Q&A: My Current Financial State

Fridays are typically “Ask the Readers” days at Get Rich Slowly, but today I’m doing something a little different. I’ve made a couple of big revelations lately, and those have generated a lot of questions. Today, I’ll answer a handful of these questions in order to give an outline of how I’m managing my money.

There’s a lot to be said about the discipline it took to be conscious spender (and saver) even after a windfall. How did you do this?

In a way, conscious spending became easier after the sale of Get Rich Slowly. But it also became more difficult. Let me explain.

When I sold GRS, Kris and I paid off our mortgage. This freed $1000 per month that I could use for whatever I wanted. (That $1000 was my half of the mortgage payment.) My spending on the Needs part of the Balanced Money Formula essentially dropped to zero, leaving me lots of room for Wants and Saving.

Plus, because I followed my own advice about spending a small portion of a windfall on things you really want, I didn’t feel deprived.

That said, it’s easy to become complacent when you have a large nest egg. It’s easy to start spending a little more here and a little more there because you know you have plenty of savings to bail yourself out. Though I never came close to spending more than I was earning, I did begin spending more than I ought to have. That’s why I started preaching the virtues of conscious spending; I needed to remind myself of the concept.

Lately, I’ve become more of a conscious spender. That’s because I don’t allow myself to touch the money from the windfall. Instead, my goal is to live on my current income, which is a little lower than it had been when I was working at the box factory.

I haven’t totaled the numbers for 2011, but leaving aside money related to the sale of the blog, I probably earned about…calculating…$48,000 from all sources, including speaking, magazine articles, book royalties, interest income, and writing for this blog. That’s roughly the median income for an American worker household (albeit I have an enormous nest egg).

Now that I’ve moved out of the house and am renting an apartment, my expenses have increased substantially. Remember that $1000 I freed by paying off the mortgage? Well, I’m now paying that again in rent and utilities. Meanwhile, I still have the other expenses I was carrying before, including gym fees, soccer tickets, and Spanish classes. Unless I find some way to boost my income — and I aim to do so — I’ll have to cut back hard on some things. Most likely travel.

If you had such a major windfall, why did you still feel compelled to give up comic books?

I felt like I was collecting comics out of compulsion. I don’t read everything I buy. I want to, but I don’t. So why buy more? Besides, I haven’t given them up completely; I’ve just reduced my comic spending radically. (As in $0 so far in 2012, though that’ll change soon.)

Also, as I’ve mentioned, I don’t want to touch the nest egg. If I’m going to buy comics, I have to do so within the constraints of my current income. Again, this is the notion of conscious spending that I write about all the time. I would much, much rather spend that comic money on Spanish lessons right now. I love learning Spanish much more than I enjoy reading comics. That may change in the future (and probably will), but for now, the Spanish is a priority, and that’s my focus.

What’s your asset allocation?

I covered this in detail last April when I wrote about rebalancing my investment portfolio. You can see my target asset allocation there. But my current asset allocation looks nothing like that. Because of market movement, and because Kris is receiving some of these funds as part of the divorce settlement, my asset allocation is a mess. It’s very heavily weighted toward broad market index funds (which is a good thing, I suppose) with very little in bonds. If the market were to crash today, I’d be hurting.

One of the challenges I now face is balancing things without incurring tax liability. If I sell stocks to buy bonds, for instance, I’ll owe long-term capital gains tax (15%) on any profits. This is why I have an investment advisor I meet with regularly. He can hold my hand as I try to navigate this. And it’s definitely something I’ll be looking at once tax season is over.

You’ve often talked how you’d like to move into your “dream” apartment and start over, so I’m wondering if you’re now following that wish at your new place? How are you doing with your war on Stuff?

I was wondering how long it’d be until somebody asked this. This is one of those chances for me to practice what I preach. How am I doing? I’d give myself a B-.

In some ways, I’ve done an amazing job of shedding layers and layers of unnecessary Stuff. It’s all sitting in the workshop at the house, waiting to be sold. (Yay! Extra income I can use to save for travel!) That said, I still moved a lot of things.

My closet is full of clothes. Not as many clothes as I used to own (all of these actually get worn), but still too many. I feel like I could benefit by intentionally pruning one quarter of my wardrobe. It’d hurt, but wouldn’t make me feel deprived.

I also own a hell of a lot of computers and gadgets. No man needs this much electronic eqipment! Plus, I keep tonds of paper. I need to get over that obsession.

My biggest battle, though, is against the books. (Surprised?) In the house, I had many many bookshelves devoted to books and comics. Here in the apartment, I have less space, so I have fewer books. But I still have a lot. Plus, there are still more to bring over. Every time I go see Kris (as I will tonight), I bring back at least one box of books (and sometimes several). Again, it might profit me to intentionally purge one quarter of my books.

After your trip to Africa, you talked about how you felt like it was your responsibility to do something to help, to contribute. Afterwards, you and Kris got a ton of school supplies but then decided not to mail them because it was too expensive. Have you changed your mind on that? Are you at least donating some of your money to some groups or charities that could benefit now that you’ve sold your site?

Over the years, the one financial choice that I’ve made that’s brought the most heat from readers is my decision not to contribute to charity. I’ve just never found a cause I want to support. That’s no longer true. Recently, I have discovered a couple of causes I’m passionate about supporting. But I’m going to start by contributing my time, not my money.

Since the start of the year, I’ve been contributing five hours a week to volunteer work. (This morning, for instance, I’ll spend two hours in a second-grade classroom helping kids learn to read and write Spanish.) Plus, I’ve been meeting with representatives from non-profits and charities. Part of this is related to actual work, but part of it is because I’m trying to find causes I believe in.

The causes I’m drawn to are all related to education (both adult and childhood), financial literacy, and immigration. And it looks like I may have found a way to combine all three! At the end of March, I plan to teach a personal finance class (in Spanish) to a group of 35 latina women. If that’s successful, I’ll try to build upon it.

So, I haven’t made any charitable donations…yet. But I’ve begun to contribute my time.

When you started GRS, did you imagine that it might end up making you a lot of money, and ultimately making you financially independent? Do you just think you got lucky, or could someone set up a blog today and emulate your success?

When I started Get Rich Slowly, I had no idea what it would become, financially or otherwise. I’ve always said that my goals were (in this order): to help me get out of debt, to help others get out of debt, and to make a little money in the process. That I’ve been able to exceed all of these goals amazes me.

Did I get lucky? Yes, of course. But luck isn’t the only element involved. I worked very hard to produce quality content. And I stuck with it day after day for years. Some folks don’t appreciate just how difficult this is. At the peak, I was working 80 hours a week on the blog. But as I’ve said in the past, hard work isn’t enough. In order to do what I’ve done, you also need some luck. In my case, I was lucky enough to catch the attention of some influential readers early on. They shared the blog with their friends, and it spread from there.

Could someone achieve the same success with a new blog today? Of course! And there are those who do. But I’m not sure what the right recipe for replicating this success is. There’s so much involved with it, and some of it seems difficult to define. I’ve started many other blogs, but none has caught on like GRS.

The Bottom Line
I make an average income. Because of some big life changes, at the moment I spend less than I earn — but not by much. Until I can find ways to make more money, my travel budget is going to suffer.

That said, I have a great job that gives me lots of flexibility to spend my time and money on the things I love. I also have a fat emergency fund. And, of course, I have a huge retirement nest egg. My aims for the coming months are both to increase my income and to continue exploring charity and volunteer work. In the meantime, I’ll share my progress with the readers of Get Rich Slowly.

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This article is about Administration, Odds and Ends, Real-Life