Sometimes the best personal finance books aren't about personal finance.
In June 2006, for example, I shared a brief review of Steven Pressfield's The War of Art. Ostensibly this book is about creativity and overcoming procrastination, but I found its lessons valuable for pursuing my financial goals. Last year I read Mastery by George Leonard. On the surface, this book has nothing to do with money, yet it's one of the best books about money I've ever read.
John C. Maxwell's Failing Forward is another of this ilk. It's not meant to be a personal finance book, yet I'm willing to bet that more of you can improve your financial lives by reading it than by reading The Automatic Millionaire or Personal Finance for Dummies (though these are both fine books). Why? Because books like Failing Forward apply to your entire life rather than just one part of it.
I've been a full-time professional blogger for more than a year now. It has been a fantastic experience, a sort of dream come true. But blogging for dollars is not without its drawbacks. As I've shared before, I feel socially isolated. I spend most of my time in this office, writing about money.
Also, the income can be irregular. For some bloggers, it is very irregular. One month you might have record earnings — and the next you might experience your own personal financial crisis. Bloggers aren't the only folks who struggle with the fluctuating incomes, of course. Many self-employed people face the same issue, as do those whose pay is tied to commission.
Creating a budget when your income fluctuates can be a frustrating experience. I am sure that each of us finds our own ways to cope. Today, I want to share the method that I've developed.
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Traditionally, most people invested for various vague goals and lumped all of their savings together in a single investment account. That's pretty boring. It's not very inspiring or effective. Purpose-Driven Investing satisfies our need for a purpose and our need for instant gratification by thinking of each of our goals as a separate “basket”. Each of our baskets represents a single goal with a clear purpose that we can see and grow.
What does this mean in the real world? It means that we have a single investment account for every goal. For example, if one of your goals is to take the family on a European vacation, create a separate savings account called “Family European Vacation Fund”. This account or basket contains all of your savings toward that one goal. Every penny in the account is for the European vacation — not for retirement, a new car, your emergency fund, your kids' college tuition, or any other goal.
Each of us has a unique relationship with money. Some have always used it wisely, have saved, have avoided debt. Others, like me, have struggled. I carried consumer debt for 20 years. I didn't open my first savings account until I was 36 years old. But now, after just over four years of intense effort, I feel financially secure. I still make mistakes (boy, do I!), but my momentum is leading me in the direction of my dreams.
Some people — through luck or right action — have good careers with comfortable salaries. Others — through luck or poor choices — face a daily grind in a low-wage job. Most of us fall somewhere in-between.
Seeking change
Each of us is different. We all have different attitudes and relationships to money. Obvious, I know, but it needs to be said. That's why I try to cover a wide range of topics at Get Rich Slowly: we're each starting from a different financial place. I think it's wrong to judge anyone based on their situation. If you're trying to improve, I'm willing to help, no matter whether you're deep in debt or financially secure.
Last summer, as a part of my quest to get rid of clutter, I began to move toward paperless personal finance. I had planned to share my system only once I'd perfected it, but yesterday Daniel e-mailed to ask for a glimpse of its current state.
To go paperless, you might need a scanner (or some other way to convert your documents to digital files). I also recommend using a shredder to dispose of paperwork. (A shredder is one of the best defenses against identity theft.) Here's how my current paperless personal finance system works after nine months of trial and error.
Handling income
Having your employer electronically deposit your paycheck for you is the first step in going paperless. This wasn't an option for me at the box factory. Now, however, I have each of my sources of blog income automatically deposited to my business checking account. This reduces the risk of mail and identity theft, and saves me the hassle of running to the bank.
Today is the last day of Financial Literacy Month. To tie everything together, I thought it would be fun to share an interview my real millionaire next door, a man we'll call John. He used the basic tenets of money management to build wealth and to retire early. Here's how I described John when I first wrote about him last year:
John is a 71-year-old retired shop teacher who lives in a modest ranch house on half an acre, the same house he's had for over forty years. He has an old barn filled with salvaged lumber, outdated appliances, and who knows what else. When he's around, he drives a junkie 25-year-old station wagon. But most of the time, he's not around.
He spends his winters in New Zealand helping friends on a dairy farm. His summers are spent fishing in Alaska. For a couple of months each year, he's home, puttering in the yard. Year-round, he rents his house to boarders. He leads a very active retirement.
Certificates of deposit (often simply called CDs), by definition are time deposits. You give your money to the bank and then promise not to touch it for a specific length of time. In general, the longer you agree to let the bank keep your money via a CD investment, the higher the interest rate you will receive.
If certificates of deposit offer higher returns than a savings account, then why doesn't everybody use them? The primary reason is that a CD investment is less liquid than a savings account in that you can't just move money in and out without penalty as you can in a savings account. You can take your money out of a CD before it “matures,” but you are docked interest when you do. In fact, it is typical for a bank to penalize the interest amount even if it hasn't been earned (meaning you could lose part of your principal if you close your CD early).
Anatomy of a CD
I was fortunate to win a $1,000 6-month certificate of deposit from ING Direct recently. (I never win anything!) Looking at it might be instructive:
My wife and I have begun to explore the idea of taking a trip later this year. We're in the preliminary stages of our research and budgeting. Though we aren't ready to book anything yet, it's fun to look at what's available, and to dream of where we might go.
Over the weekend, I polled my followers on Twitter to ask their advice for finding great travel deals. Here are some of the tips and websites they recommended. I'm sure I'll refer to this list often in the coming months.
Yesterday morning was a rough one for me. It's a day I both dread and crave every year: Steve Jobs' Macworld Conference keynote address. I'm a Macintosh fanboy from way back, and as other Mac fanboys can attest, there are few things more dangerous to our wallets than new products from Apple.
In fact, there's almost a ritual to the whole thing. In the weeks leading up to the Jobs' speech, the rumor mill begins to grind. Will there be a new iPhone? iPod upgrades? A tablet computer? After the holiday hubbub has died, visions of shiny new laptops begin to dance in our heads.
On the morning of the keynote address, geeks everywhere eagerly refresh browser pages containing live coverage of Jobs' speech. Yesterday, Nickel and I sat drooling over our keyboards and chatting via instant messaging while watching the updates stream in.
Twenty years ago, I was a freshman in college. I was a poor kid from a poor family, but my roommates came from wealth. In order to fit in, I went out and picked up a department store credit card. I bought some new clothes, an electric shaver, and a bottle of cologne. From that day on, I've been in debt.
Getting Hooked
My debt grew slowly at first. The department store credit card had a $500 limit. I knew that I shouldn't come close to the limit, and that I should pay the card off, but within a year I'd maxed it out and was only making minimum payments.
By the time I graduated from college in 1991, I had acquired two additional credit cards. I was glad I had them, too — when my job plans fell through, the credit cards became my emergency fund. I lived off them for months. I also bought a brand-new Geo Storm. Within six months of graduating from college, I was unemployed and carrying $20,000 in debt.
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Last summer, as a part of my quest to get rid of clutter, I began to move toward paperless personal finance. I had planned to share my system only once I'd perfected it, but yesterday Daniel e-mailed to ask for a glimpse of its current state.
Yesterday morning was a rough one for me. It's a day I both dread and crave every year: Steve Jobs' Macworld Conference keynote address. I'm a Macintosh fanboy from way back, and as other Mac fanboys can attest, there are few things more dangerous to our wallets than new products from Apple.
