Comments on: The Architecture of Personal Finance: Choosing the Right Materials http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/ personal finance that makes cents Mon, 13 Oct 2008 14:11:16 +0000 http://wordpress.org/?v=2.5.1 By: J.D. http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109930 J.D. Sat, 29 Dec 2007 04:07:13 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109930 Ah, great question JAS — this bugs me, too. When I wrote that original piece, I was engaging in some exaggeration. First, I left off my $21,000 home equity loan. Second, I left off several thousand I owed my wife (we keep separate finances). Finally, I left off a $2,000 loan from my family's business. Looking back, I can't say that I was intentionally lying — I really did feel like I was debt free — but I lacked perspective. It didn't take me long to realize that I was deluding myself. So, yeah, four months to pay off my car and my computer and sundry other loans, but three years to pay off the whole thing. Now all I have left is the mortgage! Ah, great question JAS — this bugs me, too. When I wrote that original piece, I was engaging in some exaggeration. First, I left off my $21,000 home equity loan. Second, I left off several thousand I owed my wife (we keep separate finances). Finally, I left off a $2,000 loan from my family’s business.

Looking back, I can’t say that I was intentionally lying — I really did feel like I was debt free — but I lacked perspective. It didn’t take me long to realize that I was deluding myself.

So, yeah, four months to pay off my car and my computer and sundry other loans, but three years to pay off the whole thing. Now all I have left is the mortgage!

]]> By: JAS http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109924 JAS Sat, 29 Dec 2007 01:19:56 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109924 I just read your first Get Rich Slowly article that you link to. You say in it that you paid off your debts in 4 months but here you are 3 years later saying you just got out of debt. What am I missing here? I just read your first Get Rich Slowly article that you link to. You say in it that you paid off your debts in 4 months but here you are 3 years later saying you just got out of debt. What am I missing here?

]]> By: Build Your Finances Brick by Brick http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109822 Build Your Finances Brick by Brick Thu, 27 Dec 2007 20:20:53 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109822 [...] As always I was perusing my favorite personal finance blog (and likely the most popular on the net, from where I’m sitting), and came across a great post about how building your financial portfolio properly is very similar to building a house. [...] [...] As always I was perusing my favorite personal finance blog (and likely the most popular on the net, from where I’m sitting), and came across a great post about how building your financial portfolio properly is very similar to building a house. [...]

]]> By: 2008 Is Almost Here - A Quick Stroll Through My Blogroll http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109801 2008 Is Almost Here - A Quick Stroll Through My Blogroll Thu, 27 Dec 2007 14:22:31 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109801 [...] Get Rich Slowly - Building A Financial Future [...] [...] Get Rich Slowly - Building A Financial Future [...]

]]> By: Grant http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109800 Grant Thu, 27 Dec 2007 14:22:17 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109800 I've been reading your site for a few weeks now and this is one of the best pieces you've produced yet. Your acknowledgement of the psychological side of successful personal finance brings in a necessary amount of balance. Kudos and keep up the great work. Grant I’ve been reading your site for a few weeks now and this is one of the best pieces you’ve produced yet. Your acknowledgement of the psychological side of successful personal finance brings in a necessary amount of balance.

Kudos and keep up the great work.

Grant

]]> By: Daniel http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109767 Daniel Wed, 26 Dec 2007 22:56:34 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109767 Mira, You've made great progress, but don't let starting to invest be intimidating. It's MUCH easier than I imagined before I started. 1) If the company you work for has a 401K (403B/457 for non-profit/gov't), use it. For every $100 you contribute, your paycheck will only be reduced $60-70. 2) Open a Roth IRA or IRA. It's incredibly easy through Fidelity, Vanguard, or T. Rowe Price. To start, use their simple S&P Index 500 fund, or a target date fund, depending on your age. I've always had excellent help over the phone from Fidelity. Love 'em! If you WANT to make it more complicated, you can. Choose a bunch of different mutual funds, compare returns and costs, make sure you're properly diversified, rebalance every 6-12 months, etc. But you don't have to. You can always make it more complicated as you learn more. But DON'T wait to understand every last detail of the investment world. -Daniel Mira,

You’ve made great progress, but don’t let starting to invest be intimidating. It’s MUCH easier than I imagined before I started.

1) If the company you work for has a 401K (403B/457 for non-profit/gov’t), use it. For every $100 you contribute, your paycheck will only be reduced $60-70.

2) Open a Roth IRA or IRA. It’s incredibly easy through Fidelity, Vanguard, or T. Rowe Price. To start, use their simple S&P Index 500 fund, or a target date fund, depending on your age. I’ve always had excellent help over the phone from Fidelity. Love ‘em!

If you WANT to make it more complicated, you can. Choose a bunch of different mutual funds, compare returns and costs, make sure you’re properly diversified, rebalance every 6-12 months, etc. But you don’t have to. You can always make it more complicated as you learn more. But DON’T wait to understand every last detail of the investment world.

-Daniel

]]> By: KC http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109766 KC Wed, 26 Dec 2007 21:58:03 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109766 Mira - take your time with investing. It is ok to continue to save money in a boring bank account until you have educated yourself about investing. The first investment I ever made was VFINX (Vanguard's index fund that mimics the S&P500) - I still regularily contribute to this. Eventhough my portfolio has expanded to include individual stocks and ETFs - the foundation is still in low cost index funds - you just can't go wrong there, IMO. But don't just take my word for it - read up on it. No one will ever care as much about YOUR money as YOU will. Mira - take your time with investing. It is ok to continue to save money in a boring bank account until you have educated yourself about investing. The first investment I ever made was VFINX (Vanguard’s index fund that mimics the S&P500) - I still regularily contribute to this. Eventhough my portfolio has expanded to include individual stocks and ETFs - the foundation is still in low cost index funds - you just can’t go wrong there, IMO. But don’t just take my word for it - read up on it. No one will ever care as much about YOUR money as YOU will.

]]> By: Dividends4Life http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109751 Dividends4Life Wed, 26 Dec 2007 20:01:41 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109751 > Do what works for you. Excellent point! We are not all assembled the same way - what motivates me is way different than what motivates my wife. I've figured me out and I've spent the last 25 years trying to figure her out. :) Best Wishes, D4L > Do what works for you.

Excellent point! We are not all assembled the same way - what motivates me is way different than what motivates my wife. I’ve figured me out and I’ve spent the last 25 years trying to figure her out. :)

Best Wishes,
D4L

]]> By: Mrs. Micah http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109742 Mrs. Micah Wed, 26 Dec 2007 17:31:26 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109742 While Mike is probably right that the actual process of building a house may be more complicated that PF (though sometimes PF can get annoyingly complicated), I think the theory is similar for both of them. I like the metaphor. It also fits quite nicely since not everyone has the same needs or desires, whether in housing or finance. While Mike is probably right that the actual process of building a house may be more complicated that PF (though sometimes PF can get annoyingly complicated), I think the theory is similar for both of them. I like the metaphor.

It also fits quite nicely since not everyone has the same needs or desires, whether in housing or finance.

]]> By: Share | Keener Living http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109740 Share | Keener Living Wed, 26 Dec 2007 17:20:00 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109740 [...] debt burden for a lot of folks. To address that, I recommend reading JD’s recent article on The Architecture of Personal Finance. In addition to being a well-thought-out article, it also has some great links in it. JD’s [...] [...] debt burden for a lot of folks. To address that, I recommend reading JD’s recent article on The Architecture of Personal Finance. In addition to being a well-thought-out article, it also has some great links in it. JD’s [...]

]]> By: Mira http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109739 Mira Wed, 26 Dec 2007 16:51:13 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109739 JD, I absolutely agree with you that we have to find what works for us. I just became dept free except for my mortgage on 12/21! I basically used Dave's plan but tweaked it a bit. My last two depts (student loan - 6% and personal line of credit - 11%) I transferred to credit cards that offered 0% interest for the first year. I dumped large payments on those while building my savings. Since the balance on the cards were not earning interest and I was not charging anything on them, I felt comfortable building my savings at the same time. I wouldn't have recommended the above method to myself five years ago because mentally, I would not have been able to follow through. I would have probably charged on the cards and pay slightly above the minimum. Now, I'm almost ready for the next phase...investment. Honestly, I don't know where to start. I think I'm supposed to invest in mutual funds and I've read and read about them but I still feel totally in the dark. So, I'm going to take a look at some of the books suggested above and see if any of them shed any light. If anyone has any ideas (maybe a website or book that breaks investment down so a fifth grader can understand :-( ), I'm open for advice. Happy holidays :-) JD,

I absolutely agree with you that we have to find what works for us. I just became dept free except for my mortgage on 12/21! I basically used Dave’s plan but tweaked it a bit. My last two depts (student loan - 6% and personal line of credit - 11%) I transferred to credit cards that offered 0% interest for the first year. I dumped large payments on those while building my savings. Since the balance on the cards were not earning interest and I was not charging anything on them, I felt comfortable building my savings at the same time. I wouldn’t have recommended the above method to myself five years ago because mentally, I would not have been able to follow through. I would have probably charged on the cards and pay slightly above the minimum.

Now, I’m almost ready for the next phase…investment. Honestly, I don’t know where to start. I think I’m supposed to invest in mutual funds and I’ve read and read about them but I still feel totally in the dark. So, I’m going to take a look at some of the books suggested above and see if any of them shed any light. If anyone has any ideas (maybe a website or book that breaks investment down so a fifth grader can understand :-( ), I’m open for advice.

Happy holidays :-)

]]> By: FourPillars http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109733 FourPillars Wed, 26 Dec 2007 16:06:33 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109733 I think you might be over complicating things a bit. Building a house is pretty complicated but managing your finances doesn't have to be. As long as you stick to the basic rules of saving (spend less than you earn) and low cost diversified investing you will do quite well. Mike I think you might be over complicating things a bit. Building a house is pretty complicated but managing your finances doesn’t have to be.

As long as you stick to the basic rules of saving (spend less than you earn) and low cost diversified investing you will do quite well.

Mike

]]> By: PW http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109731 PW Wed, 26 Dec 2007 16:03:48 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109731 Thanks JD! I'm trying to come up with a new financial plan for 2008 and this post is very helpful. Thanks! Thanks JD! I’m trying to come up with a new financial plan for 2008 and this post is very helpful. Thanks!

]]> By: The Saving Freak http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109729 The Saving Freak Wed, 26 Dec 2007 15:27:05 +0000 http://www.getrichslowly.org/blog/2007/12/26/the-architecture-of-personal-finance-choosing-the-right-materials/#comment-109729 The realm of personal finance is broad and varied and that is what makes it fun to talk about. Wouldn't it be great if we could just get everyone to the point where they are discussing whether or not to pay off the house or invest that money in the stock market? I mean, we can't get the majority of Americans to just budget properly The realm of personal finance is broad and varied and that is what makes it fun to talk about. Wouldn’t it be great if we could just get everyone to the point where they are discussing whether or not to pay off the house or invest that money in the stock market? I mean, we can’t get the majority of Americans to just budget properly

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