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My experience with the KonMari method (and the life-changing magic of tidying up)

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Because I'm a money nerd and a comics nerd, one of my favorite things is when these two obsessions come together in the form of (drom roll, please): financial graphic novels!

You might think that's a niche I just invented, but you'd be wrong. I'll admit that financial graphic novels aren't common, but they are out there. I've written before about the comics adaptation of Studs Terkel's Working, for instance. But I also own comic book versions of Think and Grow Rich, The Long Tail, The Alchemist, and Robert Caldini's Influence.

My dream project? Collaborating with an artist to create a visual version of my A Brief Guide to Financial Freedom.

Imagine how happy I was last week when I stumbled upon The Life-Changing Manga of Tidying Up, the graphic-novel adaptation of Marie Kondo's hugely popular (and hugely awesome) book on cleaning and organization. I loved The Life-Changing Magic of Tidying Up when it first came out; I love the comics version even better.

The Life-Changing Magic of Tidying Up  The Life-Changing Manga of Tidying Up

In case you've been living under a rock, Kondo's thesis is that you should only own things that “spark joy” in your life. Naturally, not everything can spark joy. (Does anyone really get pleasure from their toothbrush or their coat hangers?) But to the extent possible, you should strive to only possess things that give you pleasure.

Let's take a quick look at the KonMari method — and why it's proved to be popular with so many people (including me). [Read more…]

Spare change: Awesome articles from elsewhere

A tortoise racing a hare — so, so Get Rich Slowly

The lifestyles of the frugal and obscure [podcast]

How to get the raise you deserve

How to do passwords right

Growth without goals

"We are working so hard and barely making ends meet." Dave Ramsey doing great work. [YouTube]

How IKEA (and other stores) gets you to impulsively buy more [YouTube]

Vanguard asks: "Are you confident you're saving enough for retirement?"

Amazing! Chow Yun Fat, popular Chinese film star, has a net worth nearing $1 billion but lives on only $100 per month

How to make yourself feel richer [YouTube]

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

Celebrating one year of Get Rich Slowly 3.0

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Can you believe it? A year ago today, I returned to the helm of Get Rich Slowly. Eight-and-a-half years after selling the site, I bought it back.

During the past twelve months, GRS has been through three distinct phases as I've struggled to figure out my focus and direction.

  • First, I tried to manage the blog as a “curation engine”, collecting the best money stories from around the web.
  • You folks wanted more of my voice, though, so I spent three months running the site like I used to in the olden days: I averaged an article a day between January and March.
  • An article a day was too much — for you and for me. Since April, I've worked to find a balance. It seems that two or three articles per week is a good pace.

In my first year back in charge of Get Rich Slowly, I published 209 articles and sent out 38 weekly email updates. (Each email update is essentially a separate article, most of which is a roundup of cool money stories from around the web.)

Let's take a quick look at where we've been and where we're going.

Twelve Favorites from Twelve Months

Conventional wisdom nowadays is that a blog must be focused to be successful. It has to serve a distinct niche audience. That's smart advice, but I don't follow it.

I love the freedom I have when writing at Get Rich Slowly. I love that I'm able to explore a wide range of topics, from how to get out of debt to how to invest to how to be happy. Not every article is applicable to every reader, but I'm okay with that. Even Money Boss (the site I ran from 2015 to 2017) felt too limiting. Here at GRS, I have no contraints. I'm able to write what I want when I want, and I think that leads to better work.

Just for fun, here are twelve of my favorite pieces from the past year:

  • Your lifetime wealth ratio (and how to calculate it). Your lifetime wealth ratio (or LWR) compares how much you have today with how much you've earned during your time in the workforce. It's a way to look at the wealth you've created and gauge how well you've done at keeping that wealth.
  • How to prepare for an uncertain future. Our financial decisions are based on our expectations for the future. We base our expectations on past experience — both our own experience and the experiences of others. Generally speaking, there's nothing wrong with this method of planning. It works. But what happens when the old patterns break? What happens when past data becomes meaningless?
  • Start where you are. My main message to family and friends who find themselves at forty or fifty and feel behind the curve is: Don't panic. All is not lost. You're not too late. This isn't a contest. Start where you are. Use what you have. Do what you can.
  • How to build a wealth snowball. Spend less than you earn — that's the basic rule of personal finance. If you spend less than you earn, you'll build a wealth snowball that will allow you do do the things you dream of doing and to have the things you dream of having.
  • The plight of the poor: Thoughts on systemic poverty, fault, and responsibility. There's a seductive myth that poor people deserve what they get. Look, let's get real. Far more people live in poverty due to systemic issues and/or historical legacy than due to a pattern of financial misbehavior.
  • The six stages of financial freedom. I used to believe that financial freedom meant just one thing: Having enough money that you never had to work again. Over the years, I've learned that financial independence exists on a continuum. It's not “all or nothing”, but an ever-increasing range of options. It's a process.
  • The high cost of homeownership. For both entertainment and catharsis, I spent some time talking about the high costs of homeownership. My experiences seem typical. Everyone I talk to about homeownership has similar tales to tell. I'll bet you do too!
  • How much should you spend in retirement? I've noticed that a lot of retirees — early retired or otherwise — struggle to know how much they should spend. I believe this dilemma exists for a couple of reasons.
  • The forever fallacy. Everything changes. You change. Your circumstances change. The people around you change. Nothing is forever. The challenge then is to balance this concept — everything changes — with living in the present. You must learn to enjoy today while simultaneously preparing for possible tomorrows.
  • The advantages of buying and owning a home. I've written a lot about buying and owning a home. Much of what I've written could be construed as anti-homeownership. But I'm not anti-homeownership. Here are some of the reasons I choose to own a home.
  • The thin green line: Why you should be skeptical of financial blogs. The trouble with the rise of blogging as a business is that the business has become the focus for most financial blogs. Financial bloggers aren't making decisions based on what's best for their audience. They're making decisions based on what's likely to bring them the most income.
  • Potential needs versus actual needs: Re-writing my financial blueprint. I've begun to question my compulsion to buy things before I'm ready to use them. I'm questioning my tendency to accumulate things because I might want to use them or I might need them someday. What if I instead gave myself permission to buy whatever I need and/or want — but only if I'm going to use it right away?

Here's where I need your help! As I consider which topics to tackle in the future, I'd love to know what financial dilemmas you're wrestling with today. What's your biggest pain point when it comes to money? Also, what's your most recent big financial victory? Finally, what challenges do you anticipate in the near future?

Your feedback will help me choose which subjects to write about in the months to come.

Where We're Headed

The past twelve months have been both fun and frustrating. I've had a blast re-engaging with you folks (and gradually getting re-acquainted with long-time readers). Plus, I truly enjoy writing about money. It's my calling in life.

At the same time, I'm not so fond of the business and technical side of site management. A decade ago, this wasn't such a big deal. Blogs (and the internet, in general) were less sophisticated and one person could run and manage a site without much hassle.

In 2018, however, running a site is more complicated — especially a site that's 12-1/2 years old with an archive of 5000+ articles. If you've been following along, you know how much I hate dealing with SEO, monetization, social media, marketing, and other similar tasks. Plus, running a big blog nowadays is expensive.

During my first year back, GRS has produced roughly $20,000 in revenue. That's great! Unfortunately, the site has incurred roughly $30,000 in expenses. That's not so great. (And that doesn't even include the costs to repurchase the blog!) I don't need to make big bucks here, but I'm not a fan of working long hours while paying for the privilege.

Update! I tabulated some exact numbers. GRS produced $17,219.69 in revenue during the past year. Site-specific expenses — not counting costs for software, tools, A/V gear, etc. that I bought for the umbrella company — were $28,300.93. That's a net loss of $11,081.24. Translation: I'm currently paying about $1000 per month out of my pocket to keep this site running…plus all of my time. Plus re-acquisition costs.

That's why I've decided to collaborate with my pal Tom Drake, the brains behind MapleMoney (a Canadian personal-finance site). Tom not only knows about the technical and marketing stuff, but he actually enjoys it. What a weirdo!

With Tom diving into the behind-the-scenes tasks, I'm free to focus on my passion and strength: writing.

For the rest of 2018, I intend to publish frequently but on an irregular schedule. Topics will be random and varied. But our goal as we head into 2019 is to develop an actual (loose) publishing schedule that adheres to (loose) monthly themes. Our aim is to *gasp* prepare a lot of material in advance. We believe that doing so will free me (and the rest of the team) to do more creative stuff instead of constantly playing catch-up.

My dream is that a year from now, after we've finished renovating the site, Get Rich Slowly will be an excellent, easy-to-use resource for anyone searching for financial help. At the same time, I want it to be an entertaining and interesting place for regular readers to visit. Most of all, I want it to be an outlet for me to write about money. Because honestly, that's all I want to do.

How to do great work

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I've been frustrated lately with the quality and quantity of my work. I haven't produced as much here at Get Rich Slowly as I would like — due largely to Fincon and its aftermath (calls and meetings, calls and meetings) — and what work I have produced isn't as good as I would like. This lack of productivity makes me agitated, which makes me even less productive because I'm not in a good place mentally. It's a vicious circle.

Richard HammingHow nice, then, to rediscover the transcript of a 30-year-old talk from Richard Hamming, a former math and computer professor and researcher. (Hamming was also part of the team that worked on the Manhattan Project during World War Two.) Hamming titled his talk, which he presented on 07 March 1986, “You and Your Research,” but his actual subject was how to do great work.

I re-read the transcript this morning while I was once more feeling exasperated with how little time I've had for writing lately. (For me, writing is my yardstick for productivity. It doesn't matter how much other work I've been doing behind the scenes here; if I'm not publishing, I'm not happy.) Although this talk discusses the work of researchers and scientists, I believe that much of the advice applies to me and to writing. I suspect that many of you will find its lessons valuable too.

It's a long talk, though. In order to make it more palatable — and in order to help me remember more of this material — I'm going to summarize Hamming's message. I hope you find it useful.

What Greatness Isn't

Most people think greatness is achieved by luck, Hamming says. They're wrong.

Yes, great ideas and achievements all contain elements of chance, but hard work and preparation are the necessary groundwork to bring about this luck. “Luck favors the prepared mind,” Pasteur once said. And the brash Newton argued that, “If others would think as hard as I did, then they would get similar results.”

Hamming would agree that luck is no accident. Unexpected good things are more likely to happen when you do the work needed create favorable conditions for them.

Nor is greatness achieved solely by genius. Sure, there have been many brilliant scientists. But there's been more great work done by folks who were less gifted yet willing to put in the time and effort to achieve the results.

Finally, it's never too late to be great. Yes, many researchers did their best work when they were young. But plenty of others produced greatness later in life, after they'd had a chance to accumulate knowledge and experience.

So, if luck and youth and brains aren't pre-requisites for great work, what is necessary? Let's take a look. [Read more…]

Beating the latte factor: One money nerd’s quest for the best cheap coffee

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This is a guest post from ESI of ESI Money, a blog about achieving financial independence through earning, saving, and investing (“E”, “S”, and “I” — get it?). It's written by an early-50s retiree who achieved financial independence, shares what's worked for him, and details how others can implement those ideas in their own lives. (Note: ESI is also the owner of Rockstar Finance, the leading curation site for top personal finance articles.)

Like J.D., I'm a recent convert to coffee. For most of my life, I preferred to consume my caffeine cold in the form of Diet Coke. And then…fate intervened.

Four years ago, when my family moved to Oklahoma, my sister-in-law gave us our first Keurig coffee maker. I thought, “That's an interesting gift for a family that doesn't drink coffee.”

But a set of sample k-cups came with the machine, so we started trying them.

The kids liked the sugary cups which were more like hot chocolate than coffee. And I found that I liked the taste of coffee now and then. I played with combinations of coffee, sugar, and milk until I found out I liked it a lot. I later dropped the sugar and went straight for the coffee/milk combo.

Within a month or two, I was hooked. But I started wondering: “We're drinking a lot of coffee. Is this the best deal? What are my options for finding the best cheap coffee?” Because I'm a money nerd, I decided to find out.

My Quest for the Best Cheap Coffee> [Read more…]

How would you spend $100,000?

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What happens when a half dozen money nerds spend 48 hours together in Clearwater, Florida? Do they romp on the beach? Swim in the ocean? Cook dinner together? Drink copious quantities of alcohol? Stay up until three in the morning, laughing and telling stories? Yes. Yes, they do all of these things.

But they also spend a lot of time talking about money. A lot of time talking about money. (That's what makes them money nerds!)

For the past few days, I've been hanging out with some of my favorite fellow money nerds, including Mr. Money Mustache, Paula Pant (from Afford Anything), Joel (from FI 180), Marla (featured on this Mad Fientist podcast), Ben (who wrote this MMM article about how he gets his cars for free), and the effervescent Heather, who has no blog connections at all — but might someday.

Our little group has discussed many financial-related matters this week, some serious and some silly. One particular topic has occupied a great deal of our mindspace.

Joel and Ben, trying to decide how to spend $100,000

Four Questions About Money

I'm not sure how it came up, but during a conversation between Ben and Paula, he asked what she'd do if she were given $100,000 with no strings attached. She said that she'd buy another rental property. (Paula is building a burgeoning real-estate empire.) Paula asked Ben how he would spend a $100,000 windfall. He didn't know.

Paula and Ben then dove deeper. They tried to attach conditions to this theoretical $100,000 to see how that altered their answers. [Read more…]

Suze Orman hates the FIRE movement. She hates it, she hates it, she hates it.

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Yesterday, my pal Paula Pant published a podcast interview with financial guru Suze Orman. Based on reader requests, Paula asked what Suze thought of the FIRE movement. (For those unfamiliar, FIRE is a a term used to talk about folks who have achieved financial independence or retired early.)

As it turns out, Suze Orman does not like the financial independence movement. In fact, she hates it. She hates it, she hates it, she hates it. Take a listen to this one-minute teaser:

In my little world — the world of financial bloggers — this interview has exploded like a bomb. While a lot of folks are focusing on the content of Suze's comments, what I find fascinating is what her comments represent.

“Why do you think Suze hates the FIRE movement?” somebody asked me last Thursday night. (A few of us knew this interview was coming, and we knew what was going to be said. We could guess what the audience reaction would be.)

“I think she feels threatened,” I said. “Suze represents not only the old financial media, but also the world of traditional financial advice. The FIRE movement is an organic thing, one that's being led by bloggers and podcasters and YouTubers. And a big part of our platform is that you can do this yourself, that you don't need help from the Suze Ormans of the world. You can invest your money, and you can do it without paying anyone for help.”

“Interesting,” one of my friends said. “Do you think anyone will hear this interview?”

I laughed.

“Are you kidding? Based on what I know, this interview is going to blow up. Not only will every FIRE blogger share it with their audience, but so will tons of regular money bloggers like me. I wouldn't be surprised if this interview doubled Paula's audience.”

I haven't listened to the interview yet — because, hilariously enough, I've been spending time with Paula here in Clearwater — but I'm dying to do so.

I'm willing to bet that Suze, who is a smart woman and actually has lots of great advice, makes some valid points in the interview. (Paula has been doing her best to defend her, I should add.) But man oh man, her attitude toward financial independence comes off as not only ignorant, but elitist. It's going to be very interesting to watch how this all plays out.

What I learned (and taught) at Fincon 2018

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Greetings from sunny and sweaty Orlando, Florida!

It's been a long, lovely, crazy week behind the scenes at Get Rich Slowly. I've spent the past ten days hanging out with fellow money nerds at Fincon, the annual “money and media” conference. Fincon started in 2011 with just 225 attendees. Now there are over 2000 attendees — including nineteen of us who have been to every iteration.

Here's a quick run-down of what I learned (and taught) at Fincon 2018.

Paula Pant and Michelle Schroeder-Gardner

Bond with Friends and Colleagues

Fincon is first and foremost a chance to meet and bond with friends and colleagues. When you're a money writer (or money podcaster or money YouTuber, etc.), you spend a lot of time holed away by yourself. It's a lonely existence. It's rewarding to see each other, even if it's only once a year.

It's been eighteen months since I've seen Mr. Money Mustache, for instance, but we got to be temporary roommates this week, and are now spending a couple more days together (with other friends) at a post-conference retreat in Clearwater. Plus, I got to make new connections with folks like Piggy and Kitty from Bitches Get Riches (my favorite money blog), who are even more awesome (and hilarious) in person than they are on the cyberwebs.

Like me, the Bitches are huge fans of Harry Potter. Actually, they are huger fans than I am, considering I haven't yet read the final two books. (Sorry, I didn't like Order of the Phoenix.) Talking with them made me realize that although I've always self-identified as a Ravenclaw, I am actually a Hufflepuff. (“You're a Hufflepuff with Ravenclaw rising,” Piggy suggested, and I think she's right.)

It's strange to think that although I see these people only one week each year, they're almost like family. We're able to pick up where we left off twelve months ago and continue as if we'd never been apart.

Teach Everything You Know

Fincon is also a chance for us to teach everything we know in order to help others improve their sites, podcasts, and channels. The unrestrained sharing of info and experience is astounding. In a lot of other fields, people would be jealously guarding their secrets. Not here. Here, folks are dropping knowledge bombs all of the time.

As always, I've been involved in a couple of presentations (in addition to the bajillion casual conversations in bars and lobbies).

  • On Thursday, I joined my pal Jim Wang (from Wallet Hacks) to give a talk on how blogging has changed during the past decade. We had fun exploring the ways in which this world has (and has not) evolved since we started in 2004 and 2006.
  • On Friday, I moderated a panel discussion about “the four flavors of FIRE”. Our small group discussed the rising popularity of financial independence and early retirement. Why is the subject suddenly resonating with so many people? Is it an idea that's only applicable to tech workers without children? How does retiring early affect relationships?
  • On Saturday, I participated in a panel about Playing with Fire, the upcoming feature film about financial independence. This project has been in production for more than a year and is finally nearing completion. In fact, Fincon saw the world premiere of the Playing with Fire trailer! (To learn more about the movie, check out the Kickstarter page.)

I don't really like public speaking. I turn down a lot of requests. And when I do agree to speak, I'm often very nervous. But I'm always happy to do whatever presentations I'm asked to do at Fincon, and I'm nearly never nervous doing them. Not sure why that is. Maybe because I'm completely comfortable and in my element?

Partner with Like-Minded Companies

Lastly, Fincon is a chance to meet with potential “partners”, companies who want to advertise on our channels or who want to pitch their shiny new money apps.

I’ve never actually done this in the past and probably won’t do so again in the future. This year, I over scheduled. (In fact, I nearly collapsed from exhaustion on Friday evening — for real! — and had to return to my room for a few hours until the empty, hollow feeling and dizziness wore off.)

The real problem, however, is that many partner pitches just aren't appropriate for me — or for you. Fortunately, some are. I was impressed with three companies in particular, and hope to work with them in the future (whether or not there's financial compensation involved).

This year, I came to the startling realization that I, as a man nearing his fiftieth birthday, really ought to be working with AARP, the national non-profit whose mission is to “empower people to choose how they live as they age”. It was hilarious during my meeting with the AARP rep to watch the light switch on in both of our heads: “Oh, our missions are well-aligned, and there's an opportunity here to collaborate and make the world a better place.” We don't know what that collaboration would look like yet, but I'd be surprised if we didn't work together extensively in years to come.

J.D. Roth and Gwen Merz, podcasting

The Future of Get Rich Slowly

Perhaps the biggest Get Rich Slowly news to come out of Fincon is that I've found somebody to come on board to handle the technical side of the site. As loyal readers know, I'm a writer. All I want to do is write, to share stories and strategies for better managing money. I hate hate hate dealing with the technical and business aspects of this business. (And make no mistake, this is a business.)

Tom Drake trading cardWell, my friend Tom Drake from MapleMoney does not hate the technical and business side of things. In fact, he's the sort of nerd who digs this sort of drudgery. (For him, it's not actually drudgery.) We haven't hammered out the details yet, but we've agreed that some sort of partnership is in order. In fact, he's already begun working behind the scenes to clean things up around here. Yay!

I still have a couple of days left here in Florida. I'll return home to Portland on Wednesday. (Then, almost immediately, Kim and I will dash off to the Oregon coast to celebrate her birthday.) Next week, things will be completely back to normal at GRS.

Meanwhile, I already miss my Fincon family. I know I'll see many of my closest colleagues several times in the months ahead, but I won't see most folks for an entire year. The 2019 edition of the conference will take place in Washington, D.C. (where I've never spent any substantial time), and I can't wait.

I also can't wait to resume writing for you money bosses. There won't be anything new tomorrow, but it's my goal to publish a new substantive, real article on Wednesday. See you then!

Sunset in Clearwater

Potential needs versus actual needs: Re-writing my financial blueprint

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Last week, I was a guest on the new Fire Below Zero podcast. The interview was fun. (It'll probably be several weeks before the episode airs, though.)

Toward the end of our conversation, the hosts asked a question that my mind keeps returning to: “What's something you spend money on that other people might question?”

At the time, I had two answers:

  • On the business side of things, I spend lavishly on gear. I buy top-of-the-line Apple computers, then pimp them out with as much memory and storage as possible. I recently bought some expensive audio and video equipment to help with the GRS YouTube channel. I pay a lot for this gear, but I don't regret it.
  • In my personal life, I have season tickets to the Portland Timbers, our local pro soccer team. These tickets cost $1050 each this year (and I have two of them), or about $62 per game. The price increases to $1150 each next year (or about $67 per game). This might seem exorbitant to some people — especially when you consider costs for parking, food, etc. — but I'm fine with it. I get a lot of pleasure from these games.

This morning, my mind drifted back to this question again. It occurred to me that it doesn't bother me that I spend on either of these things, and I doubt that it would bother other people either. These are deliberate expenses. They're purchases I make mindfully and that bring me both joy and satisfaction. This is how money should be spent.

If I were to answer the question today (now that I've had a week to think about it), I'd say that my biggest spending problem is buying things that I might want to have in the future — but for which I have no use in the moment.

Let me explain what I mean. [Read more…]

Spending rate versus saving rate

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For years, I've argued that your saving rate is the most important number in personal finance. “Saving rate” in the world of personal finance is the same as profit in the world of business. We all understand that a company needs to earn a profit in order to grow and thrive, but what most people fail to realize is that people need profit too.

The greater the gap between your earning and spending, the faster you're able to grow your wealth snowball and achieve your goals.

Last week, the always-excellent Michael Kitces published an interesting article that argues spending rates matter more than saving rates. He writes:

Most households struggle to save because there is no money left at the end of the month to save in the first place. Because technically their problem isn’t a savings rate that’s too low; it’s a spending rate that’s too high.

When I began reading Kitces' article, I thought he was picking nits. After all, saving rate and spending rate feel are two sides of the same coin. Turns out, however, Kitces has a good point.

Saving Rate vs. Spending Rate

Your saving rate — and note that it's not “savings rate” — is calculated by dividing your profit (your income less your expenses) by your income.

Saving Rate

Your spending rate is calculated by dividing your spending by your income.

Spending Rate

As you can see from the equations, saving rate and spending rate are simply the inverse of one another. If you have an 80% spending rate, then you have a 20% saving rate. If you have a 5% saving rate, then you have a 95% spending rate.

Because of this, it's easy to dismiss tracking your spending rate as a needless exercise. That number is implicit in your saving rate!

But Kitces argues that shifting the attention from saving to spending makes sense because saving is, essentially, a side effect. The two numbers you actually control in this equation are your earning and spending. Saving is a byproduct. It's not a primary factor but a secondary one. This observation is subtle but it's important. [Read more…]

A visual history of U.S. bull and bear markets since 1926

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Who am I kidding?

I can't go an entire month without publishing anything here at Get Rich Slowly. I need to write. And judging from the feedback regarding my planned sabbatical, you folks want me to write! Tell you what, let's change the premise.

Instead of taking all of September off from publishing, I'll instead vow that for the next four weeks, I won't tackle any major articles. If there's something that I want to share and that thing can be shared in 20-30 minutes, I'll do it. This plan will serve the same objective — freeing my mind to focus on the other tasks that need to get done around here — while also giving me an outlet for my writing (and giving you something to read).

Sound like a plan?

Instead of a “silent September”, we'll have a “subdued September” here at Get Rich Slowly. Now and then, I'll share some quick and interesting money stories.

A History of U.S. Bull and Bear Markets

Here, for instance, is a chart providing a succinct history of the U.S. bull and bear markets since 1926. (Click to open a larger version.)

A history of U.S. bull and bear markets

I love this chart! Produced by First Trust Portfolios (and using market data from Morningstar), it mirrors a similar chart from 2014.

This chart is unique because instead of showing stock market growth as an unconnected line, it deliberately resets each individual bull and bear market to a baseline. Bear markets are shown in red. (Or is that orange?) Bull markets are shown in blue. They're plotted on a logarithmic scale.

A “bull market” here is defined as running “from the lowest close reached after the market has fallen 20% or more, to the next market high. Similarly, a “bear market” runs “from when the index closes at least 20% down from its previous high, through the lowest close after it has fallen 20% or more”. That's a little confusing, I know, but if you look at the chart for a few minutes, it should make sense.

According to First Trust Portfolios:

  • The average bull market period lasted 9.1 years with an average cumulative return of 476%.
  • The average bear market period lasted 1.4 years with an average cumulative loss of -41%.

This chart makes it easy to visualize just how costly it can be to get gun shy after a market crash. If you stop investing — or worse, pull your money out! — you can miss out on huge growth.

The chart also clearly demonstrates that the U.S. stock market has been growing steadily for the past 90+ years with only occasional (relatively minor) speed bumps. If you let your investing policy be dominated by potential drops, you run a real risk of missing out on future gains.

(And honestly? As much as I'm against market timing, I wouldn't condemn anyone who looked at this chart and thought, “Hm. It looks like we're near the end of a bull market. Maybe I should cash out for a couple of years.” I don't plan to do that, but I agree it seems like we're nearing the end of this cycle.)