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This blog is now a teenager: Thirteen years of Get Rich Slowly

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Thie middle of April is a Big Deal in my world.

The trees have nearly finished blossoming, which means my allergies will soon go away. We're seeing more of the sun, which means the worst of my seasonal depression is behind me. Yesterday, on the 14th, Kim and I celebrated seven years as a couple. And today, on the 15th, Get Rich Slowly celebrates thirteen years of existence.

That's right: This blog is now a teenager.

In the Beginning

When I started Get Rich Slowly, I had no idea what it was going to become. I had no grand plan or vision. I just wanted to write about money while accomplishing three goals.

  • My primary goal was to document my own journey as I dug out of debt and (I hoped) eventually learned how to build wealth.
  • My secondary aim was to help my family and friends get better with their money too. (Although, truthfully, in my entire social circle, I was probably the person with the worst personal finance skills.)
  • And, third on the list, I wanted to make a little extra money with the site. I figured if I could make a few hundred bucks with it, I could pay off my debt a little sooner.

On 26 April 2005 — a year before I started this blog — I published an article called “Get Rich Slowly!” for my personal site. Here's what I wrote:

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

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

Some of the books out there — most of them? — really are as bad as their titles. Others, however, offer outstanding, practical advice. The best books seem to have the same goal in mind: not wealth, not riches, but financial independence.

According to Your Money or Your Life, which I consider the very best of the financial books I've read, “Financial independence is the experience of having enough — and then some”. More practically, financial independence occurs when your investment income meets or exceeds your monthly expenses. Financial independence is linked to psychological freedom.

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

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

“It's nearly impossible to get rich quick without luck,” I concluded after summarizing all of these money books. “Getting rich quick is a sucker's bet. There's only a slim chance that you'll have the sort of luck that's required. You might as well play the lottery.”

Instead, I thought the underlying message of these books was simple: “It is possible to get rich slowly, however, with no risk, and with no luck. All that's required is patience and discipline.” [Read more…]

Spare change: Awesome articles from elsewhere

On the importance of having multiple sources of income in retirement

A long profile of debt guru Dave Ramsey from Money magazine

Has capitalism killed inflation?

Anxious customers prefer in-person, human customer service interactions [this is me]

Media companies are turning streaming back in to cable [YouTube]

The pros and cons of public money diaries

How long should you keep tax records?

Bank of the West's 2018 "millennnial study"

Why everyone thinks they're middle class (even if they aren't)

Paying off debt is hard work — but it's worth it

Find an archive of all past spare change links on Pinboard.

Welcome to fifty: My first health scare as a middle-aged man

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Three weeks ago today, I had a major health scare.

Because it was Monday, I was at the family box factory. I had just finished running payroll and had taken paychecks out to the shop. I exited the building and *bam* my chest just sort of seized up.

“Ouch,” I thought. But, being a Roth, my thought process didn't go much farther than that. (We Roths don't like doctors and we tend to deal with injuries for weeks or months or years before having them looked at.)

On the way back to the office, I stopped to talk to my cousin Duane. He was digging in the dirt, prepping a spot for his summer garden. We chatted about blueberries, tomatoes, and greenhouses. We admired the warm spring day. After a few minutes, I realized that my chest still hurt.

“I don't want to alarm you,” I said, “but I'm having chest pains. It's probably nothing. But just in case it is something, I thought you should know.”

I walked back to the office and sat down at my computer. Instead of going back to work, however, I googled heart attacks. I read the list of symptoms. I wasn't experiencing anything except chest pain but still…Every site said the same thing: Don't mess around. If you're having chest pain, have somebody drive you to a doctor.

Duane came in. “Are you feeling okay?” he asked.

“I'm still having chest pains,” I said.

“Do you want me to drive you to the doctor?” he asked.

I debated things in my mind. “It's probably nothing,” I thought. “Or maybe it's a panic attack like twenty years ago.” In 1998, I experienced two similar episodes that turned out to be panic attacks. I was under a lot of stress then. I'm not under a lot of stress now.

“Plus, if I go to the doctor, it could end up costing a fortune. My health insurance sucks,” I thought. “But if it is a heart attack and I don't go in, I could end up dead.”

“Well?” Duane said.

“Tell you what,” I said. “I know I'm not supposed to but I'm going to drive myself to urgent care. If you don't hear from me in fifteen minutes, come find me.” (There's only one logical route from the box factory to the nearest clinic.)

I gathered my stuff, hopped in my pickup, and drove slowly to the clinic. [Read more…]

By the numbers: My spending for March 2019

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March was a mixed month in my financial world. I ended March with a slightly higher net worth (up 0.6%) but my spending was the highest it's been this year: $5989.10. Yet, that spending was mostly mindful. I wasn't frittering away money on silly things.

If I wasn't buying dumb stuff, then where did my money go? A few worthwhile places:

  • I spent $653.31 on the yard and garden. Specifically, Kim and I tore out a big cedar tree in the corner of the yard, then converted that space to a small orchard. I use the word “orchard” loosely here. We planted three fruit trees, four blueberries, four grape vines, and a bunch of strawberries. I hope to write about this more in the near future.
  • I spent $625.72 on health and fitness. In the middle of the month, I had quite a scare. Out of nowhere, I had chest pains, so I visited the local hospital ER. My co-pays and prescriptions are reflected in March's spending — and there's more to come. (We're about to have a l-o-n-g article on the $6800 hospital bill I received in the mail yesterday. That'll happen in April or May.) Meanwhile, Kim had knee surgery at the end of the month. I paid for some of her stuff out of my pocket.
  • I spent $579.36 on gifts in March, which is very very unusual.
  • I paid the $450 annual fee on my Chase Sapphire Reserve credit card. (Yes, I know this seems like a lot. But remember the card comes with a $300 travel credit, which means my effective annual fee is $150. I believe I receive $150 in value from the card's other benefits.)

I don't consider any of that spending frivolous although I recognize that some of it isn't necessary. (Do we need an orchard? Do I need to give gifts?)

That said, I did have some weak spots in my spending. I bought several movies on iTunes. In fact, I spent $72.63 on iTunes in March. I need to be careful lest I return to my former profligate ways. No more looking in the iTunes store! I also spent $230.15 on alcohol during the month (most of which was beer).

How did I do with groceries? As you know, my food spending had grown out of control, which is one of the primary reasons I'm tracking my spending in detail this year. Last year, I spent over $1000 per month in food. This year, I'm spending less than $700 per month.

I was very proud of my food spending for most of March. I spent a total of $658.21 during the month: $468.27 on groceries and $184.24 on dining out. That's my lowest monthly food total in two years (excepting months during which I've been on the road).

Going into the last week of March, I'd only spent $241.87 on groceries. That's amazing! Things fell apart, however, when I stocked up on food for Kim's convalescence. Meanwhile, we only had three restaurant meals during the month. For one of those, I paid for two guests. Not bad. Not bad.

Quarterly Spending

Now that we've made it through the first three months of 2019, I was curious how my quarterly spending compared to last year. Monthly spending can fluctuate quite a bit. You can get a better idea of your actual habits by looking at a bigger picture.

Here are some highlights:

  • I spent $116.56 at the iTunes store during the first quarter of 2019. That's less than I spent on movies and TV shows during any single month last year, so that's a win.
  • I spent $2076.54 on food for the quarter, which is lower than any quarter in 2018. I spent $1179.53 on groceries, $323.52 on HelloFresh, and $542.29 on dining out. That restaurant spending is another big win. The grocery spending was good — better than any quarter in 2018 — but I feel like I can do better.
  • I spent a lot on health and fitness during the first three months of the year: $1752.60. And the thing is, it's not going to get much better.
  • This year, I decided to separate hot tub expenses into its own category. I spent $151.88 on hot tub stuff (chemicals, etc.) during the first three months of the year. And, no, that doesn't include electricity.
  • Our zoo — three cats and a dog — cost us $447.54 during the first quarter of 2019.
  • You know where I could save big bucks? By drinking less. I spent $586.36 on alcohol during the first three months of the year (and that includes four weeks during which I didn't drink a drop!). That's $6.44 per day. Time for me to cut back on my craft beer obsession…

I spent a total of $15,364.85 during the first quarter of 2019, an average of $5121.62 per month. That's not a great number, to be honest. It's pretty much what I was spending last year. Still, I'm trying not to get too stressed about things…yet.

The whole point of this exercise is for me to figure out where I'm spending my money and why. Once I have a clear picture, I can make some course corrections.

April Is the Cruelest Month

Unfortunately, April is going to have some crazy, crazy spending numbers. My accountant called yesterday to give me my tax bill. I owe $20,000. (I'm not joking.) The hospital called too. They wanted to let me know that I owe them $6800 for the ER visit in the middle of March. To cap things off, payment is due on the vacation that Kim and I booked a year ago. We'll be headed to Greece and Italy in August — but we're paying for it today.

Fortunately, I knew that some of these expenses were looming, so I have cash set aside to pay for taxes and our trip. (The ER visit was a surprise, obviously, and I don't have money set aside for that.) That doesn't change the fact that April's expenses are going to be insane, though. It just means I'm somewhat prepared for the insanity.

The upside to having a $6800 hospital bill so early in the year? It gives me a chance to make maximum use of my health insurance! My max “out of pocket” is $7900 annually. Since it looks like I'm going to hit that, it makes sense to address all medical issues that are bugging me in 2019.

At the end of 2018, I had a net worth of $1,334,227.20. At the end of March, my net worth was $1,397,545.18. That's a leap of more than $63,000 (or 4.75%). That's great! In reality, this simply reflects a hot stock market. My investment accounts are up $77,933.04 this year (11.45%).

A hot stock market can cover a multitude of sins…

Lifestyles of the Rich and Foolish

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It's the first of April. You know what that means. Spring is here! Your friends and family are pulling April Fools' Day pranks. And my tree allergies are kicking my butt. Every year, tree pollen makes my life miserable. This year is no different.

Facebook kindly reminded me this morning that three years ago, Kim and I were in Asheville, North Carolina. After wintering in Savannah, Georgia, we'd resumed our tour of the U.S. by RV.

While in Asheville, we toured the Biltmore Estate, the largest home in the U.S. This 250-room chateau contains 179,000 square feet of floor space — including 35 bedrooms, 43 bathrooms, and 65 fireplaces — and originally sat on 195 square miles of land. (Today, the estate “only” contains 8000 acres.)

The Biltmore Estate

“This feels like Downton Abbey but in North Carolina,” I said as we walked the endless halls. Just as Downton Abbey documented the excesses of British upper class, so too the Biltmore sometimes feels like an example of how rich Americans indulged in decadence.

George Washington Vanderbilt II, the man who built Biltmore, was a member of one of the country's wealthiest families. His grandfather, Cornelius Vanderbilt, was born poor in 1794, but by the time he died in 1877 he had become one of the richest men in the world. During his lifetime, he built a fortune first from steamships and then as a prominent railroad tycoon.

By family standards, grandson George didn't have a lot of money. He inherited about $7 million, and drew income from a $5 million trust fund. He decided to use the bulk of his fortune to build a huge house high in the Appalachians. Work on the Biltmore Estate began in 1889, when George was 26 years old. Six years and $5 million later, he moved into his palace. (That $5 million would be roughly $90 million in today's dollars.)

Strolling the grounds of the Biltmore Estate got me thinking about the stories we hear of wealthy people who squander their riches. How and why do they do this? Are there lessons from their stories that you and I can put to use?

We hear all the time about the “lifestyles of the rich and famous”. Today, on April 1st, let's look at some lifestyles of the rich and foolish. [Read more…]

How to cancel a credit card (without killing your credit score)

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I have a credit card I'd like to cancel, but I don't know if I should. I'm afraid it'll hurt my credit score. Today I'm going to walk you through in real time as I evaluate this decision. Then I'm going to explain how to cancel a credit card, no matter why you want to do so.

I normally don't pay much attention to my credit score. I know that it ranges between 800 and 820, so I don't worry about it. With a score like that, I'm considered to have “exceptional credit”, and that's good enough for me. (Kim's very proud that she has a higher credit score than I do, by the way.)

That said, for the past several years I've been carrying a credit card that I don't want or need. It's a Chase British Airways card that I signed up for in 2011. It's a fine card, but I never use it because I have better ones. My primary credit card right now is the Chase Sapphire Reserve, which I use for 99% of my personal credit transactions.

Basically, I'm paying $75 per year — the British Airways card's annual fee — for nothing…except to maintain my credit score. I don't like it. I'd rather cancel the card and take a temporary hit to my credit. But is it bad to cancel a credit card? And if it's bad, how bad is it?

I've decided to document the process! Let's find out together. [Read more…]

How I learned to stop worrying and love DIY

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“Oh good,” Kim said when I rolled out of bed yesterday morning. “I’m glad you’re up.” She gets up at 5:30 for work most days, but I tend to sleep in. Especially during allergy season.

“Huh?” I grunted. It was 6:10 and I was very groggy. My evening allergy meds kick my butt. Plus, I hadn't had my coffee yet.

“Something’s wrong with the bathroom sink,” she said. “Look. It’s leaking. The floor is soaked.” She wasn't kidding. The bathmat was drenched. When I looked under the vanity, I was greeted by a small lake.

“Ugh,” I grunted. This wasn't how I wanted to start my day.

Kim kissed me goodbye and hurried off to work. I pulled on a pair of pants, poured some coffee, pulled out the vanity drawers, and got to work.

I was worried that I might have caused the leak when I replaced the sink's pop-up assembly last month, but no. The problem was obvious: The hot water line to the bidet (which I installed in October) had worked itself loose. (By the way, I love my bidet. Too much information, perhaps, but it's some of the best sixty bucks I've ever spent.)

The water line to the bidet

Fortunately, the fix was simple. I reattached everything, then added a light layer of tape to prevent similar problems in the future.

Note: As a safety measure — to make sure I wasn't missing anything — I took photos of the issue and made a trip to the hardware store to ask their advice. They told me everything should be fine.

This might seem like a small thing to some folks but it’s a big deal in my world. You see, I’ve never really been a DIY type of guy. I used to get overwhelmed by home improvement. I felt unprepared, incompetent.

More and more, though, I’m learning that I can do it myself. It just takes patience and perseverance. And the more projects I complete, the more confidence I gain. [Read more…]

My life philosophy: 50 lessons from 50 years

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Happy birthday to me! Today, I turn fifty. Holy cats, that's old! To celebrate, over the weekend I replaced the tape deck in my 1993 Toyota pickup so that I can listen to my Taylor Swift cassette. (You think I'm joking but I'm not.)

The funny thing is, I don't feel like I'm fifty. Okay, my body feels like its fifty, but my mind doesn't. I suppose that's something that everybody says as they get older: “I feel younger than my age.” But it's true!

To celebrate my 50th birthday, I'm going to indulge in my annual tradition. I'm going to share fifty nuggets of wisdom I've picked up during my life on this Earth.

I'm no wiser or smarter than anybody else. And I'm certainly no better. But I am an individual. I'm my own person with my own personal preferences and personal experiences. These have all jumbled together over the past fifty years to give me a unique perspective on life (just as you have a unique perspective on life). To quote my favorite poem:

Much have I seen and known; cities of men
And manners, climates, councils, governments,
Myself not least, but honour'd of them all;
And drunk delight of battle with my peers,
Far on the ringing plains of windy Troy.
I am a part of all that I have met…

So, these fifty nuggets of wisdom are things I've found to be true for me — and, I believe, for most other people. (But each of us is different. What works for me may not work for you.) These beliefs make up the core of my personal philosophy of life.

For obvious reasons, some of these notions overlap with the core tenets of the Get Rich Slowly philosophy. Plus, long-time readers will recognize this as an article I update every year on my birthday.

Some of these ideas are original to me. Some aren't. When I've borrowed something, I've done my best to cite my source. (And I've tried to cite the oldest source I can find. Lots of folks borrow ideas from each other. There's nothing new under the sun and all that.)

Here are fifty principles I've found to be true during my fifty years on this planet:

  • Self-care comes first. If you're not healthy, it's tough to be happy. Before you can take care of your friends and your family, you need to take care of yourself. Eat well. Exercise. Nurture your mind, body, and spirit. Your body is a temple; treat it like one. If you don't have your health, you've got nothing.
  • You get what you give. Your outer life is a reflection of your inner life. If you think the world is a shitty place, the world is going to be a shitty place. If you think people are out to get you, people will be out to get you. But if you believe people are basically good, you'll find that this is true wherever you go.
  • Life is like a lottery. You receive tickets every time you try new things and meet new people. Most of these lottery tickets won't have a pay-out, and that's okay. But every now and then, you'll hit the jackpot. The more you play — the more you say “yes” to new friends and new experiences — the more often you'll win. You can't win if you don't play. That said, however…
  • Luck is no accident. What we think of as luck has almost nothing to do with randomness and almost everything to do with attitude. Lucky people watch for — and take advantage of — opportunities. They listen to their hunches. They know how to “fail forward”, making good out of bad. [Via the book Luck is No Accident.]
  • Don't try to change others. “Attempts to change others are rarely successful, and even then are probably not completely satisfying,” Harry Browne wrote in How I Found Freedom in an Unfree World. “To accept others as they are doesn't mean you have to give into them or put up with them. You are sovereign. You own your own world. You can choose…There are millions of people out there in the world; you have a lot more to choose from than just what you see in front of you now.”
  • Don't allow others to try to change you. Again from How I Found Freedom in an Unfree World: “You are free to live your life as you want…The demands and wishes of others don't control your life. You do. You make the decisions…There are thousands of people who wouldn't demand that you bend yourself out of shape to please them. There are people who will want you to be yourself, people who see things as you do, people who want the same things you want. Why should you have to waste your life in a futile effort to please those with whom you aren't compatible?”

An Early Birthday

  • Be impeccable with your word. Be honest — with yourself and others. If you promise to do something, do it. When somebody asks you a question, tell the truth. Practice what you preach. Avoid gossip. [This is directly from Don Miguel's The Four Agreements.]
  • Don't take things personally. When people criticize you and your actions, it's not about you — it's about them. They can't know what it's like to be you and live your life. When you take things personally, you're allowing others to control your life and your happiness. Heed the Arab proverb: “The dogs bark but the caravan moves on.” [Also one of The Four Agreements.]
  • Don't make assumptions. The flip side of not taking things personally is to not assume you know what's going on in other people's heads. Don't assume you know the motivations for their actions. Just as their reality doesn't reflect your reality, your life is not theirs. Give people the benefit of the doubt. [Another of The Four Agreements.]

True story: Before Kim and I moved to our current country cottage, the dog park near our home had a homeless problem. (And still does.) We early-morning walkers did our best to clean up camps when they were vacated, but it was a never-ending task. Once, I joined a new woman for a stroll down the trail. “Look at that couple,” she said, pointing to a man and a woman who were dragging a tarp down the hillside. “They just woke up and are packing up their camp.” I tried to tell her that no, they were regular dog-walkers who were pitching in to clean things up. She didn't believe me. “I'm going to report them,” she said. Classic example of a faulty assumption.

[Read more…]

The pros and cons of becoming a rideshare driver

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With so many possible side hustles available in today's gig economy, how do you decide which to choose?

Today, I want to make the case that driving with for a rideshare company is a plausible choice for several reasons. But there are also some major distractions that you should be aware of before signing up.

My name is Josh Overmyer. I've completed over 2900 rides as an Uber/UberEats driver-partner since 2014. I know what you're thinking: “That's a lot of rides!” It is. And I've learned a lot in that time.

Here are my biggest takeaways from four years as a rideshare driver.

The Pros of Becoming a Rideshare Driver

Here's the good news. You likely already have the knowledge and equipment necessary to be a rideshare driver!

Josh Overmyer's Uber ProfileAll of these services are app-based and run on a smartphone, by drivers like you who successfully navigate their communities daily. You probably already know where the popular hang-outs are located, how to get around on your city’s streets, and maybe even alternate routes when roads are backed up.

The particulars of the vehicle will change depending on which service you're signing up to drive for. But for passenger trips, you usually need a four-door vehicle, while food/parcel delivery may be possible with a two- or three-door car. (Drivers are subject to a criminal background check and a driving record check.)

As with any independent contractor gig, the amount and timing of the hours you drive are completely up to you, within regulations.

  • Some people will be comfortable driving the late-night crowd, which can be lucrative for rideshare drivers because of increased demand when passengers may have been out drinking.
  • Other drivers may stick to daytime hours and handle a more business-like crowd of people heading to/from jobs, doctor appointments, church, the grocery or the airport. Since your pay will generally be influenced by the number of trips you complete, when you need to make more money, you'll probably want to drive more hours.

Some of the networks now allow the driver to set a destination and get trip requests heading in the same general direction. This helps you to maximize both your time and mileage driven for the maximum possible gain, since you'd be driving those miles with or without a rideshare app running on your phone, such as your daily commute or when you are running errands.

Speaking of maximizing time and costs, driving rideshare could allow you to turn certain everyday life expenses into qualified business expenses.

As I mentioned above, you'll need a smartphone with a data plan, which you probably already have. Now it could be a deductible business expense! Miles driven or other driving expenses could be deductible as well, but you'll need to keep meticulous records.

The Cons of Becoming a Rideshare Driver

There are some downsides to becoming a rideshare driver.

  • Simply driving with a rideshare company means extra wear and tear on your vehicle. Every additional mile you drive is one less mile that your car will last over the long-term.
  • Extra driving means more fuel costs, more wear and tear of consumables such as tires & brakes, and you'll need more frequent oil changes.
  • As a result of all these extra costs and wear on your vehicle, you may face the additional cost of replacing your vehicle sooner than you had previously planned.

A good way to think about rideshare is that you are force-depreciating your current vehicle, which is to say you are extracting value out of your current vehicle to hopefully put money away for your next replacement vehicle.

Here's another thing to consider: inviting total strangers into your personal vehicle.

Josh Overmyer as Uber driverFrom my experience, most passengers will be normal, everyday people just going about their lives: trips to school or work, to the grocery store, church, or to the airport (or beach in my community). But they are still complete strangers, getting into your personal space, and often strangely sitting right behind you, the driver. It can be creepy!

Even worse are the strangers getting into your car who are not on their best behavior. Some are simply loud and obnoxious, and you get used to that from the young twenty-somethings. Some have spent hours at a cigar bar and reek of cigar smoke that permeates your car’s interior and the smell can linger for days.

Worse yet are the drunks who can’t handle their liquor; sometimes you'll be lucky and they'll give you enough warning to pull over to the side of the road — but other times they'll make a mess in your car.

You might have read the last two paragraphs and decided that you don’t want to deal with unruly passengers but would still like to run a side business doing food or parcel delivery.

I've delivered some food orders with Uber Eats, but I ended up with very smelly foods that would stink up my car just before a typical passenger Uber trip, and I had orders that included ice cream or milkshakes that weren’t sealed properly by the restaurant, resulting in a sticky mess.

I had a trip that took me upwards of 40 minutes to complete from the time of food pickup to delivery because the restaurant didn’t have the food ready and the recipient’s phone was dead, and for my troubles I made $6…before costs.

Also remember that you're purposely placing yourself in traffic, which we all hate.

Not only do you sit there idling, wasting time and fuel, but it drives up your blood pressure and stress. You’re also more likely to get involved in a fender-bender when there are more vehicles on the road, and when you are rushing to a pickup or trying to find a convenient parking spot near the food establishment, so you don’t waste too much time circling the block.

Even when you aren’t in bumper-to-bumper traffic, you may experience eye strain from constantly searching for obscure addresses or watching for pedestrians in congested areas such as downtown, at concert venue, or in entertainment districts. Combined with low-light situations, this makes you more likely to end up in an accident.

The Bottom Line

That's a long list of pros and cons. After all of that — and after four years of driving rideshare — what's my overall impression of this side hustle?

Rideshare is a pretty easy gig to get started in — but it won’t make you rich, despite what the radio and TV commercials were telling us all a few years ago. After all operational costs are considered, almost anything else you could think of trying would pay more!

That said, rideshare driving could be a good fit for someone in a temporary cash crunch and who isn’t worried about the longer-term impacts to their transportation budget.

As for me, I stopped driving rideshare after I got a new higher-paying day job last year. If you'd like to read more about the ups and downs of my 2,900+ trips as an Uber/UberEats driver-partner, check out the three-part series about my first side hustle, and why I ultimately decided to quit.

Small leaks sink great ships: How little habits can have large consequences

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If you've spent any amount of time reading money blogs over the past fifteen years, you've heard of the latte factor. In fact, you're probably sick of hearing about it.

This concept — put forth by David Bach in his best-selling The Automatic Millionaire — is based on the idea that daily spending on small things has a big impact on your future wealth.

“We don’t even realize how much we're actually spending on these little purchases,” Bach writes. “If we did think about it and change our habits just a little, we could actually change our destiny.”

The latte factor is nothing new. More than 200 years ago, Benjamin Franklin cautioned, “Beware of little expenses. A small leak will sink a great ship.” Jesus urged his disciples to not let anything go to waste. The stoic philosopher Seneca the Younger wrote, “With parsimony a little is sufficient. Without it nothing is sufficient. But frugality makes a poor man rich.”

Yes, the best way to spend less is to cut back on the big stuff. Yes, it's important to earn more money. But frugality is an important part of personal finance too.

Today, I want to share a real-life example of how small, daily habits can have a powerful effect on your ability to build a wealth snowball.

A Tale of Two Brothers

I've been back at the box factory for over two months now. It's been fun. (It's also been hindering my ability to work on Get Rich Slowly, but that's another story.)

One of the best parts about going back to work has been interacting with other people. Working from home is a lonely, lonely endeavor. I've enjoyed reconnecting with my brother and cousin and our company's employees.

The daily chit-chat has proved a rich source for future article ideas. As people talk about their daily lives, money is a frequent topic. Plus, we all observe what our co-workers are doing and how their choices affect their financial health.

Here's an example of how a seemingly innocuous choice is costing one of our workers a couple of thousand dollars per year.

  • To encourage employees to get to work on time, we use positive reinforcement at the box factory. If you clock in by your start time every day in a pay period, you get a $50 bonus. We run payroll semi-monthly, so this adds up to $100 per month or $1200 per year if you're on time every day.
  • Two of our employees — let's call them Joe and Gus — are brothers. They've both been with us for nearly twenty years. They're good guys. Right now, Joe and Gus live together in a house that's roughly twelve miles (and twenty minutes) from the shop.
  • Despite living together, Joe and Gus drive to work separately. Why? Because Joe likes to get his on-time bonus. He's always on time (and, in fact, often early). Gus, on the other hand, likes to sleep in. While his brother always clocks in by 7:00 (and frequently by 6:45), Gus usually doesn't show up until 7:05 or 7:10. He's getting an extra twenty minutes of sleep each morning.

On the surface, this isn't a big deal, right? Gus likes to sleep in, so he's willing to sacrifice $100 each month to do so. In reality, I think Gus is paying too much for a few minutes of sleep each day.

Let's crunch some numbers. [Read more…]

Financial advice from my father (when I was nineteen)

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Dad at work in his shop“Who was there for your father when he died?” Kim asked me a few moments ago. She's interested in becoming a death doula, so she's reading a book about end-of-life care.

“It's odd you should ask that today,” I said after I told her the story of my father's six-year battle with cancer.

“Why?” she asked.

“Today is the equivalent day in my life as the day when Dad died in his,” I said. “It's ten days until I turn fifty. Dad died ten days before his fiftieth birthday. So, it's a somber day for me. I'll be thinking of him all day.”

Actually, I've been thinking of Dad all week.

It started when I published Naomi Veak's story about how she learned to stop feeling hopeless about money. In that article, Veak shared a letter her mother sent her when she was nineteen years old. Veak was a poor kid at a rich school, and she was struggling to figure out finances. Her mother offered some words of wisdom.

I had the exact same thing happen to me at the exact same age at the exact same college. I was a poor boy at this rich school. During my sophomore year at Willamette University, when I was nineteen, my father wrote me a letter filled with financial advice.

Today seems like a good day to share it with you folks. [Read more…]