“What next?” The third stage of personal finance

I earned more money in 2008 than I've ever made in my life. Get Rich Slowly isn't just a personal success — it's a financial success, as well. Combine this income with an ongoing campaign of frugality — my spending last year was the lowest it's been since I started tracking it — and my financial position is rosy. My plan to get rich slowly is succeeding.

Financial Security

Yet despite my increased wealth, I am not happy. I love what I do — I love writing every day and interacting with readers — but I do too much of it. I spend about 60 hours each week working on this site. I'm neglecting other parts of my life.

I've reached a place of financial security. My income is good. I save and invest. I don't spend frivolously. Now I find myself in the enviable position of having to decide: Should I decrease my workload, or should I use some of my income to invest in the things that make me happy?

Eight years ago, before I started Get Rich Slowly and while I was still deep in debt, I wrote on my personal blog that my goal was “to live a pastoral lifestyle”. What I meant was that I wanted to live simply, with few obligations. I wanted to work from home, to bike on errands, to squash my obsession with Stuff. I wanted to read Dickens and Proust, to spend time with my friends, to enjoy life with Kris.

This is still my ideal.

The entire reason I paid off my debt, increased savings, quit my job, and built a business was so that I could live this pastoral lifestyle. But I'm not living it. In fact, I'm working harder than I ever have before.

I love this job. It's a joy and a privilege to do what I do. But I wonder: Am I burning myself out? Am I sacrificing time for money? Maybe there's some middle ground. Or maybe it's time to move to a new stage of personal finance.

The Stages of Money

Last month, I had an interesting conversation with three GRS readers: John, Tyler, and Victoria. Via comments and e-mail, we discussed an important question: “What next?” Each of us, in our own way, has mastered the basics of money management. We're ready to move from personal-finance goals to the next step. Tyler suggested that we're at the “third stage” of financial maturity.

  • The first stage of personal finance involves learning the basics: understanding compound interest, reducing debt, beginning to save.
  • The second stage is putting the basics into practice: choosing to live frugally, saving in earnest, and pursuing financial goals.
  • The third stage — the “what next?” stage — comes after we've mastered the fundamentals. It's at this point that we begin to ask “why?” Why are we continuing to save? All of our debts are paid, so what's the point? (There certainly is a point, but what is it?)

The four of us exchanged e-mail about what this third stage looks like, what it means to us. For example, Victoria wrote:

I, too, am beyond the first stages of personal finance. I'm focusing on self-education in entrepreneurship and philanthropy this year. I believe that every individual should have a progressive plan for when they move beyond debt, have maxed out their retirement plans, have all they need and have prioritized wants. “What next?” is a question that should be planned for.

John noted that once the basics become habit, there's a change in mindset that needs to occur. Just as we had to shift our thinking in order to reduce our debt and to establish the habit of saving, so too must we learn that there are different types of spending:

What we're doing now is investing. Maybe I'm investing in myself, maybe in other people, or maybe in causes or ideas that I want to help grow, but it is an investment. I am taking value that I have worked hard to build and develop and I am investing it in someone or something else. It's not wasteful spending — I am expecting a return, not necessarily monetary, but for something positive to come out of it. Spending is more of a gut reaction. You buy something to feel better or to make up for something you are lacking. When you are investing, it is a conscious act done with a purpose. There is thought behind it.

Most of the financial information on the internet — and in magazines and books — is directed toward those in the first two stages. There's a reason for this. The fundamentals are essential. But there's more to smart personal finance than just practicing the basics. Where's the information for those who are ready for the third stage? Are subsequent steps entirely self-directed? Is this where a financial planner comes in? And how many stages are there?

Victoria and Tyler and John wrote a lot more; I wish I had room to share it all. (I'll be publishing a guest-post from John on this subject during the next month.) Suffice it to say that our conversation — and recent events — have forced me to think about what money actually means to me.

What Next?

The death of my friend Sparky caused a seismic shift in my value system. I'm seeing fault lines I never knew existed. I still believe in the importance of smart personal finance, and I'm as passionate as ever about getting rich slowly. But I'm ready to explore new aspects of this philosophy.

Over the next few months, I hope to begin learning — and sharing — about other stages of personal finance. I'm going to start adding new flavors to the mix. I'm still going to write mostly about the fundamentals — debt reduction and frugality are important — but I want to write more about the Big Picture. I'll spend time exploring the nature of social capital. I'll try to discover the answer to the question “What next? What's the next step after you've built a solid foundation?” I'm going to write about those times it makes sense to spend — or to invest — for things that make you happy.

Last summer, one GRS reader submitted a guest article about how his friend had bought a new boat. This friend had wanted the boat for a long time, and he could afford it. He knew it would make him happy. So he bought it.

I didn't publish the story. I was worried that it would send the wrong message. I believed it might encourage reckless spending. In retrospect, I was wrong.

The boat story is about that “what next?” step I'm seeking. It's about the third stage of money maturity. It's an example of what is possible if we learn smart personal finance. It's an example of the reason we work hard and practice frugality in the first place. It's an example of the goal.

I'm not going to publish the boat story yet — I'll save it until after Memorial Day so that it makes sense — but I'm going to publish stories like it. I see now that money is not the goal. The goal is to live a life in which we can do and have the things we want — by making conscious choices. Money is a tool for reaching that goal.

I'm going to have fun learning about the third stage of personal finance — and beyond. As always, I hope you'll join me on the journey.

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Financial Jesus
Financial Jesus
11 years ago

It seems to me that it is necessary to talk about and teach the first steps towards financial independence.

When you have finally made enough money to stop worrying about making money – that’s the time to go on towards the third stage of financial maturity. That is the time to make your true dreams come true!
Your dream is never to make a lot of money – a dream can be something that you can do with the money.
Go on and fulfill your dreams J.D!

Studenomics
Studenomics
11 years ago

The third stage? That’s an interesting concept because I always wondered what happended after you managed to “master” the art of personal finance. To be honest I just figured it was the time frame where you save enough money until you can retire. I am personally no where near this level since I am still a student. I am curious to find out how your readers define the third stage.

christy
christy
11 years ago

JD, this is great. You’ve spent years showing how to identify bad money habits, learn new ones, and literally change your life. I think many, many people wonder about that dream-like “what then” state.

You now have the opportunity to model a possible future for all of your readers. How cool is that?

Excellent. I can’t wait to read.

Writer's Coin
Writer's Coin
11 years ago

This is exciting news. I have gotten to the point, as a reader, where I don’t care much for PF stories that are telling me how to do this or that.

I feel I’m way past that.

So I welcome more talk about the big stuff in life. Being a philosophy freak myself, I dig chatting about this stuff.

I, for one, am looking forward to it.

Ron@TheWisdomJournal
11 years ago

I sounds as if you’re experiencing something common to those who reach any goal … what’s next? Humans are goal driven beings and we have to constantly strive toward something, even if that something is a “pastoral lifestyle” or a “simple life.”

CF
CF
11 years ago

JD, great post. I’m at the “what’s next” stage as well, yet it’s hard to break free from the frugality, even when I know it makes sense for my happiness and well-being. While I like to revisit the fundamentals, as they provide good reminders, I certainly look forward to more of the “what’s next” posts.

Beth - Smart Family Tips
Beth - Smart Family Tips
11 years ago

I’m so glad to see this post this morning. One of the reasons that GRS is one of only two personal finance blogs I read anymore is because it isn’t entirely focused on the “first stage.” I’m very interested in personal finance and enjoy reading about it, but as you mentioned in the post, most writing about p.f. is focused on getting out of debt and beginning to save. I don’t think that’s a bad thing; a lot of people need that kind of information, as I did at one time. BUT, I, too, have moved beyond that stage. My… Read more »

Peter
Peter
11 years ago

JD, I think this is great but I think you’re also possibly moving a little hastily. You said, “The entire reason I paid off my debt, increased savings, quit my job, and built a business was so that I could live this pastoral lifestyle. But I’m not living it. In fact, I’m working harder than I ever have before. ” This may be true, but you just got to the point of being debt free (minus home) and starting to gain wealth. While you may deserve some leeway and should certainly start thinking about these other important issues, you have… Read more »

Frugal Dad
Frugal Dad
11 years ago

J.D, I know you are a fan of Dave Ramsey, as am I. To borrow from his popular saying, you have lived like no one else, and now you should live like no one else! Seriously, I would encourage you to spend some earnings on something that adds joy to your world. I’ve found that the most joy I get from money is when I give some of it away. Perhaps there is a local cause you could support with both money and time–which would also have the benefit of helping you get away from GRS a little more often.

Jen
Jen
11 years ago

When I get there, I will have to make the difficult decision on whether to buy a motorhome and travel all the time, or buy land and start a rottweiler and pit bull rescue. Unfortunately, the two are incompatible!

I think if you can’t see the third stage, it makes the saving and sacrificing much harder. It can be done any way, but if you don’t remember that money is not the end goal, it’s the tool, you’ll miss out on something.

Kelly Whalen
Kelly Whalen
11 years ago

Great post! I loved reading this. As someone who is in the first stage knowing that you made it to the 3rd stage gives me hope I can be in those same shoes someday!

I look forward to reading more. 🙂

ABCs of Investing
ABCs of Investing
11 years ago

It will be interesting to see what comes out of this “third stage”.

As for the 60 hour weeks – I wouldn’t worry about that too much. Yes, you could probably cut down a bit especially if you are neglecting other areas of your life – but there is no “correct” number of hours to work.

Luci
Luci
11 years ago

I think it’s really important to have a “third stage” goal, even when you’re at the beginning. For example, my partner and I are in our early twenties, yet we already know that we want to live frugally so that we can scrimp and save up for a retirement where we can simply travel. It’s one of the reasons that we’ve decided that, when the time comes, a mortgage will not be an option–we don’t intend on staying in one place for any set amount of time, so why take on that debt? Even though we’re nowhere close to even… Read more »

SBE
SBE
11 years ago

I’m looking forward learning from you/with you about this next stage of financial responsibility. I think there are ways to apply the basics beyond the necessities. To wit: my husband and I have long been guests at our friends’ beach and lake houses. We decided this year that a medium-term priority for us to is to have a getaway of our own. So, after maxing out our retirement savings (we have no non-mortgage debt), we’re saving $10K/year toward a down payment on a beach house. After five years we’ll have a hefty down payment, and a habit of setting aside… Read more »

Chett
Chett
11 years ago

JD, I HIGHLY recommend reading or listening to the book Happier, by Tal Ben Shahar. If you don’t want to buy it I’ll mail you my copy to borrow. In part of the book he talks about the “Lasagna principle,” how even though it is his favorite food, too much of it or eating it all the time will quickly lead to burn out. He would actually lose his appetite for it if he consumed too much, even though it used to be one of his favorite foods. In another part of his book he discusses the book Zen and… Read more »

Seth
Seth
11 years ago

Very refreshing post – I read a lot of frugality blogs, articles, etc, but this post is one of the best and most thought-provoking in quite a while… That being said, I’m in the 2nd stage and have a ways to go, but reading this definitely makes me look forward to the future and what financial freedom can mean… it’s exciting to see that our minds, free from all the burdens debt and other financial dependence can bring, can open to the exploration of new and exciting ventures in this very short life… I, too, would like the opportunities and… Read more »

HeatherK
HeatherK
11 years ago

“Money is not the goal. The goal is to live a life in which we can do and have the things we want – by making conscious choices. Money is a tool for reaching that goal.”

Brilliant! Thank you for writing this blog and sharing your wisdom. You are so appreciated!

Happiness Is Better
Happiness Is Better
11 years ago

It’s refreshing that you are looking beyond save, be frugal, invest. Certainly there is more to life than being frugal and investing. When a person is financially secure, I don’t see anything wrong with spending money on something that might give someone a great experience, but I think moderation is key. Personally, I wouldn’t choose a boat, but I also didn’t grow up around boats. Maybe the person that desires a boat grew up around boats or for some other reason. If my wife and I were to splurge, I think traveling would certainly be in the plans. Maybe that… Read more »

The Personal Finance Playbook
The Personal Finance Playbook
11 years ago

That was a great post. Good luck finding the next mountain you want to climb. Keep us informed about what it is. And congrats on having such a great year:) – Todd

acwang
acwang
11 years ago

Hi JD, great post. I’ve been following your blog for quite some time and learned a lot on saving, budget, and frugality.

Thanks to you , my wife and I were able put our finances inorder. Your blog has given us the inspiration to reduce our spending, increase our savings. Thanks to you, we just recently achieved our 100K savings milestone.

We are in our early 30’s and still have a lot to learn. But we ready to explore beyond the basics and start the journey towards the 3rd stage of personal finance.

Looking forward to learn with you.

Andy
Andy
11 years ago

JD —

Great post. First off, you should be congratulated for doing a wonderful, wonderful job. You should try and enjoy a little. Get that life balance. It’s important. But don’t be too hard on yourself. You should pat yourself on the back a little. It’s brutally tough to do what you’ve done. My wife and I started attacking our mounds of debt about 15 months ago and we still have a LONG ways to go. Keep doing what you’re doing and have a little bit of fun along the way. You’ll feel better. Keep it up!

Steve M
Steve M
11 years ago

JD, nice to have you back. I want to congratulate you on going beyond the basics of personal finance.

I can’t wait to see what you have in store. This is one of your best posts. Fresh ideas and new direction make this the best PF blog IMHO.

Steve M

April
April
11 years ago

I really enjoyed this article. In fact I also believe that my husband and I are in the third stage. And to enjoy the third stage we are planning a trip to Europe.
But it is still important to remember the basics of saving because before I knew the basics, I was always in debt. And it would be easy get back into debt again. So being able to make those big purchases you still need to be smart about them.

Kevin M
Kevin M
11 years ago

Great ideas, JD. I’ve perused your blog before, but I think you’ve just gained another regular reader. This is exactly the kind of stuff I’m looking for.

My wife and I are debt free other than mortgage and have built up a nice savings. Getting out of debt was “easy” compared to what lies ahead, I believe. It’s both exciting and scary to see the progress of getting to where we want to be.

Verdandi
Verdandi
11 years ago

Hey, this is great!
I, too, have controlled my spending and developed my saving habits. But now I’m struggling with what comes next — like investing in myself and spending on things that make me happy. I’m looking forward to your next posts about these challenges.
Good luck!

DollarDream$
DollarDream$
11 years ago

JD

What’s next? I will tell you what’s next. Start crossing off items from your ‘Bucket List’. Everybody has this list. Some people have it written down and others unknowingly have it in their minds. You only live once and if you feel comfortable financially, why not start enjoying life!

Good luck!!

Suburban Dollar
Suburban Dollar
11 years ago

As a boat owner myself, don’t worry I paid cash for it, I am interested in the boat story and look forward to reading it. People sometimes obsess to much about money and forget to enjoy life. Love your life and your family not your money, enjoy yourself now, because you can’t live forever.

Sandy E.
Sandy E.
11 years ago

When you lose a friend, close in age to yourself, bury him, that’s a huge wake-up call. Not only did you have to face his death, but your own too, because if it could happen to him, it could happen to you, and eventually it will. — you have faced your own mortality now, so you understandably feel the urgency that if you aren’t happy with your life at this moment, then you damn well better make some changes so that you will be. Time is of the essence. And so it’s quite normal that you would be doing some… Read more »

Save&Spend
Save&Spend
11 years ago

Great post!

It reminds me of an article that I read called something like “how are you spending your life?” Time is the most limited resource we have. We need to constantly evaluate our priorities – work, play, and rest.

JerichoHill
JerichoHill
11 years ago

When the world’s been good to you, it’s good to give back to the world. Like JD, I completed the second stage of personal finance. In fact, I may have been nearly completed with that stage before I ever read a post at GetRichSlowly.Org. But GRS was an inspiration, a motivation, because of a community of people with common goals and common ideals with regards to money. And those common goals and ideals were anything but common in 2005. What now? I asked myself that question about 9 months ago. My wife and I are financially set, and we could… Read more »

Jason Unger
Jason Unger
11 years ago

JD — great, great post.

Money is not the goal; it’s the tool you use to achieve your dreams.

When people start making their money work for them, instead of working for their money, they’re on their way to their dreams.

KP
KP
11 years ago

This will be the first comment I’ve posted. I’ve been reading your blog for a while, but I find this post very inspiring and felt the need to express my gratitude. I would say that my husband and I are currently in stage two and, as others before the third stage have mentioned, it will be exciting to hear how you and others are approaching it. But, what I find most promising, is what seems like a commitment to discuss the emotional, social, community and familial aspects of personal finance. These, I think, will help me even more on the… Read more »

Chris
Chris
11 years ago

Great post JD. It makes sense to have your blog mature as your personal situation changes. The good thing about the web is that your readership (as well as new folks) can and will change along with you. It is one thing to get out of debt and establish some level of assets. It is a whole other thing, once you have those assets, to know what to do with them. I work with some pretty wealthy people and it really is funny to see how big of a “problem” having money can be. Obviously it is a good problem… Read more »

Peter Owen
Peter Owen
11 years ago

This is an excellent post. Kind of a “what does it all mean and where do I go from here” post. While I am pretty young (27), I feel as though my wife and I have a leg up when it comes to debt. Though she has several outstanding school loans, we have two cars that are fully paid for and we have been watching our spending. I got laid off earlier this year and there’s no better time to change your spending habits, then when you lose one of your incomes. All that to say great post.

jtimberman
jtimberman
11 years ago

Re: friend’s boat purchase. There’s nothing wrong with spending money on a big ticket item like a ski boat, or a motorcycle, or a sports car (like a Mini!) provided two things: 1. You have the *cash* to pay for it. 2. You understand the rate of depreciation and such a purchase. I don’t know if a single item that has a motor in it that goes up in value. Cars, boats, trucks, RVs, motorcycles, they all go down in value. You shouldn’t have more than 50% your annual salary tied up in things going down in value. So if… Read more »

Mooneroid
Mooneroid
11 years ago

“Yet despite my increased wealth, I am not happy….The goal is to live a life in which we can do and have the things we want” And therein lies the question. What do we want? Fulfillment, purpose, happiness, to make a difference, etc. We all have those intangible desires, and in first and second stage financial maturity, those desires translate into physical and specific needs. But when you get past the physical and specific needs, you move back into the realms of the intangible, and have to make things up, really. What is going to bring you the most fulfillment,… Read more »

KC
KC
11 years ago

I think this is a good move. I’ve reached the third stage in my life and I increasingly have a hard time finding reading material that speaks to this area of my life. It’s quite easy to find information in the first two stages – in fact the market is flooded with it. Maybe you are on to something here…it might be an area where you can truly stand out.

Paula D.
Paula D.
11 years ago

Great and timely post for me. My parents are in what I’m calling stage 4, living off the years of scrimping and saving. It is really hard to get my mother to change her mind and realize she has more than enough to live the rest of her life in comfort.

It’s an uphill battle trying to change the mind set and at 90 and 95 I’m glad they’re still here. I just keep reminding her, this is what you saved for!

For myself, I’m still figuring it all out.

Finally Frugal
Finally Frugal
11 years ago

Isn’t this “what’s next” idea at the very center of the philosophy the authors of Your Money or Your Life wrote about? Isn’t it about streamlining (your debt, your stuff, your obligations) so you’re living closer to your values? That’s why I’m on my frugal journey—not so I can work 50+ hours a week and never get to enjoy my life. I want to have a garden, AND the time to tend it. I want to develop new relationships, AND have the energy to nurture them. I want to travel the world, but not when I’m too old to do… Read more »

kj
kj
11 years ago

This post reminded me of my dad – at least the beginning of it did. My father worked incredibly hard at three jobs for 30 years, then started a fourth job by purchasing a motorcoach and beginning a charters and tours business, which had been a dream of his for some time. After a couple of years spent getting it off the ground, he retired from his other three jobs and focused on his new business. He and my mother built their business from a very small, part time enterprise to a full-time plus gig, adding a second coach to… Read more »

Yup
Yup
11 years ago

It is time to add a financial advice column to the side.

Scott B.
Scott B.
11 years ago

I think about “what’s next” all the time…

So many of us save for retirement and don’t want to spend anything until we retire, etc… but you don’t know if you are going to be around in 30-40 years…

I am not suggesting wasting money now on the off-chance you may die next year… but I don’t think depriving yourself of pleasure is a good plan either… There is a middle ground and it is different for everyone — the trick is to find yours…

Miss M
Miss M
11 years ago

I’m only at stage 2 and will be here for some time. I think we need to put our skills to work for a few years, gaining knowledge and wealth before we’re able to move on to the “what’s next” phase you describe. There is a what’s next transition between stage 1 and 2 as well, many people who fail to move on end up back in debt and having to learn the same lessons again. I think phase 2 is the true education, phase 3 the reward that awaits graduation.

Kevin
Kevin
11 years ago

“…with few obligations” would probably be the key. Lots of people have kids going to college and/or parents (or in laws) who may be in declining health that need help. I am not taking issue with J.D.’s post. But I’m wondering if most people see this type of lifestyle (which is obviously the ideal) in their future? Or is more for people without kids and without close ties to family? I’m not saying there is a right answer here. It would be interesting to hear what other people have to say. Another interesting debate would be is it worth it… Read more »

Scott
Scott
11 years ago

The Parable of the Rich Fool Someone in the crowd said to him, “Teacher, tell my brother to divide the inheritance with me.” But he said to him, “Man, who made me a judge or arbitrator over you?” And he said to them, “Take care, and be on your guard against all covetousness, for one’s life does not consist in the abundance of his possessions.” And he told them a parable, saying, “The land of a rich man produced plentifully, and he thought to himself, ‘What shall I do, for I have nowhere to store my crops?’ And he said,… Read more »

mhb
mhb
11 years ago

I’m definitely not at the third stage yet, though we’re plugging away at stage two. I think I didn’t really believe that this stage ends, even though it makes sense: if we keep up the habits we’ve been cultivating for a few more years, we’ll be in the “what next” position, too. So I’m eager to see how you and other folks are managing that. As to the boat story, I’m put in mind of my husband’s aunt, who owns a boat and brings it out every summer to the state park lake where much of the extended family takes… Read more »

Moneymonk
Moneymonk
11 years ago

I got to the “what’s next” phase about 1 1/2 yrs ago

http://www.moneymonk.net/2007/08/when-personal-finance-gets-boring.html

I continue to read and educate myself, there will always be a new book out

Moneymonk
Moneymonk
11 years ago

GRS,

welcome to the other side!

It’s so beautiful

Teresa A
Teresa A
11 years ago

JD, I think that in your journey to reach this place in your life, you have probably learned a lot about what you really and truly do want. I think your next step is to pursue that want. I too, long for the simple life you have achieved, free from my financial burdens and doing the things I love. I have learned there is much in life that I only thought I wanted. In my soul searching, I found that the one thing I really want is to travel. I want to see the world and all it’s people. I… Read more »

Wesley
Wesley
11 years ago

Thank you, thank you, thank you! I’ve been lurking in the forums and on the site for quite a while without posting a comment (although, this is definitely not my first comment), and this site has been a huge help in getting me past the first two financial stages. I’ve been in the third for about a year or so (no debt of any kind), and I’m definitely wondering “what’s next?”. This post really hit home with me, and I’m looking forward to hearing what comes next. I’ve been dabbling with my own business for the past two years, but… Read more »

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