal-finance blogs, but it’s not possible for me to see every article.)

While I didn’t agree with Sam’s premises or conclusions in the article, that didn’t bug me. I don’t view Get Rich Slowly as a monolithic, dogmatic place that promotes only one view of money. Quite the opposite, in fact.

My motto here since Day One has been “do what works for you”. By this, I mean to say that there are many different ways to constructively manage your finances. What works for one person might not work for somebody else. There are often multiple ways to accomplish the same goal. (Take getting out of debt, for instance. There are several smart ways to go about that task.)

Because I’m open to sharing different ideas, I sometimes publish articles from authors who hold very different viewpoints from my own. This is nothing new. I’ve been doing it since I started the site.

I believe strongly, for instance, that it’s perfectly fine for committed couples — even married couples — to maintain separate finances. Again, do what works for you. All the same, I once published an article arguing that the only right way to manage money is to merge your finances when you get married. And I’ve published pieces on the importance of religion in personal finance despite the fact that I’m agnostic. You get the idea.

I don’t believe that I know everything, that I have everything figured out. (I obviously don’t!) Because of this, I think it’s fun to share other people’s perspectives.

That said, there need to be some limits to what I’ll publish, right? And there are.

  • I refuse to publish anything that’s overly promotional. (That’s why GRS has never run “advertorials” or paid posts.)
  • I won’t publish anything that’s so poorly written that it can’t be edited into a coherent piece. (You’d be surprised at how bad some submissions are.)
  • And, most importantly, I won’t publish a guest post that spreads misinformation and/or harms readers.

When I edited Sam’s article, I had some reservations but they weren’t strong enough to prevent me from publishing the piece. I made a mistake by not scrutinizing the material more closely.

I didn’t agree with some of Sam’s premises (I hate the idea of using income as a basis for determining retirement needs, for instance), and I thought his conclusion sounded extreme. So, I included a disclaimer at the end to let readers know that I didn’t agree with everything he’d written. Then, when early commenters failed to see that disclaimer, I added an additional notice at the top of the story.

After I published the story, readers quickly let me know about the original piece and its attendant controversy. This lead me to re-read the article much more closely. In doing so, the initial logical error (that safe withdrawal rates are somehow tied to bond yields) was obvious. What’s more, Sam’s conclusion (that the safe withdrawal rate is equivalent to 80% of the 10-year bond yield) seemed absurd.

I told Sam as much in an e-mail conversation during which I voiced my concerns. Sam dismissed them. When I suggested that he leave comments offering clarification, that he at least connect the dots from bond yields to safe withdrawal rates, he declined. This is disappointing. I’d hope that Sam is interested in education and accuracy. Because I am.

The final straw came when one GRS reader wrote:

The bad news is that my 67 year old father, who is perfectly positioned for retirement, somehow came across this piece and sent it to me because it panicked him.

As I said earlier, I won’t publish guest posts that spread misinformation and/or harm readers. This article crossed the line.

Get Rich Slowly isn’t about sensationalism. And it’s most certainly not about bad advice. I keep telling my business partner, Tom, that I want Get Rich Slowly to be a trusted resource where people can come to get reliable info about all aspects of personal finance.

Sam’s article contained bad information and bad advice. I want to believe that Sam’s intentions are good, and that he truly believes what he wrote. But as it stands, I cannot allow the article to remain at GRS. It violates the trust of GRS readers by spreading misinformation and drawing false conclusions.

Ultimately, this incident is my fault, and I acknowledge that. If I had read the article more closely to begin with, I wouldn’t have published it. Instead, I allowed myself to give in to the technical jargon and Sam’s years of experience in the financial industry. “This doesn’t make sense to me, but he must know what he’s talking about,” I told myself. (For real. This is almost literally what I said to myself!)

I regret that. I ought to have trusted my gut and asked Sam to provide clarification before I published the piece.

I apologize to you, the GRS readers for not vetting this more thoroughly, and I apologize to Sam for putting him through this. (I suspect, however, that Sam’s used to this and knew it was coming.)

Lesson learned!

from Get Rich Slowly https://www.getrichslowly.org/a-retraction/

Re-thinking safe-withdrawal rates and how much you’ll need in retirement

On 27 August 2020, the Federal Reserve announced a major policy shift. Fed Chair Jerome Powell said the Fed is willing to allow inflation to run hotter than normal in order to support the labor market and broader economy.

In other words, the Federal Reserve is likely to keep its Fed Funds rate at or near zero percent for longer. In the past, the Federal Reserve would consider raising interest rates when the unemployment rate falls to ward off inflation down the road.

Given this policy shift, I think you’d be a fool to follow a four-percent safe withdrawal rate in retirement. Let me tell you why.

Why the Four-Percent Rule Is Dead

The so-called four-percent rule was first published in the Journal Of Financial Planning in 1994 by William P Bengen. It was subsequently popularized by three Trinity University professors in their “Trinity Study” of 1998. At the time, inflation and interest rates were much higher and pensions were common.

In 1998, when the Trinity Study made the Four-Percent Rule popular, the 10-year bond yield was between 4.41% to 5.6%. The average 10-year bond yield rate was 5% in 1998.

Therefore, of course you’d likely never run out of money in retirement following a four-percent withdrawal rate. You could earn 5% on average risk-free!

Financial Samurai Safe Withdrawal Rate

Today, the 10-year bond yield is at around 1.1%. It got to a low of 0.51% in August 2020.

Given the dramatic decline in the 10-year bond yield since the 4% Rule was popularized, it doesn’t make sense to stick to a rule devised over 25 years ago.

The 10-Year Yield’s Importance

Returns in the stock market, bond market, and real estate market are all relative to the risk-free rate of return (10-year bond yield). If the risk-free rate of return declines, so do overall returns for risk assets ceteris paribus.

Let me share some examples on the 10-year yield’s importance.

Example #1: A Decline in Corporate Bond Yields

A company looking to raise money to fund operations isn’t going to issue a bond that pays 8%, unless it’s in dire straits. Instead, a company will probably discover that adding a 2% – 3% interest rate premium to the 10-year bond yield will garner enough demand.

In other words, companies can raise debt at a cheaper price when the 10-year goes down. In turn, the company can use the debt to fund operations or acquire new companies. With more expansion and acquisitions, company profits may go up.

Example #2: A Decline in Stock Dividend Yields

A company has historically paid a 60% dividend payout ratio. During the ups and downs, the company’s dividend yield has range between 3% – 4%. The company has always wanted its shareholders to earn at least a 1% premium to the 10-year bond yield.

With the 10-year bond yield down to 1%, the company can now cut its dividend payout ratio and provide closer to a 2% – 3% yield. The company can then keep more retained earnings for growth and operations.

Example #3: Increased Interest in Real Estate

Let’s say you want to take advantage of potential distressed asset opportunities in commercial real estate. One of the key ways to find opportunity is to monitor the spread between cap rates versus the 10-year treasury yield. The greater the gap, the greater the potential profit potential.

With the pandemic, the current office cap rate vs. 10-year treasury yield spread is at its highest in history. Therefore, commercial real estate might generate some greater returns in the future. The asset class has certainly lagged stocks and residential real estate.

The proper retirement withdrawal rate has declined

When it comes to investing, everything is intertwined. The 10-year bond yield has direct implications for asset returns and yields. Let me demonstrate.

Few Follow a 4% Safe Withdrawal Rate

What’s funny about the 4% Rule is that its proponents don’t even follow the rule!

For example, William P Bengen, the creator of the 4% rule mentioned in my post on the proper safe withdrawal rate that he’s onto his 4th career as an author and researcher. You can read his comment on my site for yourself.

Meanwhile, other retirement experts and financial advisors are certainly not following a 4% safe withdrawal rate because they are all still working.

Finally, since leaving my day job in 2012, I have yet to meet a single FIRE blogger who regularly withdraws 4% from their portfolio to pay for living expenses. Instead, FIRE bloggers are almost always earning supplemental retirement income online.

I am no exception. But I haven’t told anybody I’ve been retired since a year after I left finance in 2012. After a year of traveling and twiddling my thumbs, I focused on writing on Financial Samurai. It felt disingenuous to say I was retired when writing these posts takes hours to write!

Even J.D. has mentioned that despite being financially independent on paper, he’ll likely need to generate income to get him to 59.5. He has no plans of withdrawing from his tax-advantageous retirement accounts early and paying a 10% penalty.

The New Safe Withdrawal Rate To Follow

If you have children or plan to donate to charities after you are gone, it’s important to plan financially beyond yourself.

Given the 4% Rule was established at a 20% discount to where the 10-year bond yield was at the time, we can also establish a similar 20% discount to today’s 10-year bond yield to come up with a new safe withdrawal rate.

With the 10-year bond yield at ~1.1%, a safe withdrawal rate is actually closer to 0.88%. When the 10-year bond yield was at its low of 0.51%, the safe withdrawal rate was equivalent to 0.4%.

To make things simple, the new safe withdrawal rate equals the 10-year bond yield X 80%. Let’s call this the Financial Samurai Safe Withdrawal Rate.

For reference, below is a table I created using the Financial Safe Withdrawal Rate formula.

Proper safe withdrawal rates in retirement - 4 percent rule is outdated

Three Ways To Use The Financial Samurai Safe Withdrawal Rate Rule

Let’s look at a few ways to use this new safe withdrawal rate that I’ve developed.

1) Stretch Net Worth Growth Target

With the 4% Rule, you multiply your annual expenses by 25 to get a target net worth. If the new safe withdrawal rate is 1%, you multiply your annual expenses by 100 to get a target net worth.

For example, if you want to live off $50,000 a year in retirement and have no other income streams, then your stretch net worth target is $5 million based on the new safe withdrawal rate rule.

For a more reasonable net worth target, may I suggest the 20x Gross Annual Income Rule. With this rule you can’t cheat by simply lowering your annual expense budget. The 20s gross income rule forces you to accumulate more wealth as your income grows. It also makes you better decide whether you want to continue your way of life.

2) Calculate How More More Wealth Is Left To Build

A less onerous way to calculate your retirement net worth goal is to add up how much retirement income you already have and subtract it from your desired retirement income.

For example, let’s say your passive income portfolio already generates $30,000 a year, but you want to earn $50,000 a year. The difference is $20,000. Therefore, if the new safe withdrawal rate is 1%, your goal is to try to amass another $2 million in net worth, regardless of what your existing net worth is.

3) Reverse engineer your desired safe withdrawal rate.

Use the Financial Samurai Safe Withdrawal Rate only as a net worth target. Once you’ve reached your net worth target based on the FS Safe Withdrawal Rate, then you can change your safe withdrawal rate as you see fit.

For example, let’s say you’re happy living off $50,000 a year in retirement. You don’t have a pension, Social Security, or any passive income. A safe withdrawal rate of 1% dictates that you will need to amass a $5 million net worth. Let’s say you succeed in getting to $5 million by age 70 and expect to live until age 90.

With an expected 20 years left to live, you could divide your $5 million by 20 and safely withdraw $250,000 a year. Withdrawing $250,000 a year is equivalent to a 5 percent withdrawal rate. If there is a bear market or big unexpected expense during this time, you can adjust your withdrawal rate accordingly.

The Way Around The Financial Samurai Safe Withdrawal Rate Rule

Obviously, when the 10-year bond yield is low, following the Financial Samurai Safe Withdrawal Rate will be more difficult. Therefore, the easiest way to circumvent my new safe withdrawal rate is to earn supplemental income.

For example, let’s say you want to live off $50,000 a year in retirement income. This would equate to having a $5 million net worth using a 1 percent safe withdrawal rate. Unfortunately, you’ve been following the 4 percent safe withdrawal rule. Therefore, you thought accumulating $1.25 million was enough.

You now realize the 4% Rule was developed in 1998 when the 10-year bond yield averaged 5%. After cursing out the Federal Reserve for slashing rates to zero, you calm down and figure out the gap.

Your $1.25 million can only safely generate $12,500 a year in passive income at 1%. Therefore, your retirement income shortfall is $37,500 ($50,000 desired retirement income – $12,500 your true retirement income). You are also too young to collect Social Security, nor do you have a pension.

Since you don’t think you’ll ever get to a $5 million net worth, you need to find a way to make $37,000 a year in supplemental retirement income. Thankfully, there are multiple ways to make money from home nowadays if you start a website like this one. You can also freelance.

Taking More Risk By Reaching For Yield

The final way to circumvent the Financial Samurai Safe Withdrawal Rate is to take more risk. To be able to sustain a higher withdrawal rate, the retirement portfolio must either generate higher yields, higher returns, or both.

Ideally, if you don’t make supplemental retirement income, you want to have a portfolio that yields your desired withdrawal rate or higher. Instead of investing a more conservative 50/50 equity/bond portfolio, perhaps you’re comfortable shifting the equities allocation up to 70%.

A retiree does not have to only invest in bonds or risk-free assets in retirement, despite my new safe withdrawal rate rule.

Here are some investment ideas that have the potential to generate higher yields:

  • Investing in a REIT ETF like VNQ, which has a yield of ~3%
  • Investing in individual REITs like O, which has a yield of ~4.5%
  • Investing in private eREITs (what I’ve been investing in recently) that have historically provided a ~9% return, even when the stock market is down
  • Investing in individual dividend-paying stocks like AT&T with a forward yield of ~6.5%
  • Investing in a dividend ETF like VYM with a ~3.5% yield
  • Buying rental property
  • Lending out hard money
  • Buying an annuity

However, the more risk you take, the greater the chance of losing money. Therefore, it’s important to assess your own risk tolerance and invest accordingly.

Retirement Life Will Be Different Than What You Imagine

As someone who left his day job in 2012 at 34, I’m providing you some firsthand retirement perspective. It is easy to pontificate about the proper safe withdrawal rate in retirement while you still have a steady paycheck.

But I assure you, only when you and your partner no longer have a steady paycheck will you genuinely experience all the emotions that comes with being unemployed. And let me tell you, not all of the emotions are positive.

You may find it extremely uncomfortable to go from building your investment portfolio all your life to withdrawing. I know I did. Until this day, I still have not touched a dollar of principal from my retirement savings.

J.D. tells me that he’s just as uncomfortable drawing down his savings. But because he “retired” with a smaller nest egg than I did (and because he’s encountered some bumps along the way), he’s had no choice. Tapping his savings makes him nervous.

Use The New Safe Withdrawal Rate Rule As A Guide

Don’t be mad at the Financial Samurai Safe Withdrawal Rate. If anything, be mad at the Federal Reserve and the government for saving us from a global pandemic. The trillions in stimulus have crushed interest rates. Further, the debt will eventually have to be paid back.

Thankfully, none of us are zombies. We don’t aimlessly follow a safe withdrawal rate rule until we die. Instead, we adjust based on economic conditions. Further, there should be Social Security income, perhaps just not the full amount as promised.

My new safe withdrawal rate rule of the 10-year bond yield x 80% is just a net worth and safe withdrawal rate guide in this low-interest rate environment.

Depending on how much of your wealth you want to pass on and how much risk you want to take, my safe withdrawal rate rule may be too aggressive or too conservative. Only you can decide.

At the very least, let’s agree that following a 4% safe withdrawal rate today is misguided. We must adjust our retirement planning based on the realities of the world today.

Personally, I plan to keep on trying to generate as much active and passive income as possible. Once we reach herd immunity, fingers crossed, then it’ll finally be time to take things down a notch. Here’s hoping that our investments cooperate in the meantime!

Readers, what do you think is an appropriate safe withdrawal rate in this low-interest rate environment? After such a long bull market, have investors become complacent in always expecting positive returns? Why do think people still believe in the 4% Rule when the risk-free rate of return was 5% when the rule was first created?

J.D.’s notes
Financial Samurai is a smart guy and I think this is an interesting analysis. That said, I don’t necessarily agree with all of his conclusions.

For instance, I remain vocally opposed to making any sort of retirement calculations based on income. I think doing so completely misses the point. (So, in other words, I think Sam’s 20x Gross Annual Income Rule is a red herring.) I believe it’s much better to use spending when determining how much to save for retirement.

You should also know that William Bengen, the source of the four-percent rule, has been public in recent years that he would actually revise safe withdrawal rates upward, not down. He’s good with something like 7% in many cases, and certainly 5% in nearly every case.

That said, I’ll admit that Sam knows far more about this stuff than I do. So, give his advice serious consideration. But balance it by reading other perspectives too.

from Get Rich Slowly https://www.getrichslowly.org/rethinking-safe-withdrawal-rates/

The power of habit tracking

For decades, I’ve been a proponent of habit tracking. Habit tracking sounds and feels nerdy to a lot of folks, so many people avoid it. That’s too bad. Habit tracking is a powerful tool that can help you make better decisions about your life.

Let me share an example.

Over at Reaktor, Olof Hoverfält recently published a long piece about why he’s tracked every single piece of clothing he’s worn for three years.

That’s right: For 1000+ days, Hoverfält documented every garment he wore. (And, in fact, he’s continuing to document his wardrobe publicly.) Using the info he collected, he’s now able to make better decisions about which clothes to keep and which clothes to buy. I love it!

Hoverfält says people worry about how much time it’d take to do something like this but they shouldn’t. Most of the time investment is in the initial setup, in that first batch of data entry. Actually using and maintaining the system requires about one minute each day. And the rewards are far greater than the cost in time.

Hoverfält’s project is a perfect example of the power of habit tracking.

The Power of Habit Tracking

For a long time, I’ve preached the importance of tracking your spending. But I think it’s smart to log anything you’re curious about or want to change: your fitness habits, your time habits, your work habits. Documentation is the first step to lasting change.

I recently met my goal to lose thirty pounds in six months, for instance. To succeed, I logged my fitness stats every morning. (And I’ll continue to do so for the foreseeable future.) Kim is starting a weight-loss journey of her own, so she’s logging every calorie she burns or consumes.

And what about tracking your time? All this month, I’ve been using an app called ATracker to log what I’m doing at any given moment. Using the app requires very little effort. The results are interesting. They provide insight into how I actually use my time versus how I think I use it.

Using ATracker for habit tracking

That’s the real value to projects like this. Habit tracking allows us to differentiate perception from reality. (In his article, Hoverfält covers this in the section on “actual versus imagined use”.)

I’ve learned that what people think they do (or what they say they do) is often quite different from their actual behavior. “I don’t spend much on clothes,” somebody will say, but when they actually crunch the numbers, they see that their clothes spending is much higher than average. “I don’t overeat,” another person will say, but when they log their calories, the see that their ginger ale addiction adds an extra 500 calories per day to their diet.

Faithful, honest tracking of habits is the only way to truly learn what it is you do with your time and your life.

Here’s another (silly) example of how tracking can help you differentiate perception from reality. A couple of years ago, Kim and I had a disagreement over who cleaned the litterbox most often. She felt like she always did it. I felt like I always did it. We started tracking behavior. We put a sticky note next to the litterbox, and when one of us changed the litter, we made a note. Turns out we were both cleaning the litterbox equally. Disagreement over! The solution to our litterbox problem is to have fewer cats haha.

Don’t Combine Tracking with Judgment

It’s important to keep decisions separate from tracking. When you’re tracking a habit — your spending, your alcohol consumption, your wardrobe use — you want to track actual behavior. Your job in that moment is recorder, not judge.

This is something I’m trying to stress to Kim as she begins logging her food intake. “Don’t beat yourself up over any of this right now,” I told her. “If you eat a cookie, that’s fine. Just write it down.”

If you combine judging with data collection, it’s a recipe for failure. You end up feeling guilty every time you make a poor choice. This makes it so you don’t want to document your behavior. You want to give up. You want to hide.

Habit tracking is only habit tracking. Data collection is only data collection. You’re like an impartial third-party observer who is noting what you actually do and who has not vested interest in whether those actions support your goals or not. In data collection mode, you’re after information — and only information.

Tracking my weight loss this year

Once you’ve collected enough info, then you can act.

After Kim has documented her diet for a few weeks, she can sit down and look for patterns. Based on these patterns, she can experiment with adopting different habits.

You can see this in my own annual financial updates. I track my spending throughout the year, but I do so only for information. Normally, I don’t try to make course corrections in June or July. But in early January, after I’ve had a chance to crunch the numbers, then I compare how my current habits have veered from my goals. I use this info to make choices like “I want to spend less in restaurants this year” or “I want to experiment with a spending moratorium”.

I’ve found that by keeping documentation and judgment separate, I’m more likely to make changes. Plus, I don’t beat myself up as much. When it comes time to analyze the data, I’m able to do so more rationally because I’m not in the heat of the moment, and I’m looking at a large collection of data instead of individual choices.

The Bottom Line

Okay, you get the point. Habit tracking is a great way to learn what you do with your time, money, and energy. But you need to be sure to keep tracking separate from judgment. Got it. But what about Hoverfält’s wardrobe project? What lessons did he learn?

Cost per wear

If you don’t want to read the entire article (although I think you should), here are some quick takeaways:

  • “In some cases, buying cheap is provenly more expensive.” This is the boots theory of socioeconomic unfairness. More expensive items are often (not always) better quality. As a result, they actually cost less to own in the long run than repeatedly buying cheap. This is only true when the extra cost buys extra quality, though. If the extra cost is due to buying a brand or a style, that doesn’t necessarily translate into savings.
  • “Frequency of use is the underlying driver of performance.” This is obvious but easily overlooked. The more you wear something, the less its long-term cost. The $100 shoes you wear twice a week for a year are actually more cost-effective than the $50 shoes you wear once a month.
  • “A wardrobe with nothing but favorite clothes sounds nice. It may also be the best in terms of cost performance.” Because the value of your garments is driven by “cost per wear”, the more you wear a given item, the more value you receive from it. This naturally means your favorite pieces are most cost-effective. The bottom line? Not only do you enjoy wearing your favorite pieces more than your other clothes, these favorites save you money.

Based on three years of data, Hoverfält has some advice for others.

Find what you need and love, then buy only that. Focus on cost per use, not on price. Buy only favorites. (Or, using Marie Kondo’s terminology, buy only those items that “spark joy”.) Try to buy only clothes that can be worn in a wide range of situations. Buy for the long-term. Take good care of your clothes. Know when to get rid of an item.

I think one reason I love this article (and project) so much is that it reinforces some conclusions I’ve already come to.

Now that I’ve lost thirty pounds, I can fit in my old clothes again. And now my closet is filled to the gills because it contains both skinny clothes and fat clothes. It’s a mess. I’ve been thinking about how to evaluate what to keep and what to discard, and Hoverfält’s article helped to provide some clarity.

This weekend, I’ll make a pass through my closet and drawers to get rid of (and/or store) the things I know I won’t wear. And who knows? When I’m finished, maybe I’ll make time to create a wardrobe spreadsheet of my own. It sounds like fun!

from Get Rich Slowly https://www.getrichslowly.org/habit-tracking/

My spending moratorium while on vacation

Kim and I are back from a week-long beach vacation with her brother and his family. We traveled to a luxury timeshare resort where it was super easy to practice social distancing because almost nobody was there. (The place was running at maybe 10% capacity because of COVID, and the level of cleanliness was mind-boggling. I felt safer there than at home! Sanitizer, mask, wipe your feet. Instant-read thermometers. Digital menus. Etc. Etc. Etc.)

This trip was a terrific early test of my spending moratorium resolve. I was mostly good.

The vacation itself cost money, of course, but I’m okay with that. We scheduled it months ago, long before I decided to take a year off from spending. I didn’t cancel it, and I’m not canceling the other trip we have planned for March. Instead, my aim is to keep my spending as low as possible for both trips. Plus, I have no plans to book other vacations this year.

Because of my spending moratorium, I deliberately altered my standard vacation behavior. I’m the kind of guy who likes to get small souvenirs wherever I go: pins, patches, t-shirts, and so on. I didn’t buy one this time. In fact, I only spent money on food. (On our first day, we stocked up on groceries so that we could eat most of our meals in our room.)

For the entire week, there were two purchases that violated the rules I’ve set for myself.

My Two Purchases

One night, Kim and I watched her two nephews (ages four and seven) so that her brother and his wife could enjoy a nice evening out. We goofed around for a while, then watched silly cartoons on the television. Before bed, the seven-year-old wanted to play Minecraft on my iPad.

“I don’t have Minecraft,” I said. You can guess how that went.

In the end, I made a calculated decision. I paid six bucks to download Minecraft so that he’d be content for an hour. (Then, ironically, he watched Minecraft videos on YouTube instead of actually playing the game. So, six dollars I didn’t need to spend if I’d simply stood my ground a little longer. This is why I am not a parent haha.)

As a sidenote, I don’t know how either boy finds videos on YouTube. Neither can read nor write. Yet, they do it. Somehow, they magically navigate to what they want. It’s like we live in a post-literate age. I am old.

That first purchase was intentional. My second purchase was a simple brain fart.

At the airport before our flight home (yes, we flew for this trip), I killed some time by going into a bookstore. I found the graphic-novel version of Sapiens, one of my favorite books! I had no idea such a thing existed. I bought it to read on the plane.

Eventually it occurred to me: I had just violated my “no spending” rules. Oops. The fact that I didn’t notice I was violating my rules as I was doing so is a pretty clear indication that, hard as I try, not all of my spending decisions are conscious. I still make some purchases out of habit.

Things Unbought

While I’ve made two purchases in the ten days since starting this project, I’ve mostly stuck to my plan. In fact, I’m thinking about it all of the time. (I’m thinking about it this very second while I have the Amazon page for Sapiens open as I write this article, and I see a couple of other interesting graphic novels…)

Let’s use movies as an example.

As I’ve shared many times before, I buy a lot of films off the iTunes store. Too many.

On the flight back from vacation, I watched Mission Impossible 2 (awful!) and Mission Impossible 3 (fun!) via American Airline’s in-flight entertainment system. The next day, I decided to watch the rest of the films in the series. I had previously purchased the fourth and fifth episodes on iTunes, so no problem. But I don’t own the most recent installment, Mission Impossible: Fallout.

Under normal circumstances, I’d just spend $13 to buy the movie from iTunes. Not during this spending moratorium. And I feel like paying $4 to rent it also violates the rules I’ve set for myself. Netflix didn’t have the movie in its library…but Amazon did. Whew!

True story: I am not even joking when I say this, but Mission Impossible: Rogue Nation is now my favorite film of all time. For real. And it’s not even close. My other faves include Alien, Crouching Tiger, L.A. Confidential, and The Big Country. I was shocked at just how good MI5 actually is. Again, no joke: I’ve watched it three times in the past three days…and I plan to watch it again this afternoon, if I get my work done. I’ve heard about people who watch the same movie(s) over and over and over again. I never thought I could be one of those people — until now.

While we were at the beach, everyone — even the kids — bought stuff except for me. I wanted a t-shirt, but I knew that buying it would break my spending moratorium, so I didn’t. The only non-food item I bought was sunscreen.

In the meantime, I’ve deliberately been avoiding known spending traps. I’m not looking at Amazon. I’m not reading comic-book blogs. I’m planning ahead to read books I already own instead of trying to find books that I don’t.

Final Thoughts

As I said when I announced this project, it probably seems silly to many of you. I get that. You’re the folks who don’t have natural spending tendencies. But I am not one of you. I am one of those who has to force myself to make smart decisions.

And even when I’m deliberately trying to do the right thing, I still make mistakes. I buy $6 games for my nephew. I buy $26 books at the airport.

Here’s the thing, though. I’m not going to beat myself up about these choices. For one, they’re very minor in the grand scheme of things. For another, the whole point here is to build awareness into my actions and to make use of the things I already own. I’m not expecting to achieve absolute zero spending.

Now that we’re home, the real work begins. It’s one thing to avoid spending in a novel environment. It’s something else entirely to stick to spending moratorium in day-to-day life while adhering to established habits! How will I do when I head to the grocery store this afternoon? Can I force myself to buy only what’s on my list?

Anyhow, I don’t intend to provide weekly updates on this project, but I do think it’d be fun (and useful for me) to update you on my progress now and then. So, that’s how it’s going after ten days. Let’s see what the next ten bring…

from Get Rich Slowly https://www.getrichslowly.org/spending-moratorium-on-vacation/

A year-long spending moratorium

While walking the dog last weekend, Kim noted that I’ve been getting a lot of packages in the mail lately. “What’s up with that?” she asked.

I sighed.

“Remember how we shared that bottle of champagne on New Year’s Eve?” I said. “Well, that got me buzzed enough that I sat down at my computer and ordered a bunch of used books. Mystery novels and manga. So, those are starting to filter in.” That’s right. I got drunk on New Year’s Eve (because I no longer drink regularly, I’ve become a lightweight) and ordered old John le Carré paperbacks and Lone Wolf and Cub compilations from ABE Books. I lead an exciting life, my friends.

“Don’t you have enough books?” Kim asked.

“Honestly, I do,” I said. “And I haven’t read half of them. I haven’t watched half of the movies I’ve purchased. I haven’t read half of my graphic novels.”

“You only wear about half of the clothes in your closet,” Kim added. We stopped to let the dog dig in the ditch. Tally was certain she smelled a rodent and was desperate to find it.

“Right,” I said. “I know I’m not the only one who does this, but that doesn’t mean I like it. I feel as if I ought to take a break from buying new stuff and just work through the books and movies and clothes I already own.”

“I feel as if you ought to do that too,” Kim said, laughing. Then Tahlequah saw a deer in the neighbor’s field, and our conversation was forgotten in the ensuing excitement. Bark bark bark! Deers are evil.

A Spending Moratorium

During the fifteen years I’ve been writing about personal finance, I’ve read a number of stories from folks who’ve elected to do a “buy nothing” year or a “no spend” year. Although I’ve always viewed these spending moratoriums with interest, I’ve never considered doing one of my own until now.

After my conversation with Kim, though, I’ve decided it would be a useful exercise. But what rules should I set for myself? How long should the spending moratorium last? What should it cover?

To answer these questions, I need to be clear on the purpose of this spending hiatus. My goal is to spend less money, yes, but more importantly I want to appreciate the things I already own. I want to use them. And I want to bring less Stuff into the house. Plus, I want to break the conditioning that makes me believe that I have to own everything that looks interesting.

Money is one part of the equation, but only one part. This project would be more about adjusting my psychology, my mindset.

In a way, I’m approaching this project as if I were going on a “money diet”.

As of today, I’m exactly two weeks from the end of my actual diet. Since July 28th, I’ve lost 28.5 pounds. I have a pound and a half to lose in the next fourteen days to meet my goal.

I’ve lost this weight through simple calorie counting. Nothing else. I track the calories I consume and the calories I burn. I try to maintain a gap between the two. This means that I need to be mindful about everything I put in my mouth. (I ate a 350 calorie donut as I started writing this article. It wasn’t worth it!)

I’m trying to think of this spending moratorium as something similar. Or at least as something that flexes the same mental muscles. It’ll require the same sort of discipline.

Because I’m already channeling a lot of willpower to maintain my calorie deficit, I’m going to delay the start of my spending moratorium until I’m finished with the diet. I don’t want to create unnecessary difficulties by focusing on two things at once.

My Spending Rules

Because my diet ends (or should end) on January 29th, I think February 1st makes a great date to start the spending moratorium in earnest. In reality, I’m already trying to adhere to it. But my official spending hiatus will run from 01 February 2021 to 31 January 2022.

So, the timeline is easy to pick. It’s more difficult to decide what kind of spending this project applies to.

I don’t have the same spending issues that a lot of other folks do. I’m not tempted to pick up fancy coffee. I hate malls. I don’t like shopping for clothes. I rarely want to eat out for breakfast or lunch. (Dining out for dinner is an issue, though.)

My trouble areas are media and tech. I like new gadgets. (I’m typing this on a brand-new M1 Macbook Air.) More than gadgets, I have this bizarre compulsion to own each and every book or song or movie that interests me whether I have immediate plans to consume the media or not. This is so dumb, yet it’s how I operate.

As a result, the rules for my personal spending moratorium might be different than the rules you’d set for yourself. Here are the guidelines I currently plan to adopt. (This might change by the time I start in February.)

  • No new technology. None. Not even for business. (I tend to rationalize tech purchases by telling myself they’re for the company — which they are — but that’s not really an excuse to upgrade things that still work just fine.)
  • No new comics, manga, or graphic novels. None. I sold my comic book collection a few years ago, but I still have plenty of comics material I can read when the mood strikes. There’s no need to buy more.
  • No new movies or TV shows. None. I already have something like 800 movies in my iTunes library, plus a few dozen TV series. Plus, we subscribe to Netflix and Disney+. There is zero need for me to buy new movies. (For films like Dune, which I’m eagerly awaiting, I’ll need to go to a theater or catch it on streaming or wait until the moratorium is over.)
  • No new books except for those specifically required for my work. I’ll allow myself to purchase a book if it’s needed to write an article or to do research. But I don’t want to stretch things here. I have to legit need it to get the project done. Otherwise, I have plenty of financial reference books. And I have scores of unread mystery novels and sci-fi books for leisure reading.
  • No new furniture, yard tools, or other household items. This area isn’t really a weakness for me, but I want to explicitly exclude these items from my spending. That said, there are two projects I’ll allow spending on this year. First, we need to fix the rot and/or foundation problem under the bathroom. Second, I’m okay spending a few hundred dollars to complete our “Japanese garden” area. (Most of that spending will be on gravel!) But nothing else.

As you can see, my spending moratorium targets my natural tendency toward acquisitiveness. It doesn’t address spending on experiences. That’s for two reasons.

First, I’m not spending much on experiences (vacations, restaurants) at the moment thanks to the coronavirus pandemic. It’s not even an option. If things change and experiential spending because tempting once more, I’ll revisit this.

Second, I don’t feel like I overspend on experiences even during normal times. (Yes, restaurants are an issue, but I’m aware of it and working on it.)

Even with these guidelines, there are some grey areas. Take fitness, for instance. Now that I’m nearing the end of my weight-loss journey, it’s time to get serious about exercise. I have a nice bicycle and I plan to ride it for aerobic activity. But I also want to build some muscle. I don’t want to join a gym. I’m tempted to purchase some free weights off of Craigslist. But would this violate my spending moratorium? Should I simply make do with the dumbbells and kettlebells I already own?

I don’t have an answer.

One solution might be to implement a rule where I’m required to consult Kim for any purchase like this. I could have a default “no” position on my problem areas, then for everything else I’d double-check with her in order to verify the worthiness of any given purchase. This seems sensible, but I haven’t decided what to do yet.

After years of talking about it, this is the year I’ll be letting go of my season tickets to the Portland Timbers. Kim thinks I should keep the tickets and simply sell them game by game. “You may end up regretting that you gave up your seats,” she says. “If you keep the tickets but sell them game by game, you always have the option of attending. And you get to keep the seats in case you change your mind.” We’ll see. For now, though, I plan to give them up.

My Spending Plan

Setting goals and intentions is a great start. Deciding to change is the first step to change. But deciding isn’t enough. For me to succeed, I know that I need to have a plan that ensures success.

With my current weight loss, it wasn’t enough to simply say, “I want to lose thirty pounds.” I had to devise a strategy to do so, a strategy that I knew I could follow. I stopped keeping treats in the house (except for fruit-based popsicles, which have been my one cheat these past six months). I stopped buying alcohol. When I felt myself wanting to overeat, I deliberately made myself sit in the hot tub for an hour or two. (Such a sacrifice, I know.)

These little changes of habit (and others) have been effective. I haven’t adhered to them without fail, but I’ve done so maybe 95% of the time. That’s enough to see great results.

Based on past experience, I know that I need to employ similar restrictions in order to succeed with my spending moratorium. As far as possible, I need to avoid temptation.

I spend when sad or stressed.

Here are some of the changes I intend to make:

  • Stop browsing shopping sites simply to kill time. I’m not sure why I do it, but about once per week I’ll find myself browsing Amazon or Apple or ABE Books for no other reason than to look at all of the things I don’t own yet. This is so, so dumb. It has to stop.
  • Stop reading blogs that highlight new stuff. Right now, I read MacRumors every single day. I browse a couple of comic book blogs. Every week, I check for new releases on the iTunes store. I subscribe to subreddits like /r/DidntKnowIWantedThat that. These habits need to be put on hold. They tempt me to spend.
  • Stop spending to self soothe. Like many others who have spending problems (whether present or in the past), I have a tendency to buy things in order to make myself feel better. [Reddit Meme. Which subreddit was that? Poverty finance?) I’m much better at this than I used to be, but I still do it sometimes. Because both the end of my diet and and springtime are approaching, I hope to switch to exercise as a source of self-soothing.
  • Start using a wish list. Even with these rules in place, I know there will be many, many times this year that I find things I want to buy. I’m going to keep a text-based wish list of these items (not a wish list on Amazon). When the project is over, I can review the list to see if I still truly want any of these things or whether they were passing fancies. (This would basically be a variation of the 30-day rule to control impulse spending.)

I’ll probably think of other strategies I could use to keep myself in check during this exercise. Plus, I’m hoping that you folks will chime in with tips and suggestions. Basically, I’m trying to follow my own advice: Build barriers between yourself an bad behavior while removing barriers between you and doing the right thing.

So, that’s my plan.

Starting February 1st, I’ll undertake a year-long spending moratorium intended to reduce my consumer habits. This is less about the financial benefits of such a project (although I welcome those) and more about the psychological benefits. I’m curious to see how it goes. If my current diet is any indication, things will be great for long stretches — but there will be days I’m sorely tempted to “cheat”.

from Get Rich Slowly https://www.getrichslowly.org/spending-moratorium/

My 2020 in review: Steps in the right direction

Are you all ready for this? It’s one of my favorite days of the year! I just spent an hour entering data in Quicken, then another thirty minutes analyzing it. It’s time to run some numbers.

How well did I do with my financial goals last year? Was I able to cut back on dining out? (Hint: There was a global pandemic. What do you think?) Did my net worth rise or fall? Let’s take a look.

First, let’s review where I was at the end of 2019.

Quite simply, I was a mess. Objectively, my life was good, but subjectively it was a disaster. My mental health was in shambles. Depression and anxiety were crippling me and truly affecting my relationships with other people. I felt like I was in the middle of a prolonged car crash.

The good news is that, for the most part, 2020 was much better from a personal perspective. Yes, I understand that 2020 sucked for a lot of people. And it was the most tumultuous year our country has seen in a generation. But for me, personally, the year was mostly good. I’ll explain why this is in a bit, but first lets look at the Big Picture.

My Net Worth

Here’s my end-of-year net worth from each of the past three years. (These numbers do not include the value of my business or this website.)

  • At the end of 2018, my net worth was $1,334,227 — a 15.2% decrease from 2017.
  • At the end of 2019, my net worth was $1,437,543 — a 7.7% increase from 2018.
  • At the end of 2020, my net worth was $1,373,233 — a 4.5% decrease from 2019.

Now, on paper a decrease of net worth amounting to $64,310 might seem scary. Maybe it’s because I’m in a better mental space than last year, but it doesn’t bother me. This may also be due to the fact that I realize most of that drop comes from Zillow’s valuation of our home.

At the end of 2019, Zillow said our country cottage was worth $495,749. At the end of 2020, the home was valued at $437,127, which is a drop of $58,622.

Yes, I realize using Zillow to track our home value is…erratic. And it leads to fluctuations like this. Still, I feel like it’s a solid enough source for home values, and it gives me some sort of number to go on.

That’s one way of looking at it. But looked at another way, things are a little dicier. You see, I currently live off of my investments. Most of those investments are in retirement accounts, which I can’t touch (unless I want a tax penalty) for another eight years. At the start of 2019, my regular taxable investment accounts contained $269,264. Today, they have $197,117. That there could also be my drop in net worth.

One thing is certain, though. That $197,117 isn’t enough to get me to age 59-1/2 at my current level of spending. I need to spend less, earn more, or (preferably) both.

Now, let’s look at some of the numbers in greater detail.

I’m still tracking my money in Quicken 2007. I continue to try new money apps but none of them is as good as this clunky old program.

Having said that, I didn’t track my spending from May 12th to October 1st last year. I wasn’t spending anything, so I thought the process was pointless. (In retrospect, I wish I had continue to track the numbers because they would have made a good baseline.) Because of this break, I have no way to know exactly what I spent over the course of the entire year. But I do have complete numbers for the first quarter (mostly pre-COVID) and the last quarter.

Food Spending

A year ago, I declared that my financial goal for 2020 was to spend less on food. I’m pleased to report that I achieved this goal although I had some help from a global pandemic. The COVID crisis kept me (and most people) at home. Yes, we did eat out now and then, but it was rare. And it was outside, when possible.

Here’s my food spending from 2020.

  • From January to March, I spent $1700.91 on food (or about $566.97 per month). Of this, $1189.28 ($396.42 per month) was on groceries and $498 ($166 per month) was on dining out.
  • From October to December, I spent $1751.26 on food (or about $583.75 per month). Of this, $1427.81 ($475.94 per month) was on groceries and $323.45 (107.82 per month) was on dinging out.) I should also note that the bulk of this food spending was in December ($663.32 on groceries, $92.00 on our only restaurant meal, and $755.62 total).

So, yay! I met my goal! My monthly food spending dropped from $1053.28 in 2019 to $575.36 in 2020. If I had tracked the stats during the middle of the year, that number would be even lower.

To put things into perspective, here’s a tiny spreadsheet comparing my monthly food spending over the last four years. Numbers from 2019 are incomplete. And numbers from last year are for the first quarter and laster quarter combined. (Again, data is missing for the middle of the year.)

My food spending

That looks like some solid progress to me.

And you know what? I’m willing to bet that a big part of that drop in spending is because I drank less alcohol in 2020. Technically, I don’t want my alcohol spending to appear as “food”. I have a separate category for booze. In reality, I’m lazy and I rarely separate beer and wine purchases from other grocery purchases. So, I think some of that drop in food spending is because I was drinking less.

Let’s talk a little more about that.

Booze Spending

Perhaps the biggest win for me in 2020 — financially and otherwise — was my decreased dependence on alcohol.

I had two stints last year during which I was alcohol free: January 1st to mid-February, then Independence Day to Halloween. And since I “fell off the wagon” at the end of October, I’ve done fairly good about minimizing my alcohol intake. (I refuse to keep whiskey or wine in the house. If I’m truly craving a beer, I drive to the store to buy one. Or two. This policy has really helped me cut down on how much I consume.)

In 2019, I was spending roughly $200 each month on alcohol. In 2018, this was closer to $300 per month. Holy cats! In 2020, I spent zero on alcohol for half the year. During the six months I tracked my expenses last year, I spent a total of $227.07 on booze — $37.85 per month.

My marijuana expense was also down. Pot is cheaper than alcohol in the first place, but I was also trying to reduce my use of weed while I was trying to cut out alcohol. I spent maybe $20 a month on the stuff in 2020.

My current weight-loss status

As an added benefit, by cutting out alcohol I was better able to lose weight. I’m currently down more than 25 pounds since July. (I want to lose another five or ten pounds, then turn my attention to building strength once more.)

Best of all? My mental health improved! In September and October, after being alcohol-free for a few months, I was enjoying peak performance. I was happier and more productive than I have been in years. This benefit to reduced alcohol use is the best benefit of all and the one most likely to keep me away from the stuff.

Now, as I mentioned, I’ve resumed drinking some. I’ve had four beers in the past week, for instance (including New Year’s). For now, I’m okay with this. My mental and physical health seem great at this level of consumption. But there’s still a chance I’ll opt to give up the stuff completely for an extended period of time. (I have a sticky note on my work computer with a question that Tom asked me in October: “What’s the postive for you in using alcohol and pot?” Great question.)

Big Spending

The sorest spot in my budget over the past few years has been big expenses. In 2015, I spent $35,000 on an RV. In 2017, we sold the condo and bought this country cottage, then poured money into repairs and upgrades. In 2018, we spent more on remodeling.

Well, last year didn’t have any major home expenses but I did replace my Mini Cooper, at long last.

At the end of June, I spent $40,000 on a 2019 Mini Countryman SE All4. This seemed like a good idea at the time. In retrospect, the purchase wasn’t the smartest move. The car is fine — it’s not great but it’s not bad — and I enjoy driving it. I especially like that most of my driving is now electric (and that I’m averaging 53 miles per gallon.) But I don’t drive often enough or value vehicles enough to justify having spent this much on a car.

I don’t want to say this was a dumb move…but I think it was probably a dumb move.

Time will tell.

Looking ahead, 2021 should have zero large expenses. I hope. We’ve performed all of the repairs and upgrades we need to do on the house. (I say that, yet I’m worried about the foundation settling.) I just bought a car. My health is good. We have no big trips planned. Our food spending seems to be under control. I have high hopes that 2021 will, at long last, be a year without major outlays. Fingers crossed!

Final Thoughts

Honestly, nothing else about my spending worries me. There were a couple of categories that saw increases last year — books and movies — but this doesn’t bother me. COVID has led me to read more and to watch more shows. These forms of entertainment are relatively inexpensive. All the same, I’ll keep an eye out to be sure my book and movie spending doesn’t become problematic.

Here are a couple of final thoughts after crunching the numbers.

  • My new electric hybrid is amazing when it comes to fuel costs. It has an electric range of roughly 16 miles. That doesn’t seem like much, but it coveres 90% of my driving. I’m getting 53 miles per gallon overall. I last put gas in the tank on November 8th and it’s still half full. (The downside is that it only gets about 23 mpg when using the combustion engine.) My fuel expense has dropped from $100/month to $20/month.
  • My spending on streaming services boomed at the end of 2020, but part of that is because I’m researching and writing a GRS article on the subject. Three TV-replacement services totals $200/month! But I only had those for one month. (And, in retrospect, I should have made them a business expense.)

The bottom line? Last year was pretty good for me. I’m certainly starting 2021 in a much better mental state than I started 2020. Things aren’t perfect but are they ever? I have a good life, an amazing partner in Kim, and I’m currently enjoying the work I’m doing here at Get Rich Slowly and at my newly-revived personal site.

Looking ahead, I don’t have any specific personal financial goals. I guess that I want to increase my income. To that end, I’ll continue channeling my renewed focus on this website.

2020 was a mixed bag for the business side of Get Rich Slowly. The initial expenses in re-acquiring the site have been paid, so my costs were a lot lower last year. That said, so was revenue. The site earned something like $72,000 (before expenses) in 2019. In 2020, that fell to about $30,000.

Some of my colleagues make big bucks from their blogs. I don’t. I’m okay with that, though, because I recognize that many of the decisions I make are deliberately reader-centric, which means I’m foregoing easy money. Still, it would be nice to boost revenue so that I could draw income from the work I do here. Let’s see what that looks like going forward…

Okay, it’s your turn. How was your 2020?

from Get Rich Slowly https://www.getrichslowly.org/my-2020-in-review/

Start where you are

Ah, a brand new year.

Especially after the shitshow that was 2020, it’s good to have the sense that we can begin anew, that we can shed some of those habits and behaviors that have been holding us down while adopting new patterns that lead us to become better humans.

I actually enjoyed a fruitful second half to 2020. I lost 24 pounds. I (mostly) gave up alcohol. I recorded 61 videos. I made progress in my fight against depression and anxiety. And, most importantly, I resumed the habit of writing every day.

In 2021, I want to build on this momentum. I want to continue these habits while incorporating a few new ones, such as tracking my time, keeping a personal journal, and — once I reach my target weight — exercising regularly once more.

There’s one thing that often holds me back when I decide to make changes. It holds others back too. It’s the overwhelming feeling that there’s just so much to do — and that I’ve handicapped myself through poor choices in the past. I remember the physical feats I was capable of when doing Crossfit a decade ago, for instance, and I feel a sense of helplessness. I’m nowhere near as fit I was ten years ago. There’s no way I can do that stuff today.

But I have to remind myself: It’s not a competition. I ought not compare myself to others — or to my past self. My sole goal should be a better person tomorrow than I am today.

To do this, I must accept who I am, where I am. It sure would be nice if I were to start a fitness program in better shape than I currently am, but that’s only a dream. If I want to change, I have to accept reality. I need to start where I am.

And if you want to change — if you want to master your money, your health, your relationships, your career — you too must start where you are.

How to Start Where You Are

Start where you are quote by Arthur AsheClearly, this is easier said than done. It’s one thing for me to sit at my desk and type out pithy advice; it’s another to actually deal with the situation day-to-day in real life.

But here’s the thing: In order to get where I am, I had to start where I was. In order for other Get Rich Slowly readers to get where they are today, they had to start where they were.

When I say “start where you are”, I mean that you should accept that who you are and what you have today is, essentially, your starting hand. Don’t beat yourself up for past mistakes. Don’t blame others for getting you into this situation. These are the cards you’ve been dealt (even if you’ve dealt them to yourself), and it’s now up to you to play them as best you can.

How do you do this?

  • First and foremost, take care of yourself. Pause. Breathe. Prioritize your physical and mental health, even if that means spending a bit of time and money. Exercise. Eat right. If you need the help of a therapist, see a therapist. Money spent on self-care is never wasted.
  • Next, take stock of your situation. Figure out exactly where you are starting from. Set aside a Saturday morning to perform a “financial inventory”. Ideally, you’d take the time to begin tracking your money with a program like Quicken or YNAB or Personal Capital. At the very least, calculate your net worth and list all of your debts, bills, assets, and income. You need a snapshot of your current financial situation so you know what you’re working with.
  • Figure out where you want to go. It’s great to decide that you want to change, that you want to improve your financial life, for instance. But you’ll have greater success if your reason for change is specific, not nebulous. Craft a personal mission statement, and maybe use this to set up a series of smart goals to act as waypoints along the road to your destination.
  • If needed, restructure your life. We all suffer from “financial drift”. We become complacent and lose sight of our larger goals from time to time. When you press the reset button, when you start your financial journey, it’s the perfect time to make changes, large and small. Analyze all of your spending. Cut the crap you do not need. Consider changing jobs. Ask yourself if it might make sense to move to a cheaper home — or to a cheaper city or state.
  • Meanwhile, don’t compare yourself to others — not even in the abstract. On an individual level, comparing yourself to your friends and family is a bad idea because you’re pitting your internal worst against their external best. Of course this’ll make you feel like crap! Besides, it doesn’t matter where anybody else is; what matters is where you are relative to where you want to be. It’s also a bad idea to compare yourself to statistical norms. Sure, stats can be fun to look at — and I share them all the time here at GRS — but stats are soul-less, lifeless abstract numbers. Statistics don’t have cancer. Statistics don’t get divorces. Statistics don’t struggle with faulty financial blueprints. When you start where you are, worry about your own self — not anybody else.
  • Keep things simple. I know first-hand just how tempting it can be to over-complicate things when you want to make a change. I’m a master at this. But the thing is, when you make things too complex, you’re less likely to follow through on them. If your fitness program is “I’m going to walk around the block each day”, you’ll have a better shot at success than if you decide “I’ll bike for all of my errands”. One is simple and the other is not. This advice is especially true with money. Keep things simple at the start; you can always add complexity later.
  • Seek support. One of the best things you can do when starting out is find support for the journey ahead. This support can take many forms. You might find a mentor, for instance, somebody who’s been down the same path before you. Pick their brain. Find out what worked for them and what didn’t. You might put together a “personal board of directors”, trusted experts who can give you solid financial advice. Most of all, look for other people in a similar position to you. Band together so that you can start your journeys together.

I’d also add that when you’re making changes, you shouldn’t expect to get things right immediately. There’s a lot of trial and error. You’ll make mistakes. You’ll try certain methods that don’t quite work, then switch to others. That’s okay. Don’t get trapped by the need to make a perfect choice when starting out. It’s enough to make a good choice in the beginning. There’ll be time for perfection later.

There’s a lot more to getting out of debt, managing your money, and saving for retirement, obviously. That’s what the rest of Get Rich Slowly is all about! But these are the essential steps to getting started. You don’t start where your friends or co-workers started. You don’t start where you wish you were. You start where you are.

Do More of What Works

Change Your Life and Everyone In ItI’m currently reading Change Your Life and Everyone In It, a 1996 self-help book by Michelle Weiner-Davis. My therapist recommended it as a possible antidote to my depression and anxiety. The author offers a simple path to building a better life: Do more of what works and less of what doesn’t.

To some, this advice will sound stupid. To me, it’s a revelation. So simple! So obvious! So smart!

I’ve read similar advice before, of course. Tim Ferriss, for instance, has talked about the importance of playing to your strengths rather than working on your weaknesses. When you do more of what you’re good at, you naturally do less of what you’re bad at. You don’t have to deliberately avoid your trouble spots because the good crowds out the bad.

Take me, for example.

I like to write. I think I’m good at it. I also like to play videogames. Writing is productive but gaming is not. Some game play is fine; too much is a vice. Rather than try to play fewer games, which seems like deprivation, Ferriss would say that I should instead try to write more, which seems like abundance. If I spend more time writing, as a side effect I will have less time to play games. By honing a strength, I’ll be avoiding a weakness.

Or, as Weiner-Davis puts it, I’ll be doing more of what works and less of what doesn’t.

Doing more of what works and less of what doesn’t is an essential part of starting where you are. It’s tacit acceptance that, like everyone, you’re imperfect. You’re good at some things but suck at others.

Where I Started

I was in debt for seventeen years before I began my own quest for financial freedom. For many of those seventeen years, I was grasping at straws, trying to find quick fixes to fundamental problems. When I looked at my friends — at my wife, even — I felt ashamed that they were financially successful and I was not.

I wasn’t able to turn things around until I surrendered to the idea that I had to start where I was. I couldn’t magically will myself into smart financial habits. No amount of wishing was going to give me the same amount of savings that my wife had or the fancy house that my best friend had. It didn’t matter where anyone else was on their financial journey. I had to approach my money with what Zen Buddhists call a “beginner’s mind”.

So, in October 2004, I sat down one night to take stock of my situation. I put all of my financial information into Quicken. I entered my bills, my debts, and my income. For the past thirteen years, I’ve used Quicken (on and off) to keep tabs on where I am.

Next, I figured out where I wanted to go. I drew up this “spending plan” as a roadmap to my desired destination:

Gradually, I restructured my life to be more aligned with my mission. I made major cuts to my spending, which included giving up things I had previously valued such as computer games and comic books. I boosted my income by taking side gigs — and starting this blog.

I stopped comparing myself to my friends. I realized it didn’t matter what they had achieved. (I also realized that, in some cases, what appeared to be financial success was built on a house of cards. Some of my friends were just as poor with money as I was. They fueled their fancy lifestyles with debt!)

And, most importantly, sought support. I found people who actually were good with money and asked them for advice. I read books. I participated in online communities. I started Get Rich Slowly, which turned into a massive support group for myself and many others.

The Final Word

My girlfriend Kim has been fretting that at age 48 she doesn’t have enough saved for retirement. She hangs out with me and at early retirement gatherings and comes away feeling inadequate, like she doesn’t measure up to the rest of us.

Or there’s my friend Joel who desperately wants financial advice — but is afraid to ask for it. He’s embarrassed by his past decisions and his present circumstances. He’s afraid to look foolish.

Text exchange with Joel re: starting at 50

Text exchange with Joel re: starting at 50

Here’s my message to people like Kim and Joel: Start where you are. Don’t panic. All is not lost. You’re not too late. This isn’t a contest. Don’t fret about your past, and don’t worry about how others are doing. Start where you are. Use what you have. Do what you can.

If you’re meticulous and methodical, it doesn’t matter when or where you start. It’s still possible to get rich slowly. I’m here to help — and so are other GRS readers. Join us.

from Get Rich Slowly https://www.getrichslowly.org/start-where-you-are/

Myths and misconceptions about financial independence and early retirement

As the financial independence and early retirement movement (or FIRE movement, for short) has gained popularity, some myths and misconceptions have sprung up about what it entails. Too many people make assumptions about what the FIRE movement is and what it’s made of.

A lot of folks think the FIRE movement is cult-ish. Some think that financial independence and early retirement are only for rich white people. (Or, more specifically, for white men in the tech industry.) Others say that early retirement is only possible with a high income. Or you can only do this if you’re so frugal it hurts. And, of course, there are folks like Suze Orman who “hate hate hate” the FIRE movement because they believe you need millions in order to retire — early or otherwise.

I’ll be honest. Each objection and complaint about financial independence contains a grain of truth. But each objection and complaint misses the point in some important ways.

Today, let’s look at some of these myths and misconceptions about financial independence and early retirement, and explore why these myths and misconceptions are myths and misconceptions.

What IS financial independence?
Before we dive in, here are the basics of FIRE for those who are unfamiliar.

Financial independence and early retirement are two terms for the same concept: You’ve saved enough money that — in theory – you shouldn’t ever have to work for income again…unless you want to. We talk about “financial independence” because too many people want to argue over the definition of retirement.

Roughly speaking, you can consider yourself financially independent (and able to retire early) when your investments equal 25x your annual spending. There’s some nuance to this, but that’s a fine rule of thumb. So, if you spend $50,000 per year, you’ve achieved F.I. when you have $1.25 million in your investment accounts. If you spend $20,000 per year, you need $500,000 invested. If you spend $200,000 per year, you need $5,000,000.

Financial independence is achieved by creating a gap between your earning and spending. This gap — your saving rate — is the key to achieving all financial goals, especially early retirement. The larger your saving rate, the sooner you’ll build the life of your dreams.

That’s it. That’s all there is to it. It’s just math — plus hard work and patience.

While researching this article, I found a October 2018 survey of the FIRE movement produced by TD Ameritrade. The Harris Poll talked to 1503 Americans about their money and about early retirement, then TD Ameritrade interpreted the results. This is the only systematic survey about FIRE that I know of, and I’m going to refer to it throughout this article.

Financial Independence Isn’t Possible with Kids

The most common misconception about FIRE is that it’s not possible if you have children. When I explain the idea to people I meet, this is often the first thing they say: “Well, that works great if you’re single, but it just won’t work if you have a family.”

Parenthood is an expensive proposition. The USDA estimates that it costs roughly $250,000 to raise a child — and that does not include college. Obviously, this means that if you have children and want to retire early (or achieve other financial goals), you’ll need to earn more money. But children don’t make financial independence impossible.

In fact, from my experience, most folks in the world of FIRE have kids. It’s the norm rather than the exception. (This 2019 article from Marketwatch profiles several families pursuing financial independence, including Angela from Tread Lightly, Retire Early.)

Kids are only a barrier to your financial goals if you allow them to be. And the reality is that many people in the FIRE community take great pleasure in their children, especially in educating them about how money works. (Doug Nordman recently published a book called Raising Your Money-Savvy Family for Next Generation Financial Independence. That’s a mouthful, but the gist is FIRE can be a family pursuit.)

Financial Independence Requires Extreme Frugality

Probably the second-most common misconception is that financial independence requires extreme frugality. “I don’t want to live like a miser,” people tell me, and they dismiss the FIRE movement without fully understanding it.

While thrift is certainly a virtue, it is not a requirement for achieving financial independence. If you have a high income, it’s perfectly possible to retire early even while enjoying a luxurious lifestyle during your working years. (But a good salary is required for this to work.)

If your income is average — or less — then some degree of frugality is needed, no doubt. Again, financial independence is all about math. There are only two variables here: what you earn and what you spend. If you can’t adjust one variable to boost your saving rate, then you have to adjust the other. (Ideally, you’d adjust both.)

For the sake of completeness, I should point out that there’s actually a third variable involved. What you do with your savings is also important, so your return on investments is another factor. But these are the three fundamental variables of financial independence: what you earn, what you spend, and the rate of return you earn on the difference.

Believe it or not, the afore-mentioned FIRE survey found just one key difference between those are and those who aren’t on the path to financial independence: F.I. folks spend about 7% less of their income on housing — and put about 7% more of their income into saving and investments. (These numbers are more striking if you frame them differently. FIRE folks allocate 30% less of their budget to housing but set aside 78% more of their budget for investing.)

FIRE budget vs. regular budget

So, what’s the source of the misconception that financial independence requires hard-core thrift? I think it probably stems from the fact that two of the earliest proponents of the modern FIRE movement were Jacob from Early Retirement Extreme and Pete from Mr. Money Mustache, both of whom advocate extreme frugality as a path to wealth. They’re not wrong. But they’re not the only ones who are right.

Financial Independence Requires a High Income

The flip side of the “extreme frugality” myth is the belief that financial independence requires a six-figure salary.

There’s a reason this myth exists. Most folks in the FIRE movement do have high incomes. They’re doctors or software engineers or entrepreneurs. Or they work multiple jobs so that they can earn more. The TD Ameritrade survey makes this clear. While it is possible to pursue F.I. with a low income, it’s much easier to do so with more money.

FIRE survey income graph

There’s a reason for this. You reach FIRE by increasing the gap between your earning and spending. Thus, a high income absolutely accelerates the process.

That said, there are plenty of people who reach financial independence without making millions of dollars. This is only possible, though, if you keep your expenses low. Remember, this is all about math. You want to increase the difference between your income and expenses. If your income is low and you can’t (or won’t) increase it, then your only option is to cut expenses.

Also, I hope it’s obvious to you that if both of these beliefs exist — FIRE is only possible through extreme frugality and FIRE is only possible with a high income — then neither is likely accurate. Because that’s the truth.

In reality, financial independence is best achieved by finding balance, by doing whatever possible to both increase earnings while decreasing expenses. Ultimately, your aim is to increase the gap between the two, to increase your saving rate. How you choose to do this depends on your own strengths, goals, and circumstances

Let’s look at some actual data! According to the TD Ameritrade survey about financial independence, FIRE folks take both approaches: increasing income and reducing expenses. But one is a clear favorite.

income vs. expenses in the FIRE community

Of those surveyed, nearly twice as many people prefer to increase their saving rate by cutting expenses rather than increasing income. From my experience, this is largely due to the fact that it’s easier to cut costs than to boost earning power. If you were motivated, you could slash your non-housing expenses drastically in only a couple of weeks. But it takes time and planning to increase your income.

Financial Independence Is a Get-Rich-Quick Cult

My brain has grown numb from the people who call the FIRE movement a cult. It’s not a cult. There’s no leader. There’s no rulebook. There isn’t even collective agreement on many of the core concepts. (Seriously, you should see the arguments in the financial independence subreddit.)

The FIRE movement is a loose collection of like-minded folks who are all pursuing similar aims: They want to save enough that they can quit their day jobs and pursue more meaningful lives.

Now, it’s true that FIRE folks can exhibit cult-like qualities.

  • They’re enthusiastic about the subject, so they can be evangelical and want to share with the people they meet.
  • They use a lot of jargon, which is unfortunate.
  • They tend to lead unconventional lives, eschewing a lot of what most people consider “normal”. (I downsized from a fancy 1800-square-foot penthouse condo, for instance, to a quirky 1100-square foot “country cottage”.)
  • They tend to hang out with each other, both online and in the Real World.

It’s also true that the FIRE movement is indeed about getting rich quickly. (Or quick-ish, anyhow.) But this isn’t a bad thing.

Typically when we talk about get-rich-quick schemes, we mean shady enterprises that are somehow meant to trick people and/or build wealth by cutting corners. These schemes are scams. They offer promises that cannot possibly be fulfilled.

Financial independence isn’t a scam. It’s math. There’s nothing shady about it. It’s simply the process of putting existing tools to use in a highly-efficient manner so that you can make the numbers work in your favor.

Most folks save 5% to 10% of their income. Aggressive financial advisors urge their clients to save 20%. People in the FIRE movement have saving rates of 50% — or higher. There’s nothing scammy about saving more of your own money.

Financial Independence Is Only Possible Through Privilege and Luck

During the past year, a new myth has reared its ugly head. And it’s a myth that gets me riled up.

Some have begun to argue that financial independence and early retirement are only options for folks blessed by privilege or luck. (Better yet, both.) The point of these pieces — whether explicit or implied — is that preaching the power of personal responsibility is misguided, that we should instead focus on the Big Picture in order to improve economic opportunity for people.

I agree that privilege and luck do make it easier for some folks to achieve their financial goals than others. I, as a white man, have enjoyed benefits that other demographics have not. And systemic poverty is a real problem. Fundamentally, there are barriers that make it extremely difficult for certain people to succeed. I think it’s great that there are people out there who want to prioritize a fight for public policy that leads to increased wealth for more people.

Having said that, I also value personal responsibility. I’m not going to mince words here: Those who deny the power of self-determination are full of bullshit. No, agency isn’t going to be equally effective for every person. Some who take action will enjoy better results. Some people are starting from much better positions than others. And bad things will happen. They happen to everyone.

But I believe — strongly — that individual action is always the most effective way for any given individual to better her circumstances. In fact, “action beats inaction” is one of the fundamental tenets of my financial philosophy.

It’s so frustrating to to hear people argue that personal action doesn’t work. They’re wrong. And what they’re doing (without realizing it, I think) is giving people permission to do nothing about their circumstances instead of resolving to take responsibility.

Here’s the thing that really bugs me though. This is a false dichotomy. It’s not either-or. These aims aren’t mutually exclusive. You can pursue both systemic change and personal responsibility at the same time. That’s how I’ve tried to live my life, and that’s how many others in the FIRE movement live theirs. I believe that those who argue solely for policy change are just as misguided as those who argue solely for personal responsibility.

Privilege and luck play a hand in the FIRE movement, yes. But from my experience chatting with hundreds of early retirees over the past decade, more folks find financial independence through deliberate efforts to save more and spend less than through the whims of fate.

Some will dismiss my response here simply because I’m a white guy. Fortunately, the message of self-determination is prominent in all demographic groups. Because it’s important. For instance, check out The Wealth Choice: Success Secrets of Black Millionaires from Dennis Kimbro or A Latina’s Guide to Money by Eva Macias. Same message, different delivery vehicles.

Financial Independence Means Never Working Again

It’s a persistent myth that when somebody retires early, she’ll never work again. People think that once you achieve financial independence, you transition to an indolent life of luxury: beaches, martinis, pedicures, personal assistants. This simply isn’t so.

In nearly every case I know, folks who achieve FIRE maintain their existing lifestyle. In fact, that’s usually the goal. People on the path to financial independence generally make a deliberate decision to save enough to fund their current way of life. That’s the explicit aim. Only a handful of people want to live large after early retirement.

Plus, many of people do choose to work in early retirement, just as many choose to work after traditional retirement. The so-called Internet Retirement Police want to argue that “if you work, you aren’t retired”, but this is bullshit. This has never been the definition of retirement.

Work gives people purpose. It offers meaning. It lets them do good work that improves their community — and the world. And sure, work provides additional income. There’s nothing wrong with that. If anything, earning more in retirement is a smart risk-mitigation measure. But mostly, the jobs we take after reaching financial independence help us to fend off ennui.

I always use myself as an example when tackling this subject. I have enough saved that I don’t have to work again if I don’t want to. And, in fact, I took some time off for a couple of years to do nothing. But you know what? A life of leisure isn’t all it’s cracked up to be. It turns out that writing about money makes me happy. It brings me fulfillment and gives me a reason to get up every morning!

I’m reminded of the end of one of my favorite TV shows, The Good Place. (Spoiler alert!) Our main characters reach the quasi-heaven of the afterlife, where every wish is fulfilled and life is perfect. But they’re surprised to find that the existing population of The Good Place is anything but happy. The residents are numb. They’re bored. Why? Because having it all doesn’t mean anything without context.

FIRE folks are not Scrooge McDucks!

Financial Independence Is All About Greed

Another myth that bugs me is the belief that the FIRE movement is all about greed, that we’re a bunch of Scrooge McDucks looking to hoard our wealth for selfish purposes.

Sure, there are people who are in this only for themselves. They’re like Han Solo in Star Wars, who has no interest in defeating the Galactic Empire. “Look, I ain’t in this for your revolution,” he says. “I’m not in it for you, Princess. I expect to be well paid. I’m in it for the money.”

If that’s your aim, fine. I’m okay with that. Who am I to judge other people’s motivations? But I think it’s a mistake to ascribe this motive to everyone in the FIRE movement. (Or even to most people in the FIRE movement!) Those who learn about financial independence and stick with it often have higher aims.

Famously, Mr. Money Mustache, one of FIRE’s most prominent voices, makes no secret that his website is only secondarily about money. His goal is to get people to live lighter on the world. He wants to help the environment by reducing consumption. He wants people to be rich, happy, and to save the world.

Or there’s Vicki Robin, one of the modern FIRE movement’s earliest voices. When I wrote to ask about her initial inspiration, Vicki responded:

“I wanted the world to be a better place. More beautiful. More aligned with my highest sense of interrelatedness of life. I was also influenced by Thoreau and Emerson. I studied utopian communities as early as high school…Money itself was never of interest.”

Vicki’s vision is clearly evident in Your Money or Your Life, her 1992 book that inspired many folks in the FIRE movement to pursue this path.

And what about about Tanja Hester from Our Next Life? Tanja is all about using her position in early retirement as a force for good.

As you can probably tell, I’ve thought a lot about this, and I’ve had many discussions about the topic. In fact, I’ve begun developing a talk on this subject, which I presented for the first time in October 2019. And it’s a big reason that I recently ordered a copy of What We Owe to Each Other by T.M. Scanlon. (The other reason? “ELEANOR — FIND CHIDI”.)

For more on this subject, check out my article on what happens after you achieve financial independence.

Financial Independence is a Fad

Finally, there are a lot of people who believe the FIRE movement is a fad, and that its popularity will fade with time.

Some would put me in this camp. I’ve been very vocal that I do believe FIRE’s current popularity is a product of the past decade’s roaring economy. Times are good, so personal wealth has grown. People feel rich. They’re interested in topics like early retirement. But when I started Get Rich Slowly, things were bleaker. Frugality and thrift and getting out of debt were the popular topics.

The past 11-12 years have produced an extraordinary set of circumstances that have allowed many people to build wealth quickly — if they had the ability (and knowledge) to invest in either real estate or the stock market. As a result, there’s a bunch of people who find they’re able to retire early if they want, and that’s led to greater interest in the FIRE ideals.

In one talk recently, I claimed that we’ve reached “peak FIRE”. And I stand by that. But while I think we’re at (or near) peak popularity for this subject, I do not think financial independence is a fad. In fact, I know it’s not.

If you research the history of financial independence, you can see that this idea has been around for a long, long time. In 1758, Benjamin Franklin was espousing many of the core concepts we know and love today. But it wasn’t just Franklin. Throughout the 19th century (and into the 20th), many books promoted “pecuniary independence” as a path to financial fulfillment.

What we’ve seen lately — over the past eight years or so — is a rapid refinement of these concepts, a codification of the steps required to build wealth rapidly. It’s sort of how the the various elements that make up the theory of evolution had been around for centuries, but it wasn’t until Darwin published On the Origin of Species that the entire process was neatly packaged in one place.

The Bottom Line

Most of these myths about financial independence and early retirement stem from the same problem: assuming that the FIRE movement is homogenous, that there’s some unifying motive or method. There’s not. Financial independence isn’t simply one thing. Early retirement is different for everyone.

From my experience, the only thing that unites FIRE folks is math. This pursuit is only possible by creating a personal profit, a gap between what you earn and spend. That’s it. That’s the only commonality.

Before I close, I’d like to address one final myth. There are those who discover the idea of financial independence later in life. They don’t decide they want to retire early until their forties — or fifties. Too many times, people abandon the idea because they think they just can’t make it happen.

But according to the survey I’ve been citing this entire article, the average FIRE adherent starts his journey to financial independence at age 37 and plans to retire in twenty years. Only one-third of FIRE folks start before age 30. (In July, I met Beck Heptig who writes the blog Started at 50, which is all about this subject.)

There’s no question that starting early helps. It makes a huge difference. But you know what’s better than starting yesterday? Starting today. Don’t fret having waited so long. Start where you are.

If you’re intrigued by financial independence and early retirement but don’t know where to start, check out The Money Boss Manifesto, my free guide to achieving financial freedom. There are no sales pitches in this thing. It’s not an attempt to upsell you. (I don’t think I even ask you to sign up for my mailing list!) The Money Boss Manifesto is a legit free introduction to the framework of financial independence and early retirement.

If this subject interests you and you want to learn more, you should read it.

To wrap things up, I’d like to point out that my buddy Diania Merriam is hosting a free webinar about FIRE misconceptions, assumptions, and criticisms this Sunday (13 December 2020 — Taylor Swift’s 31st birthday!) at noon Eastern (or 9 a.m. Pacific). Diania is the founder of the EconoMe conference, and I’ve been helping her in a volunteer capacity lately. She’s awesome. If this topic is up your alley, you should absolutely check out the webinar!

Diania's webinar

from Get Rich Slowly https://www.getrichslowly.org/fire-myths-misconceptions/

The GRS Holiday Gift Guide

Every year at about this time, I start getting questions by email and social media — and even in Real Life: “Do you have any personal-finance or money-related gift ideas?”

I know how tempting it can be to choose gifts that encourage smart financial choices. You look at the poor decisions your brother or sister have made, and you feel like you could help. If only they would read this one book that helped you so much!

I get it. I’ve felt the same way. After all, my financial turnaround is a direct result of reading two books that were gifted to me by friends: Your Money or Your Life and Dave Ramsey’s The Total Money Makeover.

That said, money gifts like these can be dangerous. They have the very real potential to create hard feelings and resentment rather than achieve the goal you’re after. Any time you offer unsolicited advice — especially in the form of a gift — you run the risk of making the recipient more resistant.

Now, having said that, there are times and situations where gifts with a financial theme make sense.

  • Do you have a niece who’s about to leave home and forge out on a life of her own? A money manual might indeed be a welcome gift.
  • Are there kids in your life whose parents don’t have personal finance figured out? A money-based board game could indeed impart lessons to the entire family.
  • Has your father been talking lately about needing to take retirement seriously? Well, he probably could profit from a meeting with a financial advisor.

After fifteen years of thinking about this subject, I’ve come up with a short list of financial gift ideas that might help to foster smart money moves without creating resentment. Let’s take a quick look at some potential personal-finance gifts that sometimes make sense — if the recipient is ready to hear the message.

Note that I’ve deliberately tried to steer clear of junk. There are tons of money-themed gifts out there that serve absolutely no purpose: money soap, money placemats, money t-shirts. These are all basically rubbish. The money gift ideas I’ve listed here are meant to be practical, to foster future wealth. They’re not novelties.

Books About Money

When it comes to actual money manuals, my default recommendation remains Your Money or Your Life by Joe Dominguez and Vicki Robin. My friend Michael sent me a copy of this book when I was at the lowest point of my financial life. (But he only did so because he could tell I was ready to read it.)

Your Money or Your Life introduced many concepts that nowadays we take for granted in the world of personal finance. It covers budgeting, mindful spending, financial independence, simple living, and your true hourly wage. And it conveys the info using real-life stories from real-life people. (The book can get a little New Age-y in parts, so keep that in mind.)

That’s my default recommendation. Based on the subject’s circumstances, though, I might suggest a different title. Here are some examples:

  • For young adults just starting out, I recommend I Will Teach You to Be Rich by Ramit Sethi. Sethi’s book is filled with actionable advice applicable to kids just out of college (or high school). It covers topics such as salary negotiation, basic investing, and smart use of credit. This is an essential money manual for people in their early twenties — but it can be good for people in their thirties and forties too.
  • For parents with young children, consider The Opposite of Spoiled by Ron Lieber. This book covers work, allowances, consumerism, charity, gratitude, and more. It’s a terrific guide to instilling financial wisdom in our youth.
  • For folks you suspect might be interested in investing and/or early retirement, I recommend The Simple Path to Wealth by J.L. Collins. This book is for people who have mastered the basics but who lack a clear vision for their future. It is not a good option for somebody who still struggles with the debt and/or budgeting, but it’s terrific for those ready to build real wealth.
  • Over the past year, I’ve become a fan of Wild Money by Luna Jaffe. This isn’t a book for left-brained engineering types. It’s aimed directly at right-brained artists who have been struggling to make sense of money. Before COVID hit, Kim and I were meeting monthly with Jaffe and working through her Wild Money methodology. Kim loved it. I did too. This book isn’t for everyone, but it’s perfect for some.

Just typing this list, I’m filled with trepidation. Giving gifts that attempt to teach an overt lesson is…well, risky. It’s not the best approach. Instead, I think it’s often better to come at things sideways. In the case of helping somebody get better with money, I might pass along a book that’s more subtle, something tangentially related to the subject, something that helps the recipient build skills and habits that will lead to money.

Books Obliquely Related to Money

For instance, I’m a huge fan of all of the following — and none of them come across as “preachy” (especially if you include a personalized note that explains how the book changed your life).

  • The Seven Habits of Highly Effective People by Stephen Covey has helped millions of people achieve happier, more productive lives. When I first read this, I thought it was pop psychology at its worst. How wrong I was. The older I get, the more I realize this book is filled with solid advice. Mr. Money Mustache and I have had a couple of conversations about how the ideas in this book are important to building a mental framework that leads to financial success.
  • The Road Less Traveled by M. Scott Peck is another massive bestseller that can lead to improved psychological and emotional stability. The first section on discipline is especially powerful. Peck says that we can achieve mental and spiritual health by using four tools to cope with the challenges we face: delayed gratification, acceptance of responsibility, dedication to truth, and balance. (When I pulled The Road Less Traveled from my bookshelf to write this blurb, I realized I’m in a place in my life where I ought to re-read it. That’s what I’ll do this afternoon.)
  • Thinking in Bets: Making Smart Decisions When You Don’t Have All the Facts by Annie Duke. For a long time, I’ve argued that the best money books are often not about money at all. Thinking in Bets is an example of this. Duke says that there are exactly two things that determine how our lives turn out: The quality of our decisions and luck. She uses plenty of personal finance examples, but the book itself is about self-improvement. It’s not specifically about personal finance, yet the info here could have a profound impact on your financial future.
  • Grit: The Power of Passion and Perseverance by Angela Duckworth. When I first found this book a year ago, I re-read it four times in a single week. It’s that good. Duckworth’s thesis is that while talent and skill do matter, grit — the combination of passion, patience, and perseverance — matters more. Grit has fewer practical action steps than the other books on this list, but it’s a modern book in a modern style that might be more accessible to many people.

Another way to impart financial wisdom is through biographies. For example, I enjoyed The Snowball by Alice Schroeder, which is a thick and thorough look at the life of Warren Buffett. Schroeder shows how Buffett’s path to wealth started from a young age, when he’d go door to door selling chewing gum and soda pop to people in his neighborhood. This money “became the first few snowflakes in a snowball of money to come,” she writes. Then she chronicles the next seventy years as he becomes one of the richest men on Earth.

Consumer Reports
In the olden days — say, a decade ago — I would have been quick to recommend magazine subscriptions. At the time, there were several great personal-finance magazines that you could gift to somebody without looking overbearing. Today, magazines are dead (or dying).

Still, the venerable Consumer Reports is around, and I think it’s a great option. The monthly print edition is becoming less and less useful as it moves from text-rich, in-depth feature stories to shorter, breezier content. (Such a terrible editorial decision!) But it still has some value. Plus, a subscription comes with the annual buying guide, which I find useful.

For $60/year, you can gift the print+digital Consumer Reports combo. A digital-only subscription costs $40/year. A print-only subscription costs $30/year. Here’s the Consumer Reports subscription page.

Financial Games

As an avid game player, I would love to be able to recommend some board games or computer games that foster personal-finance skills. In the past, I’ve played some good ones. My cousin and I used to play Acquire and Stocks & Bonds, two 1960s-era “bookshelf” games from 3M Games. These used to be available from thrift stores for five bucks each, but now they’re rare collector’s items that go for $100 to $200 online!

While researching this article, however, I realized there’s currently a dearth of good money-related board games. That’s too bad.

I guess the traditional money game recommendation would be Monopoly. Monopoly is a fine game (as long it’s not corrupted by too many house rules), but I’m not sure it does a great job of teaching personal finance. Instead, I’d opt for Payday or — especially — The Game of Life. I’ve always thought that the Game of Life did a fine job teaching about the various costs (and windfalls) life has in store. If a parent were to play this with children and talk about the events, it could be pretty educational.

If you know of any good personal-finance board games (or video games), share them in the comments below.

While writing this section, I discovered Don’s Game Closet, a very very 2007-esque web store that’s a jackpot for board game geeks like me. If you like vintage board games, I highly recommend visiting this site. After I finish writing this story, I’m going to browse it.

Wallets, Purses, and Piggy Banks

Wallets, purses, and piggy banks are another source of money-related gift ideas.

In recent years, I’ve become a fan of minimalist wallets. I mean really minimalist. For the past decade, I’ve used wallets that only allow space for the basics: a driver license, insurance info, a couple of credit cards, and a bit of cash.

Right now, I use this minimalist wallet from Tom Bihn. There isn’t anything fancy about it (not at all!). It’s simply a small, lightweight wallet that carries the essentials.

I’ll be honest, though. Despite the fact that I know it’s an example of lifestyle inflation, I covet the metal wallets from Secrid.

The Cardprotector wallet (which holds 4-6 cards) is cool enough, but the Cardslide wallet looks even cooler. It’s the Cardprotector plus two add-ons that give you an elastic moneyband and a sliding compartment for cards or banknotes or maybe a key.

(True story: When Kim and I were in Venice last year, we waited out a rainstorm by browsing the Secrid store in St. Mark’s Square. If the storm had lasted any longer, I’d now own one of those wallets.)

I was going to offer some advice on cool purses for women, but you know what? I know nothing about them, so I’ll pass. However, if any Get Rich Slowly readers have any suggestions, I’ll gladly add them here.

Purses and wallets hold your money on the go, but what about protecting your treasures at home? Every family should have a high-quality security safe to protect their most important records and documents. There’s no need to spend a fortune on a good quality safe, but you do want to make sure it offers protection against fire and flooding.

In a recent Reader’s Digest article, security experts recommended this “catastrophe-proof” .94-cubic-foot security safe. Similar products are available at this price point (which is roughly $200).

If you’re not worried about fire or flooding, you could probably get away with a simple security safe, such as these Amazon Basics models:

For the kids in your life, you might consider the standard child-friendly security safe: the piggy bank. I’m partial to a traditional pink piggy bank, but while doing some Amazon shopping recently, I found two other options that seem cool.

The first is a handmade piggy bank cut from actual forest wood. They’re pretty darn cute! The second is this Lego pig coin bank that I just might have to order for myself…



* Money itself
* Money in other forms
* Stock
* 529 contribution or savings account contribution

* Bond or certificate of deposit.
* Savings bonds.


I’ve saved the best gift ideas for last. If you truly want to help somebody improve their financial situation and you know they’re receptive to it, books and games and wallets and silver coins aren’t the best option. If it were me presenting a gift like this, I’d choose something much more practical.

When I polled the GRS community on Facebook and Twitter about their choices for personal-finance gifts, a couple folks mentioned subscriptions to You Need a Budget. YNAB, as it’s more commonly known, is a well-regarded budgeting tool that adheres to a solid financial philosophy. I’m a fan. And YNAB allows you to purchase gift subscriptions. But a word of caution: There’s no way I’d purchase this for somebody unless I was certain they were going to follow through with using it. (To increase the likelihood that the recipient would actually use YNAB, I might consider pairing it with the excellent You Need a Budget book.)

Other folks suggested pre-paying for a session with a real-life financial planner. This is an amazing idea, and well-worth considering if you have somebody in your life who might profit from it. Yes, it’ll probably cost you a few hundred bucks. But paying for some sort of evaluation session with a fee-only planner could make a real difference in a loved one’s life. If I were to do this, I’d start by using the search tool from the Garrett Planning Network.

But you know what?

If I wanted to present a gift that would help somebody improve her financial life, I think my top choice would be some sort of personal- or career-development course. Gifting a course related to your recipient’s personal and/or professional interests is a great way to foster their enthusiasm for life while giving them skills they can use to further their career.

My girlfriend, for instance, is constantly taking classes. Sometimes these are related to her current career (she’s a dental hygienist), but sometimes they’re purely aspirational. Kim is currently taking a course an animal communication. (She thinks she might like to volunteer with an animal shelter in the future.) I’ve thought about offering to pay for a follow-up course once she’s finished.

Here are some examples of what I mean:

  • Ramit Sethi from I Will Teach You to Be Rich offers a variety of courses and products that could help almost anyone master their money — and their life.
  • Many people could profit from learning a second language. Group language classes are inexpensive and fun. One-on-one tutoring sessions cost more, but they’re crazy effective. Either option would make a good gift.
  • Community colleges offer a variety of classes that teach skills that we wish we’d learned when we were younger: woodworking, computer programming, art, and more. Offering to pay for a class of your recipient’s choice could help them make the most of their free time.
  • And, of course, you could always pay for a few music lessons. Many people want to learn to play the piano or the guitar or the French horn — but they don’t know how to start. If you take the time to find a good instructor and arrange the first five or six lessons, that immediately removes the biggest barrier to learning.
  • Classes like these provide true value that will only compound with time. I think they’re terrific gift ideas.

    Final Thoughts

    When I decided I wanted to put together a round-up of financial gift ideas, I knew I needed to get out of my own head and seek advice from the Get Rich Slowly community. So, I asked the Facebook group and our followers on Twitter for their suggestions.

    I like this idea from @YeagerJim on Twitter:

    money gift idea on twitter

    What a great idea! If this would work with your kids, do it.

    As a final note, I’m a big fan of these money tree 3D cards. They are expensive (13 bucks a pop!) but they’re so fun (and so well-made). For real: I have several in my office waiting to be used in the future. The website says these are birthday cards, but there’s nothing birthday-specific about them that I’ve noticed.

    3d money tree card

    Okay, that’s it from me. Those are my money-themed gift ideas. Now, let’s turn it back to you. Have you given a financial-related gift before? Would you ever consider doing so? What gifts do you think are effective? Which ones should be avoided? Let us know in the comments below!

from Get Rich Slowly https://www.getrichslowly.org/financial-gift-ideas/

A vision for the future of Get Rich Slowly

Well, it only took me three years, but I finally have a vision for what I want to do with Get Rich Slowly.

When I re-purchased this site in 2017, I did so without any real idea of what I’d do with it. I wanted it back for sentimental reasons. (And so that nobody else had control of this monster I created.) I didn’t really know what to do with the 5000+ articles in the archives.

You see, when I started Get Rich Slowly, it was clearly a forum for me to share my experiences as I dug myself out of debt. After I succeeded, I sort of lost my way. (Well, and a bunch of Real Life stuff made me lose my focus.) So, I sold it.

When I started writing at Money Boss in 2015, I had a clear vision for what I wanted to do with that site. I had a mission. That made it easy to decide what to write there and what not to write.

But when I bought back Get Rich Slowly? Well, I didn’t have a clear mission. I didn’t have a clear focus. I think that’s been pretty obvious, not just to me but to everyone.

Now, though, thanks to my recent deep dive into essentialism, I’m finally finding some focus for this blog. Essentialism helped me figure out what’s important in my personal life right now, but it’s also helped me get clear on what I want Get Rich Slowly to be.

I want Get Rich Slowly to be a definitive, unbiased resource about smart personal finance. I want to push my Money Boss philosophy while providing the best possible information about the world of money management.

But here’s the challenge: Despite Tom having whittled our archives from 5000+ articles to exactly 2500 articles, things here are still a mess. (A “clusterfork” as Eleanor Shellstrop would say on The Good Place.) The chaos behind the scenes is almost overwhelming.

Still, the only way to eat an elephant is one bite at a time, right? So, I’ve started taking bites.

conversation with TomOn Halloween, Tom sent me a spreadsheet listing every single article we have at Get Rich Slowly. Instead of writing new stuff — and I have an article I want to write about politics and personal finance! — I’ve been diligently working through this spreadsheet line by line, analyzing every one of our 2500 articles. As of this morning, I’ve processed 1537 of them.

Here’s what I’ve learned from this site audit:

  • We have a ton of good material in our archives. That’s awesome. I wrote some of it. Staff writers wrote some of it. Guest authors wrote some of it.
  • There’s also a lot of chaff in there. There are too many personal anecdotes that no longer serve a purpose. There are articles that made sense at the time (“oh no! the financial crisis of 2008!”), articles about now-dead money tools, and articles about concepts I no longer believe. This stuff needs to be winnowed out.
  • More problematic are the topics we’ve covered extensively. Do we really need fourteen different articles on how to build a budget? No. We need one article on how to build a budget, and it should be the best possible article we can create on the subject.

This site audit has also made clear our path forward. I now have a focus for my work here. For the foreseeable future (read: “years to come”), my job is to take our existing material and re-work it into fresh, new stuff. My job is take those fourteen articles on how to build a budget and to create that single, definitive resource on the subject. My job is to do this for all of the various topics in the world of personal finance.

As of this moment — and again, I’ve processed about 60% of our archives so far — I have identified 213 different concepts that currently have redundant articles. I’ve found 465 other articles worth keeping. And I’ve slotted over 600 posts for summary execution. (There are also some pieces in a sort of limbo.)

It’ll probably take me another week to finish this content audit. After I’m through, we can immediately turn our attention to content renovation. I can start tackling the years-long task of smushing everything together, of transforming Get Rich Slowly from its current chaotic state into a clean, orderly encyclopedia of personal-finance advice.

As I do that, Tom and I will be publishing these revised pieces as new articles. Because they will be new articles.

Anyhow, I just wanted to let you all know that I haven’t sunk into depression and I’m not ignoring the site. In fact, I’m doing more work on it now than I have since I re-purchased it. But that work is fundamental, structural work. I’m repairing the site’s foundation. It might be a little bit before you’re able to see any evidence of that work out here.

As a footnote, I should mention that we’ve had six months to sit with the site redesign now, and we recognize that some things need to be tweaked. I had a chance to watch my brother and cousin browse GRS a few weeks ago, and it was enlightening. I see that some things that are obvious to me aren’t obvious to others. So, we’ll be making some changes. (Eventually.) If you have feedback on the site design, please let us know. Now is the time to speak up.

from Get Rich Slowly https://www.getrichslowly.org/a-vision-for-the-future-of-get-rich-slowly/

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