Stopping the motor of the world

"What a crazy day," Kim said yesterday after she got home from work.

"Coronavirus?" I asked.

"Yeah," she said. "My schedule fell apart, which I figured it would. But I did see three patients in the morning. All three were doctors. Obviously, they thought it was safe to see the dentist. A lot of others stayed home though. Staff too. Meanwhile, people are pissed."

"What do you mean?" I asked.

"Well, it looks like our practice is going to have to shut down for a while. The Oregon Dental Association sent everyone a letter today that explained we're in high-risk professions. They recommended shutting down except for emergency procedures, except for cases that involve pain. So, our office is probably going to close for a while, and that means nobody's going to get paid."

"That makes sense," I said.

"It does," Kim agreed, "but people aren't happy about it. Some of the people in the office need each paycheck. They can't pay their bills if they don't get paid. They think the dentist should keep paying them -- out of his own pocket, if necessary."

"Whoa!" I said.

"I know," Kim said. "They don't understand that if we don't see patients, the practice doesn't make money. And if the practice doesn't make money, it can't pay employees. They just figure dentists are rich, so he should be able to pay us anyhow."

Naturally, this will have a ripple effect.

  • Fewer people are going to the dentist (and the O.D.A. has recommended closing anyhow), so the practice isn't making money.
  • The practice isn't making money, so it can't pay employees.
  • Employees aren't being paid, so they can't buy things. Some can't even pay their bills.
  • And, of course, the businesses that rely on payment from the employees then lose revenue -- and cannot pay their employees.

This morning in The New York Times, Neil Irwin calls this the one simple idea that explains why the economy is in great danger. "One person’s spending is another person’s income," he writes. "That, in a single sentence, is what the $87 trillion global economy is."

It's as if the global economy is a perpetual motion machine. It's a virtuous cycle. I buy from you. You buy from Jim. Jim buys from Jane. Jane buys from me. In a very real way, money makes the world go round.

When money stops changing hands, the world stops spinning. Markets crash. People panic. It's as if we've stopped the motor of the world.

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More about...Economics

How will the coronavirus affect your personal finances?

How quickly things change.

Last week, the coronavirus (or Covid-19, if you prefer) was a distant problem. It was something other people in other places had to wrestle with. Sure, there was a looming sense that maybe this runaway train was steaming our way, but it still seemed distant enough that maybe it'd stop before it reached us.

Not anymore. Now it's clear that the coronavirus isn't just headed to the U.S., it's already here in our communities.

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More about...Economics

How to build credit the quick and easy way

Most Americans know that it's important to build credit but many don't know how. If you're one of those confused about how to build credit, you're not alone.

In 2019, CNBC reported that around 40% of Americans don’t know how credit scores work. This is a disappointing but not altogether surprising statistic since credit-building is still absent from curriculum at most schools. Good for you for seeking out this valuable information!

Today, let's cover some credit-building basics. In this article, I'll share some tips on how to build credit quickly and easily. Continue reading...

More about...Credit

What to do when the stock market crashes

Can you feel it? There's panic in the streets! We're in the middle of a stock market crash and the hysteria is starting again. As I write this, the S&P 500 is down six percent today -- and 17.3% off its record high of 3386.15 on February 19th.

S&P 500 status

Media outlets everywhere are sharing panicked headlines.

Panicked headlines

All over the TV and internet, other financial reporters are filing similar stories. And why not? This stuff sells. It's the financial equivalent of the old reporter's adage: "If it bleeds, it leads."

Here's the top story at USA Today at this very moment:

USA Today headline

But here's the thing: To succeed at investing, you have to pull yourself away from the financial news. You have to ignore it. All it'll do is make you crazy.

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More about...Investing, Economics, Psychology

Keeping up appearances

Spring has sprung here in Portland, and that means yard work. I'll spend most of March completing my project for Audible and The Great Courses -- which means things around here may be slow for a few weeks -- but when I'm done hacking in the word mines each day, there's plenty of mowing and pruning and digging and weeding and planting to do at home.

"I'll be glad when everything looks pretty back here," Kim said last Saturday. We were lounging at the bottom of the yard, soaking up sun and sipping beer. We'd spent the afternoon trimming blackberry vines and moving yard debris. Now, our three cats and one dog were with us, enjoying Family Time.

"Me too," I said. "This back yard is a jungle. It was a mess when we moved in, and it's only gotten worse in the past three years. My goal for 2020 is to clean it up completely, to create a space where it's fun to hang out with our friends."

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More about...Spending Wisely, Psychology

15 best paid survey sites in 2020

If you have some spare time and are looking for ways to make a little extra money, you could try filling out surveys for money. With survey companies paying out millions of dollars to users each year, it’s a legitimate way to earn an income online.

Or is it? There’s a natural skepticism whenever this topic is brought up in personal finance circles, and for good reason. For starters, far too many people have been burned by the claims of ‘scammy’ survey sites in the past, walking away with nothing more than a whole lot of wasted time. And, let’s face it, you’re never going to get rich filling out online surveys. Forget rich, you’re going to struggle just to get to minimum wage.

So why even bother? Survey sites are definitely not for everyone, yet they remain very popular. If you stick to the most reputable ones, there is money to be made. We’re not talking rent-erasing money, but it might cover the cost of your monthly Netflix subscription, or subsidize your coffee habit, which for some people is worth the effort.

In this

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More about...Side Hustles

How much does it cost to drive? Driving cost calculators and tools

My girlfriend recently bought a new car. After 23 years, she sold her 1997 Honda Accord to a guy who's more mechanically inclined than we are. Kim upgraded to a 2016 Toyota RAV4, and she loves it.

One of her primary considerations when searching for a new car was the cost to drive it. In her ideal world, she would have purchased a fully-electric vehicle but it just wasn't in her budget. The RAV4 hybrid was a compromise. According to fueleconomy.gov, it gets an estimated 32 miles per gallon. (And actual users report 34.7 miles per gallon.)

Cost to drive a RAV4 hybrid

Kim's quest for a fuel-efficient car prompted me to revisit apps and online tools that help users track their driving and fuel habits. I've written about these in the past -- and, in fact, this is an updated article from 2008! -- but haven't looked into them recently.

Here's a quick look at some of my favorite driving cost calculators, tools, and apps.

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More about...Transportation, Apps

A brief guide to cybersecurity basics

Last Monday, I got an email from Spotify saying that somebody in Brazil had logged into my account.

Security warning from Spotify

I checked. Sure enough: A stranger was using my Spotify to listen to Michael Jackson. I told Spotify to "sign me out everywhere" — but I didn't change my password.

On Wednesday, it happened again. At 2 a.m., I got another email from Spotify. This time, my sneaky Brazilian friend was listening to Prince. And they apparently liked the looks of one of my playlists ("Funk Is Its Own Reward"), because they'd been listening to that too.

My hacked Spotify account

I signed out everywhere again, and this time I changed my password. And I made a resolution.

You see, I've done a poor job of implementing modern online security measures. Yes, I have my critical financial accounts locked down with two-factor authentification, etc., but mostly I'm sloppy when it comes to cybersecurity.

For example, I re-use passwords. I still use passwords from thirty years ago for low-security situations (such as signing up for a wine club or a business loyalty program). And while I've begun creating strong (yet easy to remember) passwords for more important accounts, these passwords all follow a pattern and they're not randomized. Worst of all, I maintain a 20-year-old plain text document in which I store all of my sensitive personal information.

This is dumb. Dumb dumb dumb dumb dumb.

I know it's dumb, but I've never bothered to make changes -- until now. Now, for a variety of reasons, I feel like it's time for me to make my digital life a little more secure. I spent several hours over the weekend locking things down. Here's how.

A brief guide to cybersecurity basics

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More about...Money Basics

Passive income ideas you can try today

Earlier this week, J.D. wrote about what he calls the biggest truth in personal finance: You can't get rich through frugality alone. As Liz at Frugalwoods says, "You can't frugalize income you don't earn." Income is one-half the fundamental personal-finance equation, and it's probably the most important half.

J.D. advocates a three-pronged attack for boosting income: becoming better educated, becoming a more valuable worker, and learning to negotiate salary. But I think he's missing a fourth important income source: the proverbial "passive income".

I know, I know. Passive income has a bad reputation. Actually, passive income has a terrible reputation. And deservedly so. The Land of Passive Income is populated by scammers, hucksters, and charlatans. "Hey, little boy, wanna buy my course?" (Sorry, no links. They're easy enough to find without us helping them.) That's too bad because legit sources of passive income can be a great way to make more money.

What is Passive Income?

First up, let's be clear: Actual passive "passive income" (as pitched by the scammers) is a lie. It doesn't exist. When we talk about passive income, we're talking about ways to make minimal money with minimal effort. Does that make sense? And it's a supplement to your main income, not the primary source.

To me, passive income is money that’s earned, usually on a recurring basis, without a significant time investment.

For example, if you own a rental property that brings in $1500 each month, but only requires two or three hours of time to manage, that's (mostly) passive income. Most nine-to-five jobs are the opposite of this. The income you earn is tied closely to the amount of time you spend at the office.

That’s not to say that passive income doesn’t require effort, though.

Often, there’s a lot of upfront work required before income can become passive. Using the same rental property example, before you can make any money, you have to purchase and renovate the property, and spend time advertising and interviewing potential tenants. All of that takes time and money.

Or, take J.D.'s book as an example. When I asked, he told me that he spent four months working full-time in 2009 and 2010 to write Your Money: The Missing Manual. That's not passive! But he hasn't touched the thing since then, and he continues to receive $50 checks every month. That is passive.

Passive Income Ideas You Can Try Today

Some degree of passive income is possible -- and without shyster shenanigans. In this article, I’ve compiled 40 passive income ideas for you to consider. Not all of these passive income ideas will be right for you. In fact, maybe none of them will fit you. That's okay. But I'm willing to bet that many GRS readers will find at least one source of inspiration here that they can use to help increase their income...even if it's only a few dollars per month.

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More about...Side Hustles, Investing

The biggest truth in personal finance

For the past six weeks, I've been hard at work writing my "introduction to financial independence and early retirement" project for Audible and The Great Courses. It's been challenging -- and fun -- to rework my past material for a new audience in a new format.

Naturally, I'm emphasizing two important points in this project: profit and purpose.

  • I believe strongly that you need a clear personal mission statement in order to find success with money (and life).
  • I also believe that the most important number on your path to financial freedom is your personal profit, the difference between your income and your spending. (Most people refer to this number as saving rate. I prefer the term "personal profit" because it's, well, sexier.)

That last point is important.

Too many people want magic bullets. They want quick and easy ways to get out of debt and build wealth. They believe (or hope) that there's some sort of secret they can uncover, that somehow they've missed. Well, there aren't any secrets. Money mastery is a combination of psychology and math. And the math part is so simple a third-grader could understand it. Wealth is the accumulation of what you earn minus what you spend.

There are only two sides to this wealth equation -- earning and spending -- but a disproportionate amount of financial advice focuses on the one factor, on spending, and that's too bad. Sure, frugality is an important part of personal finance. And if you're in a tight spot and/or have a high income and still struggle, then cutting expenses is an excellent choice. But the reality is, you won't get rich -- slowly or otherwise -- by pinching pennies alone.

The biggest truth in personal finance

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More about...Earning Money