Debt Settlement Companies that You Should Consider

People get debts such as a credit card debt, a personal loan or a medical debt among others. However, when experiencing difficulty in paying the debt and are looking into the viable options that you have, one needs to educate themselves about debt settlement services and what they entail. It is also essential that one gets to know more about some of the best debt settlement companies that are available.

To begin with, debt settlement involves getting into a program with a debt settlement company. The company then gets to engage with the creditor thereby trying to negotiate on behalf of the person who owes a debt. This is in an effort of having the creditor to forgive part of the debt. However, it should be noted that this option is only available to those who are experiencing financial difficulty and the loan involved in unsecured.

This program will direct that the client ceases to make payments to the creditors and instead open an account with the debt settlement company. Every month, you will deposit a given amount to that account. Depending on the amount owed, the settlement company will commence the negotiation process. If an agreement is arrived at, you will hand over the money from the account to the creditors. As one considers reaching out to the best debt settlement companies, it is important that you know that this program comes with its advantages and disadvantages.

Some of the best debt settlement companies that might be at your disposal include;

1. National Debt Relief

This debt settlement company has proved its value and thus been deemed as one of the best debt settlement companies. It is highly praised as it has helped people by reducing their debts by up to 49 %. In addition, their customer service is excellent because they have representatives who can promptly take clients through what the program is about.

Their website has been acknowledged as being very informative as it includes all the vital information that can help a potential client to make an informed decision. Also, clients who get into a program with this company are in a position to keep track of their progress through a dashboard. It is important to note that this company only operates in 41 states. However, its accreditation with the IAPDA and AFCC goes a long way towards proving that it deserves to be among the best debt settlement companies.

2. Freedom Debt Relief

This company features among the best debt settlement companies because of their fantastic customer services. Not only is it one of the biggest debt settlement companies but also it has been around for more than a decade. Given the nature of the relationship between these companies and a client, it is important for a client to identify a company which has excellent customer services. This is exactly what Freedom Debt Relief provides. A major benefit which associated with this company is the instantaneous responses to inquiries. The representatives who are involved also give accurate information as they undergo a three-month training before they start interacting with customers.

Additionally, those under this program are provided an interactive Client Dashboard from where they can learn about the progress that is being made as to the settlement of the debt. This company is also accredited with the Better Business Bureau and is operational in more than 30 states in the USA.

3. The New Era Debt Relief

This is definitely in the category of the best-known debt settlement companies as of now. A unique feature that it has is that a representative is attached to each client that the company has. This is in an effort to achieve a more personalized and efficient customer service system. The representative is charged with the responsibility of keeping the client in the loop with what is happening regarding their debt settlement.

Further, this company is well known for being transparent with their clients. They have a section which highlights the truth on issues such as the fees that will be charged and the amount of debt that is likely to be reduced among other important details. This transparency has contributed a great deal towards getting this company on the list of the best debt settlement companies.

As one considers this option, it is important to be aware of both the pros and the cons that come with it. To begin with, indeed this option does have its benefits. The biggest of which is that one stands a chance of having part of their debt reduced. Also, you can reduce the amount that goes towards paying the loan from what it currently is to an agreed amount with the best debt settlement companies.

However, the disadvantages include having to pay a fee to the debt settlement companies for the services that they have rendered. One should also be aware that by doing a debt settlement, it will have some negative effect on their credit score. This is because your debt will be declared as being delinquent when you stop making payments to the creditor.

A client’s credit score might lose points as a result. In addition, the IRS will consider the forgiven debt as income and thus subject it to taxation.

In conclusion, there are various companies which offer debt settlement services. However, those who are looking for quality services, are advised to hire the services of among the best debt settlement companies.

How to Choose the Best Type of Student Loan

Student loans exist to help financially needy students get through college. Sometimes grants and scholarships do not cover the whole tuition fee, or you fail to get them. The next option you have is to consider getting a student loan. Well, both the government and private banks offer loans, but the government has more friendly terms such as lower interest. Let us look at the best student loans to consider.

1. Government/federal loans

There is a variety of loans within the federal government. Apart from the loans offering lower, fixed interest, they give borrowers several repayment plans. Your credit history is not a requirement when applying for a federal loan.

The other advantage of getting a federal loan is that if you get employed in the public service sector, you may access loan forgiveness plans. Federal loans can also be subsidized making them more affordable for students. You will start making payments six months after graduating. If you have decided to borrow a federal student loan, it’s mandatory to fill up a FAFSA which is a ( Free Application for the Federal Student Aid) form online. From here, you will find loan options that suit your needs.

2. Private loans

When grants, scholarships, and federal loans are not meeting your financial needs at school, it is time to consider the private sector. Banks that offer best student loans understand the higher risk the loans pose. They lack collateral or assets. For this reason, their loans have high-interest rates.

One concern about private loans is they require a great credit score. Many students fail to achieve a good score forcing them to get a cosigner. Unlike federal loans that have fixed rates, private loans have variable rates. This depends on changes in the market.

While the government can offer forbearance and defer payments due to hardships, private banks do not provide such privileges. Even if they allow forbearance, it is up to them to decide whether to grant you forbearance or not. There is no guarantee that you will get it.

Therefore, only go for a private loan when a federal loan is not enough for you.

When do you need a cosigner for a private loan?

If you have a weak credit history, think about getting a cosigner. Such an arrangement may earn you lower rates on your loan. Remember to choose a loan with a fixed interest rate so that market fluctuations do not affect you. Through cosigning, you will be able to boost your credit.

Lenders release your cosigner when they believe you are going to pay them. They determine this after you have left school and have made several payments on time within one to four years. The other terms of release vary from lender to lender.

As a cosigner in a student loan, there is a risk. If the borrower does not make payments, you will be the one to cover them. Late repayments also affect your credit. Therefore, make sure you sit down with the borrower, know him or her and agree on terms of your cosigning relationship.

As you search for the best student loans online, you need to understand the following terms.

Loan limit

Both private and federal loans have a limited amount of money you can borrow. With a federal loan, your limit will be determined by whether you are a dependent or independent student. If you are in graduate or professional school, the amount of money to borrow will be higher for the obvious reason that tuition fee at these levels is higher. Whatever loan limit a lender offers, just borrow what you need.

Loan consolidation

Loan consolidation is applicable when you acquire several student loans. It eases payment and lowers rates. The best student loans bank should be able to consolidate a private and federal loan. Nonetheless, loan consolidation only works after completing school. Before deciding to consolidate, remember you will miss federal offers, for instance, lower interest rates, forbearance and loan forgiveness. The consolidating entity pays your loans then gives you new terms and rates.


You are given forbearance if you are facing financial hardship. The lender allows you to pay less than the full amount. However, interest keeps accruing and there are penalties if you do not pay within the forbearance period.

Help and support

The best student loans provider is available for customers. The lender should quickly attend to your concerns about your account and payment. Look out for support avenues such as chat services, phone, and email on lender websites.

Paying back loans

There are three ways for paying your lender. You can pay after graduating, pay interest while still in school or pay the principal amount plus the interest when in school.


Student loans are helpful. However, it is important to keep in mind the amount you need and select the best student loans to cover your tuition fees.

49 things I’ve learned during 49 years on Earth

Happy birthday to me! Today I turn 49. Here’s a photo from my third birthday. (I’m tucked just behind Mom, opening a present.)

To celebrate my 49th birthday, I want to share 49 nuggets of wisdom I’ve picked up during my time on this Earth. These are things I’ve found to be true for me — and, I believe, for most other people. (But, as always, remember that each of us is different. What works for me may not work for you.)

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 update to an article I’ve shared before on my birthday.

Some of the ideas that follow 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 49 principles I’ve found to be true during my 49 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?”

How I Found Freedom in an Unfree World: A Handbook for Personal Liberty

Disclosure: If you follow this link and make a purchase, Get Rich Slowly earns a commission (at no additional cost to you).

  • 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 last summer, 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.

  • Always do your best. Your best varies from moment to moment. Some days in the gym, for instance, I’m able to lift heavier weights than on other days. Some days I can run faster than usual; some days, I’m slower. That’s okay. What matters most is that I give my best effort every time. No matter what you do, do it as well as you can. This is one of the keys to success and happiness. [This is the last of The Four Agreements.]

The Four Agreements: A Practical Guide to Personal Freedom (A Toltec Wisdom Book)

Price: $8.86

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  • Effort matters more than skill or talent. “Effort counts twice,” argues Angela Duckworth in Grit: The Power of Passon and Perseverance. Skill, she says, is talent multiplied by effort. The more you do what you’re good at, the better you get. But achievement is the product of skill multiplied by effort. Effort counts twice. (This may be why psychologists say it’s better to praise your child’s efforts instead of her results. Praise her for spending time on her homework, not because she got an A.)
  • Embrace the imperfections. If you do what is right, and you do your best, then there’s no reason to feel bad about the outcome. Nobody’s perfect. Don’t beat yourself up if you make mistakes. And don’t sweat it if other people get upset with you too. If you’re doing the best you can, that’s good enough.
  • The perfect is the enemy of the good. Too many people never get started because they don’t know that the “best” first step is. You don’t know the best guitar, so you never learn to play. You don’t know which Spanish book is best, so you never learn to speak. You don’t know how to bench press, so you never go to the gym. Don’t worry about getting things exactly right — just choose a good option and do something to get started.
  • There’s no single “right” way to achieve success. Each of us is different. We have different goals, personalities, and experiences. We each need to find the tools and techniques that are effective for our own situations. There’s no one right way to eat, love, pray, or pay off debt. Don’t believe anyone who tells you there is. Experiment until you find methods that are effective for you. (Note, however, that there are wrong ways to do these things — steer clear of obvious bad choices.)
  • Be present in the moment. Accept life for what it is, without labels or judgment. Yield to events; don’t block them. Go with the flow. Nothing exists outside the present moment: Don’t dwell on the past or worry about the future. Improve the quality of the here and now. When you do something, do that thing. When you’re with somebody, be with them. Don’t multitask. Put away the smartphone or the computer or the book. Be all there. [This is an ancient concept made popular by The Power of Now.]
  • Spirituality is personal. The desire for one person (or group) to impose her (or their) beliefs on others is the source of much of this world’s strife. Believe what you want, and let others do the same. “There is no need for temples, no need for complicated philosophies. My brain and heart are my temples; my philosophy is kindness.” — the Dalai Lama
  • Be skeptical — but keep an open mind. Don’t believe everything you hear — from others and from your own internal self-talk. Practice healthy skepticism. But keep an open mind. Don’t automatically assume that everything is fake or false. Do your best to analyze the things you see and hear to determine whether they actually make sense.
  • Don’t yuck someone else’s yum. Just because you don’t like something doesn’t mean it’s bad. Pursue your passions, and let others pursue theirs. If you don’t like something, fine. Don’t make a big deal about it.
  • You can’t prevent every possible thing from going wrong. Don’t even try. Instead, learn to deal effectively with minor problems. You’ll build self-confidence, which will lead to an increased willingness to take calculated risks. (Similarly, you can’t make everyone like you. It’s foolish to try.)
  • Be flexible. Goals are good, but single-minded devotion to a goal can often blind a person to other opportunities. And it’s a mistake to cling to one path out of sense of obligation. If you enter law school and discover you hate it, then quit. Don’t endure years of misery because you feel like it’s expected of you. That’s dumb. You have more options than you think, but you may need to slow down and open your eyes in order to see them.
  • Be encouraging. Support the creative, positive actions of others. There are a lot of people out there who want to tell others what’s wrong with their actions, why the things they want to do can’t be done. They’re quick to criticize small mistakes instead of praising the greater effort. Don’t be this way. Do what you can — in ways both big and small — to help others achieve their goals. [Taken from Action Girl’s Guide to Living.]

Keep Dropping Keys All Night Long

  • You are the author of your own life. Everyone has a story they want to tell you about yourself. Society tries to push a “standard narrative” on us about how life should go. Ignore these stories. If you don’t like the story you’re living, it’s up to you to change the plot. You didn’t write the beginning of your story, but you have the power to choose the ending. Choose and adventure you love instead of one that makes you unhappy.
  • You don’t need permission. When we’re young, we wait for our parents and teachers to say it’s okay to do the things we want to do. As an adult, you don’t need permission from anybody else. Do you want to quit your job and travel the world? Do it. Do you want to learn how to ride a motorcycle? Do it. Don’t wait for somebody else to give you the go-ahead. You are the only one who needs to give yourself permission to do these things.
  • Don’t let fear guide your decision-making process. My girlfriend Kim told me this on one of our first dates, and it echoes something my accountant once told me. He says that too many people make money moves based solely on the tax repercussions. “That’s dumb,” he told me. “You should do what you want because you want to, not because of the tax hit.” This applies in all aspects of life. Make decisions based on what you want to do. Move toward something, not away from something.
  • Action cures fear. Thought creates fear; action cures it. What we’re actually afraid of is the unknown. We like certainty, and choosing to do something with an uncertain outcome makes us nervous. Taking the first step can be scary, but each additional step becomes easier and easier. When you act, you remove the mystery. Action creates confidence. It creates motivation. (Most people think motivation comes before action. They’re wrong. Action leads to motivation.) [This is an old idea but this phrasing is from The Magic of Thinking Big.]
  • Action is character. If you never did anything, you wouldn’t be anybody. Superman is a superhero because he does heroic things, not because he talks about doing them. And a writer is a writer because she writes, not because she talks about writing. What we say doesn’t matter; it’s what we do that counts. We are what we repeatedly do. [From F. Scott Fitzgerald’s notes on The Last Tycoon.]
  • You’re more likely to regret the things you don’t do than the things you do. That’s not to say you should be an asshole, or that you won’t regret making big mistakes. But generally speaking, you’re more likely to be sorry that you didn’t introduce yourself to the barista at the coffeehouse, didn’t go bungee-jumping with your friends, didn’t stay in touch with your friends. [This is the central idea in The Top Five Regrets of the Dying.]

The Top Five Regrets of the Dying: A Life Transformed by the Dearly Departing

Price: $7.78

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  • Give without the expectation of return. Help other people — even if it costs a bit of money or time. Don’t always expect a financial payoff. Don’t get offended if your effort isn’t acknowledged or appreciated. Help because it’s the right thing to do, not because you want to be noticed.
  • When good things happen to people you know, help them celebrate. Their success does not diminish you. Be happy when your friends and family achieve something cool. If a co-worker gets a raise, be supportive and not jealous. Approach life as if it were a win-win game. Because it is.
  • Happy people almost never criticize, says Steven Pressfield in The War of Art. “If they speak at all,” he writes, “it’s to offer encouragement.” This is true in my experience, as well. Being sarcastic and cutting doesn’t mean that you’re smarter than the people around you. Most of the time, it simply means you’re an asshole. And that leads me to the next lesson…
  • Staying in a relationship out of a sense of obligation or pity is not a good reason. Sometimes you really do have to walk away — from a friendship, from a family member, even from a romantic partner. Yours isn’t the only story in this world; sometimes it’s better to be somebody else’s villain than to make yourself miserable.
  • You have the freedom to choose how you respond to any event. In the classic Man’s Search for Meaning, Victor Fankl writes, “Everything can be taken from a man but one thing: the last of human freedoms — to choose one’s attitude in any given set of circumstances, to choose one’s own way.” He based this philosophy on his personal experience in a Nazi concentration camp. When that jerk cuts you off on the freeway, you get to choose if you’ll get angry or give him the benefit of the doubt. When you get stuck behind the old lady in line at the grocery store, it’s up to you how to respond. When those stupid kids next door vandalize your lawn, you get to choose how you feel about it.
  • You’ll be happier if you focus on efforts and attention only on the things you can control. Each of us has a large number of things about which we’re concerned: our health, our family, our friends, our jobs; world affairs, the plight of the poor, the threat of terrorism, the current political climate. Within that Circle of Concern, there’s a smaller subset of things over which we have actual, direct control: how much we exercise, what time we go to bed, whether we leave for work on time; what we eat, where we live, with whom we socialize. You’ll be happier and more productive if you dedicate yourself to your Circle of Control and ignore your Circle of Concern. [This notion is part of Julian Rotter’s social-learning theory of personality, but was popularized by Stephen Covey in The Seven Habits of Highly Effective People.]

[Circle of Concern vs. Circle of Control]

  • You can have anything you want — but you can’t have everything you want. Everything is a trade-off. You have limited resources. When you choose to spend — time, money, brainwidth — on one thing, you’re also choosing not to spend on others. Do your best to spend only on the things that matter most to you. Don’t really give a rat’s ass about Big Bang Theory? Then why are you watching it? Spend your time and energy on something you do care about.
  • Make room for the big rocks first. It’s easy to let your time and energy be sucked up by trivial errands and tasks. You find you no longer have space for the things you thought were most important. Don’t do that. Always carve out time and attention for those people and activities you value most. If the house doesn’t get clean because you were hanging out with a friend, so what? If you didn’t mow the lawn because you went to the gym instead, that’s a good thing. Tackle the important, then the trivial.
  • If you want to avoid feeling overwhelmed, create margin in your life. Simplicity brings peace. Many people have tried to beat this into my head over the years, but it wasn’t until I read The Life-Changing Magic of Tidying Up that I really understood. Every item you own, every meeting you schedule, every email you receive — every obligation in your life carries both psychic and physical weight. Traveling in an RV for fifteen months, I learned to love owning very little. It was freeing! And it was freeing too to not be a slave to a schedule. As much as you can, build margin into your life so that you can feel peaceful and free.

The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing

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  • Be your own advocate. Don’t be afraid to ask what you want and what you need — especially if it’s help. Too often, we struggle in silence when we could make our lives better simply by asking a question or two. Better to look ignorant for a moment than to remain ignorant for a lifetime. Don’t wait for others to solve your problems. Be proactive. Find answers. Take action. Learn to help yourself.
  • It’s always best to be proactive. In life, there are often default options. If you don’t consciously and deliberately choose something different, you get the default. When this happens, your life shapes you instead of you shaping your life. Most people go through their entire lives in default mode. They accept what life hands them without question. They’re reactive. Choose to be proactive instead. If you don’t set your own goals, somebody else will set them for you.
  • Quality tools can make life better. For years, I equated low cost with smart spending. Now I know that’s not always the case. Now, I’m willing to spend to buy high-quality things when I know I’ll use them all the time. I have high-quality boots, for instance, and an expensive computer. I’m okay with that. I walk everywhere I go, so the boots are worth it. And my computer is my livelihood. The expense is worth it because it makes working a joy. For items used daily, buy the best. If you don’t use it often, of if it’s not important to you, buy the cheapest possible.
  • The meaning of life is the meaning you decide to give it. Some people are searchers. They wander through life looking for answers…but rarely find them. Others accept without question what an outside authority tells them is true. I believe that the meaning of life comes from within, from the things that you lean to prioritize and value. Nobody is going to tell you what life should mean to you; you have to decide that for yourself.
  • You are the boss of you. Your circumstances might not be your fault, but they’re your responsibility. Don’t blame anyone or anything else for your situation, and don’t expect somebody else to rescue you. If you don’t like where you are, resolve to do what it takes to make a change.
  • Don’t compare yourself to others. I preach this often at Money Boss. Comparing yourself to others is counter-productive. Generally one of two things happens: You either feel shitty because you’re not as good as the other person, or you feel superior because they’re not as good as you. In reality, nobody is better than anybody else. We’re just different. If you want to compare yourself, compare Present You to Past You — and do what you can to make Future You a better version of why you are today.
  • You can’t get rid of a bad habit; you can only change it. “You can never truly extinguish bad habits,” writes Charles Duhigg in The Power of Habit. “Rather, to change a habit, you must keep the old cue, and deliver the old reward, but insert a new routine.” He calls this the Golden Rule of Habit Change. To change your habit loop, you have to do something different when the habit is triggered. Let me give you an example: I used to be a stress-eater. I’d eat junk food — and lots of it — any time I had a deadline or a conflict with a friend. The act of eating soothed my mind. The stress was the cue (the trigger), and the rush was the reward. No surprise, this habit made me fat. I’ve managed to (mostly) change the habit loop by walking instead of eating. Now if I get stressed, I go for a walk. I get a similar rush for a reward, but my actions are healthier.
  • Positive reinforcement is powerful. When Tahlequah performs a desired behavior — sitting, coming when called, being nice to the cats — we reward her. She learns to connect the treat with the actions we wants, and becomes more likely to offer them…even when we don’t reward her. What’s true for dogs is true for people too. Does nagging your spouse actually work? Probably not. (In fact, it probably has the opposite effect you intend!) But if you reward the behavior your want, you’ll eventually see it offered without prompting. The same thing is true with children, co-workers, family members, and so on. [This is a fundamental principle of psychology. An excellent source for more info is Don’t Shoot the Dog.]

  • Create your own certainty. Don’t allow yourself to be dependent on the choices and actions of others. I call this “Michelle’s Law” after my friend who taught it to me. But I have another friend — Jenn — who talks about “ensuring success”. When she’s working on something important, whether it’s a relationship or a vacation, she always follows up to make sure that what she expects to happen will happen. This philosophy is akin to the idea that you should trust, but verify.
  • Choose happiness. Do work and play that brings fulfillment. Spend time with people who build you up, not those who bring you (and others) down. Strip from your life the things that take time, money, and energy, but which do not bring you joy. Focus on the essentials.
  • It’s never too late to be great. It takes time to achieve anything worthwhile. But just because you haven’t started yet — or haven’t reached the level your aiming for — doesn’t mean you can’t or won’t make it happen. Don’t be daunted by audacious goals. Are you fifty and want to run a marathon? Start training. Are you sixty and only now thinking of retirement? That’s okay. Better late than never. Are you seventy and want to write a novel? Do it. History is filled with examples of folks who achieve great things later in life. [This argument is made persuasively by Tom Butler-Bowdon in his book, Never Too Late to Be Great.]
  • Be yourself. This is the most important thing I’ve learned during my 49 years of life. For too long, I tried to please others. I tried to be and do the things I thought they wanted me to be and do. As a result, I was unhappy. And most of the time, my actions didn’t have the results I thought they would. They didn’t make others like me any better. Instead of trying to please others, now I’m just me. I’m honest about who I am and what I want. Maybe some of my old friends don’t like who I’ve become. That’s okay. I’ve made plenty of people who do like who I am.
  • “Everybody is talented, original and has something important to say.” — Barbara Ueland, If You Want to Write.

This isn’t a comprehensive list of my beliefs, but it’s a fair survey of my life philosophy. It’s very different from my philosophy when I was 39 or 29. And I’m sure that my philosophy at 59 will have changed in ways that I cannot foresee.

Also note that although I really do believe these things to be true, I also struggle with them. I’m human, just like you. I don’t always live up to my ideal self.

How many of these ideas do you agree with? Which do you disagree with? More to the point: What are the core ideas that make up your personal philosophy?

One Hundred Words

How to think like a billionaire Get Rich Slowly

Whenever you make a choice, there’s a cost.

By choosing to buy one item, you pass on the opportunity to purchase other items. By choosing to do one thing, you pass on the opportunity to spend your time on anything else. Opportunity cost is what we give up in order to have the thing we choose.

Let’s look at an example.

Imagine you own a delivery company. You have $10,000 to spend on new equipment. You could buy a new truck to add to the fleet, but then you wouldn’t be able to replace the ten-year-old computers in the main office. But if you buy new computers, you won’t have as many trucks available to make deliveries. No matter which option you choose, something is lost. That’s opportunity cost in action.

While this concept is applied constantly in business, it’s often overlooked in personal finance.

When you use money for one thing, that money can’t be used for anything else. If you purchase a home with a $1500 monthly mortgage payment, for instance, you can’t use that money to travel or to fund your retirement.

Opportunity costs are neither good nor bad. They’re simply the price you pay to have what you choose. The problem comes when the choices you make aren’t intentional — when you make them out of reflex or habit.

Every time you spend money, there’s an opportunity cost associated with it. But you’re not just sacrificing other choices in the present; you’re also sacrificing your future freedom.

The Magic of Compounding

American statesman Benjamin Franklin is credited with having said, “A penny saved is a penny earned.” In reality, a penny saved is two pennies earned — or more.

When buy something, you spend after-tax dollars. If you were to purchase a new $23,000 Mini Cooper, for example, you’d use money left over after paying the government. But in order to get that $23,000, the average American would have to earn $30,000. The other $7000 — in the form of 5-1/2 weeks of work — goes to taxes.

One dollar saved is worth more than one dollar spent.

In the United States, where the tax burden is low compared to other countries, the average worker must earn $1.33 to have $1.00 left over. (In some countries, a worker might have to earn $2.00 to have $1.00 remaining.)

But it gets worse!

If you spend one dollar you could have invested, you don’t just lose that dollar but any future return you might have earned on it. Assuming typical stock-market growth, that dollar would have a value of $1.93 ten years from now — and $7.20 in thirty years. (This effect is called “compounding”, which Einstein reportedly called “the most powerful force in the universe”.)

Now, watch what happens when opportunity cost and compounding come together.

The Wealth Snowball

You have to earn more than a buck to have a buck; and if you spend that buck, you’re also spending its future value.

On average, when you include taxes in the consideration, each dollar an American spends represents $2.57 of value in ten years or $9.57 in thirty years. (If you live outside the U.S., the consequences of spending that dollar are probably even greater.)

The bottom line? The opportunity cost of spending one dollar today is ten dollars you could have had in retirement.

In fact, this single concept is the cornerstone of billionaire Warren Buffett’s vast fortune. He recognized the idea when he was ten years old and it’s guided his decisions ever since. Here’s a quote from a recent Buffett biography:

The way that numbers exploded as they grew at a constant rate over time was how a small sum could turn into a fortune. [Buffett] could picture the numbers compounding as vividly as the way a snowball grew when he rolled it across the lawn. Warren began to think about time in a different way. Compounding married the present to the future. If a dollar today was going to be worth ten some years from now, then in his mind the two were the same.

This idea is so central to Buffett’s philosophy that the author named the book after it: The Snowball. (It’s a great book, by the way. I recommend it.)

The Snowball: Warren Buffett and the Business of Life

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A lot of experts urge people to use the “debt snowball” method to quickly pay down what they owe. Here at Get Rich Slowly, I want you to apply the same concept to life after debt.

Your goal, like Warren Buffett, should be to create a wealth snowball.

Tom the Turtle on saving and sacrifice

When you look at things like Warren Buffett, it’s easier to see that saving is not sacrifice. When you save, that money’s still spent. It’s just not spent on a Mercedes or a big house. It’s spent buying your future.

The opportunity cost of starting late, a foolish purchase, or a bad investment isn’t lost income or lost compounding. It’s lost time – lost experience and lost life.

I’m not arguing that you should live like a monk. Far from it! But it’s important to consider the opportunity costs of every purchase you make. When you buy something, you should do so intentionally because the opportunity cost of buying on impulse is enormous.

Mindful Spending

I endorse a concept called conscious spending, which I learned from Ramit Sethi, author of I Will Teach You to Be Rich.

“Being a conscious spender is about making your money match up with your values guilt-free,” Sethi says. “It’s about spending extravagantly on the things you love while cutting costs on the things you don’t.” (Some experts use the term “mindful spending” to refer to the same concept.)

Conscious spending means actively choosing to spend on some things and not on others.

Contrast this with how most people spend.

We buy things because we’re expected to. We spend to have what other people have. We sign up for gym memberships that we never use, subscribe to magazines we never read, and pay for golf clubs that get buried in the garage. We make impulse purchases at the grocery store–or even on large items, like computers and cars. In other words, we often spend without thinking.

The opportunity costs of these unconscious purchases are significant. We’re sacrificing our futures for lesser pleasures today.

But with conscious spending, you evaluate every purchase, asking yourself:

  • “Why am I buying this? Will it make me happier? Will this help me meet my long-term goals?”
  • “Would I rather have this now, or would I rather have something bigger and better next year?”
  • “Are there other, cheaper options? Could I borrow this? Could I buy it used?”

Mindful spending forces you to become more aware of every purchase you make.

You Pay the Price for the Lifestyle You Choose

For a long time, I was willing to spend $200 each month on gym and fitness programs because doing so helped me to lose fifty pounds and become fit. I made an active, conscious decision to spend that money, and I made certain that I derived value from it. I recognized that I was sacrificing a great deal in the future, but I believed my improved health was a worthwhile reward.

On the other hand, I’m unwilling to own a new car. Financial considerations aside, I don’t care enough about features and flash to make such a purchase worthwhile. For somebody else, though, the car might be a worthwhile purchase and the gym membership a waste of money.

“There are things we love, and it’s okay to spend on them,” says Sethi. “But you can’t afford to have everything. So ask yourself what you don’t care about when it comes to spending. Choose to spend your money on what you love instead.”

My colleague Todd Tresidder, the Financial Mentor, once explained it to me this way: “Decide the level of comfort that’s right for you. There’s no right or wrong. You just have to be willing to pay the price for the lifestyle you choose.

  • If you choose to save for the future, you give up comfort in the present.
  • If you choose to live large today, you sacrifice a richer tomorrow.

That’s opportunity cost in action. Neither option is correct, but you can’t have both. It’s up to you to decide what matters most. Truthfully, there’s a balance to be had.

When you spend, be sure it’s aligned with your purpose and mission.

Tom the Turtle on choosing a lifestyle

Note: I’m migrating old Money Boss material to Get Rich Slowly — including the articles that describe the “Money Boss method”. This is the seventh of those articles.

Look for further installments in the “Money Boss method” series twice a week until they’ve all been transferred from the old site.

Live the life you want, not just the life you can afford

Over the past decade, I’ve attended a variety of camps and conferences to speak to people about money. Most of these events are money-related, but every once in a while I’m asked to speak at a non-financial function.

In 2011, for instance, I was on a panel at the International Game Developers Association summit, which is a conference for videogame designers. (How perfect for nerdy ol’ me!) My colleagues and I spent an hour discussing the “gamification” of personal finance — learning to manage money using techniques more commonly associated with games.

Think of your favorite games — especially video games. What makes them fun? What makes you want to play again? How can these elements be extracted from game design and used in real life? In this case, for promoting smart personal finance? Over the past few years, I’ve seen this idea discussed a few times, but nobody’s ever really taken the time to explore the idea at length. Until now.

Today, former GRS staff writer Kristin Wong released her first book, Get Money, which is all about applying game-playing principles to money management. “This book gamifies personal finance so that you’re motivated to take control of your money,” Wong writes. “Most books have chapters, but being more action-oriented this book has ‘levels’ that you must ‘beat’.”

I love this concept, and I love this book.

Like any good modern money manual, Get Money includes a supporting website that features downloadable templates and worksheets. Plus, I’ve really been enjoying Kristin’s YouTube channel.

Stage I – Power Up

Wong groups Get Money‘s “levels” into three stages, the first of which covers core financial topics.

She begins where I’ve learned to begin with people new to money management: She asks her readers to “define their mission”. In every good game, you have a clear objective that you’re trying to complete. To win at the game of money, you need clear objectives too. “The secret to successfully managing long-term,” Wong writes, “is to think of money as a tool to support what matters to you, then give your money an actionable mission.”

After you have a plan, your first assignment is to build an emergency fund to cope with unexpected expenses. Why is this so important? Wong writes, “As unnecessary and as much like overkill as it may seem, an emergency fund is a crucial first step toward getting your money in order for one simple reason: it empowers you.”

Next, Wong walks readers through the thrill of thrift and budgeting. Okay, thrill might be stating it a little strong. But Get Money does a great job of explaining why frugality is a virtue, how it’s a practical tool that allows you to cut costs on the unimportant things so that you can spend more on the stuff that matters.

Wong also explains how budgeting doesn’t have to be restrictive. Done right, a budget helps you create a plan to achieve the mission you’ve set for yourself, a way to “win” the game of money.

To trim spending, Wong encourages readers to consider the budgeting inverted pyramid:

When you make cuts, start at the top of this pyramid and work your way down. Start by trimming “variable wants”, then move on to “fixed wants”, and so on. I had never heard of this concept before, but I think it’s valuable. (And, in fact, I intend to incorporate the idea into a workshop I’m doing in June!)

The final “level” of Stage I is thinking about how money affects your relationships.

Stage II – Optimize

As with any game, after you’ve mastered the basics, it’s time to move on to more difficult (and more rewarding) challenges. Once you’ve learned how a game’s controls work and what the essential mechanics of gameplay look like, then you’re ready for more interesting obstacles.

In the game of personal finance, that means learning how to optimize and upgrade your actions and accounts.

If you havne’t already done so, for instance, Wong recommends taking the time to research the best bank accounts and credit cards. If you’re stuck with a Wells Fargo checking account that charges you a $10 per month service charge, it’s in your best interest to find a free checking account — and a savings account that pays more than 0.01% interest. If your credit card doesn’t offer perks and rewards that work with your life, find a better one.

For those with debt, gamification is a perfect way to pay it off. Instead of letting the process drag you down, turn debt reduction into a “mini-game”. That means doing things like using the debt snowball, sure, but it also means looking for ways to “supercharge” debt repayments: taking advantage of windfalls, selling the stuff you no longer want or need, and looking for other ways to earn more money.

But optimization isn’t just about paying off debt and building a better credit score. Wong spends an entire chapter teaching how to “de-consumerize your brain” by overcoming emotional spending, avoiding cognitive biases, and making mindful decisions with money.

Stage III – Grow

The final stage of Get Money‘s financial gamification challenges readers to grow their wealth snowball. “Concepts like budgeting, frugality, and conscious consumption are important,” Wong writes, “but nothing will turn your finances around better than simply making more money.”

In this final section, she covers three essential topics:

  • How to invest and save for retirement. “Investing is not just for some elite group of rich folks,” Wong writes. “It should be for all of us.” She covers the basics of investing, including asset allocation and passive indexing. Plus, Get Money includes a discussion of which retirement account to use when.

Retirement Accounts flowchart

  • How to get over your fear of negotiating and start asking for more money. Revisiting a subject she introduced earlier in the book, Wong spends an entire chapter (or “level”) explaining the benefits of negotiation — then showing readers how to develop the confidence to put the ideas intro practice. She stresses that done properly, negotiation isn’t confrontational; it’s a way to give somebody else what they want while making sure you get what you deserve.
  • How to make money in your spare time with a side gig. Because Wong has profited from side hustles — doing everything from freelance writing to selling used boots on eBay — she sees it as an excellent path to increasing income. The final chapter of her book gives readers practical tips for finding ways to earn more money.

By the time a reader has worked his way through Get Money, it’s Wong’s hope (and my belief) that he will not only be well on the way to winning the game of personal finance, but that he’ll move forward with a sense of financial confidence. She wants readers to feel more in control of their money.

“When you feel in control,” Wong writes, “you’re more likely to make decisions that maintain your control, and that sense of power becomes a self-fulfilling prophecy.”

“Twenty bucks ins’t going to change your situation overnight, but the outcome is less important than the process. The point is to simply make a choice because the very act of making a choice helps you establish control.”

Game Over

Often, reading a money book is passive. The author gives you stats and concepts, but never asks you to act. Get Money is not passive. Every chapter explores a key financial concept, then asks the reader to put the ideas into practice.

Wong spends a lot of time urging readers to negotiate, for instance. She provides detailed instructions on when and how to do this, then asks readers to set aside an afternoon to actually put these negotiation skills into practice by haggling for better deals on every monthly bill.

Get Money contains dozens of exercises like this. Plus, it’s packed with advice from subject-matter experts (like tax advice from a tax expert) and links to supporting material and further reading. It’s very much a book intended to help readers actively take control of their financial lives.

When Wong applied to be a GRS staff writer in 2012, I was impressed with her ability to communicate complicated subjects. She was able to take boring stuff like frugality and saving, and make those topics relatable to the average person. Plus, her articles were funny.

Unsurprisingly, Wong exhibits these same strengths in Get Money. Most money books tend toward boring and stale. Not this one. Get Money is both funny and wise, packed with practical tips for how to play the game of money — and win. If you want to take your financial life to the next level, you need this book!

Get Money: Live the Life You Want, Not Just the Life You Can Afford

Price: $16.99

Disclosure: If you follow this link and make a purchase, Get Rich Slowly earns a commission (at no additional cost to you).

A simple (but effective) investment strategy Get Rich Slowly

As you spend less and earn more, you’ll begin to earn a profit and save more money. Maybe at first you’ll have a few dollars per month in surplus. Eventually, however, you’ll find that you’re saving 10%, 20%, or even 50% of your everything you earn.

The average person spends his surplus on whatever wants come to mind. Instead of using the money to get ahead, he stays in the same place. Or, worse, he falls behind by taking on debt. A smart money manager puts her profit to use by investing for the future.

At first, you’ll pursue short-term goals.

  • If you’re in debt, get out of debt. Destroying high-interest debt offers the best possible return for your money.
  • Build a cash reserve. It’s smart to have money in a savings account to cover short-term emergencies.
  • Invest in yourself. Remember: the more you learn, the more you earn. Increase your skills and education. Update your wardrobe and improve your health. Become a better you.
  • Pursue your personal mission: fund college funds for the kids, pay off the mortgage, start a business, spend a year in southeast Asia. Use money as a tool to improve your life.

After your near-term wants and needs are satisfied, it’s time to look farther into the future, toward retirement and Financial Independence. You know what that means, right? It’s time to invest in the stock market!

Investing doesn’t have to be difficult. If you keep things simple, you can invest yourself and receive reasonable returns — all with a minimum of work and worry.

First, lets look at what not to do.

The Worst Investor I’ve Ever Known

Allow me to introduce you to the worst investor I’ve ever known. His name is J.D. Roth:

That’s right, I’m using myself as an example of what not to do when investing.

You see, for a long time I didn’t understand how the stock market worked. I treated it as if it were a casino. I picked a stock, put all my money into it, and crossed my fingers. I took risky gambles hoping to strike it rich.

Unsurprisingly, I lost a ton of money.

  • During the late 1990s, I formed an investment club with some close friends. Each month, we contributed money and picked where to put it. We chose stupid, stupid stocks — whatever was riding high at the moment. When the tech bubble burst, so did our bankroll and our enthusiasm.
  • In 2000, enamored by PalmPilot, I bought stock in the company that made the devices. I paid close to $90 per share. Just over a year later, the stock had lost 90% of its value. Oops.
  • One of my friends worked for The Sharper Image. In 2007, the company was struggling and the stock was in the toilet. At dinner one night, my friend told me how management was trying to turn things around. Sounded promising, so I put my $3500 Roth IRA contribution into the company’s stock. The company soon went bankrupt and my 2007 IRA contribution is now worth nothing.
  • During the banking crisis, I invested in Countrywide Financial. “Countrywide is on your side,” right? Wrong. Yet another stock that went to zero.

Look, I was dumb, and I know it. Unfortunately, my story is far from unique.

My father bought gold at over $500 per ounce only to watch it fall to $300 during the 1980s. More recently, I have friends who’ve bought Bitcoins for $700. And readers often tell me about how they’ve lost by speculating in the stock market like I did.

In the past decade, I’ve mended my ways. I no longer treat the stock market like a casino game. Today, I take a different approach, the same strategy recommended by Warren Buffett and lots of other smart folks.

Before I share this strategy, however, let’s talk a bit about philosophy.

The Get Rich Slowly Investment Philosophy

Your investment philosophy contains the core beliefs that guide your actions and decisions when saving for the future. It’s like your money blueprint for the stock market. Without a defined philosophy, your choices are arbitrary. You buy and sell based on whim and emotion. When you have a clear ideology, your options become limited to strategies that fit your beliefs.

Here’s how author Rick Ferri describes the difference between investment philosophy and investment strategy:

“Philosophy is universal, strategy is personal, and discipline is required. Philosophy acts as the glue that holds everything together. Philosophy first, strategy second and discipline third. These are the keys to successful investing.”

Back when I was doing stupid stock-market tricks, I didn’t have a coherent investment philosophy. Today, I do. After a decade of reading and writing about money, I’ve come to believe that a smart investor should:

  • Start early. “The amount of capital you start with is not nearly as important as getting started early,” writes Burton Malkiel in The Random Walk Guide to Investing. “Every year you put off investing makes your [goals] more difficult to achieve.” The secret to getting rich slowly, he says, is the extraordinary power of compounding. Given enough time, even modest investment returns can generate real wealth.

The Random Walk Guide To Investing

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  • Think long-term. It takes time — decades, not years — for compounding to work its magic. Plus, there’s another reason to take the long view. In the short term, stocks are volatile. The market might jump 30% one year, then fall 20% the next. But in the long run, stocks return an average of around 10% per year (or about 7% when you factor inflation).
  • Spread the risk. Another way to smooth the market’s wild ups and downs is through diversification, which simply means not putting all of your eggs into one basket. Own more than one stock, and own other types of investments (such as bonds or real estate). When you spread your money around, you decrease risk while (counter-intuitively) earning a similar return.
  • Keep costs low. In Your Money and Your Brain, Jason Zweig notes, “Decades of rigorous research have proven that the single most critical factor in the future performance of a mutual fund is that small, relatively static number: its fees and expenses. Hot performance comes and goes, but expenses never go away.” Warren Buffett bet a $2,222,278 that, because of high fees, an actively managed hedge fund cannot beat an average market index fund. He won the bet by a wide margin.

Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

Price: $14.42

Disclosure: If you follow this link and make a purchase, Get Rich Slowly earns a commission (at no additional cost to you).

  • Keep it simple. Most people make investing far too complicated. There’s no need to guess which stocks are going to outperform the market. In fact, you probably can’t. For the average person, it’s much easier and profitable to simply buy index funds. (About which, more in a moment.)
  • Make it automatic. It’s important to automate good behavior so that you don’t sabotage yourself. You want to remove the human element from the equation. I recommend creating a monthly transfer from your checking account to your investment account. And if you have a retirement plan at work, ask HR to max out your contribution via payroll deduction.
  • Ignore everyone. You might think that a smart investor pays attention to daily financial news, keeping his finger on the pulse of the market. But you’d be wrong. Smart investors ignore the market. If you’re investing for twenty or thirty years down the road, today’s financial news is mostly irrelevant. Make decisions based on your personal financial goals, not on whether the market jumped or dropped today.
  • Conduct an annual review. While it does zero good to monitor your investments day to day, it’s smart to look things over occasionally. Some folks do this quarterly. I recommend once per year. An annual review lets you shift money around, if needed. And it’s a great time to be sure your investment strategy still matches your goals and values.

This philosophy — which is based on years of research and experience — limits the number of investment strategies at my disposal.

Here are the investing philosophies of several leading investors and financial thinkers.

The Get Rich Slowly Investment Strategy

How would you put the Get Rich Slowly investment philosophy into action? The answer is shockingly simple: Set up automatic investments into a portfolio of index funds, mutual funds designed to match the movement of the market (or a portion of the market).

It’s easy to get started. Here’s how:

  • Put as much as you can into investment accounts — as soon as possible. Fund tax-advantaged accounts (such as retirement accounts) before taxable accounts.
  • Invest in low-cost index funds, such as Vanguard’s Total Stock Market Index Fund (VTSMX) or Fidelity’s Spartan Total Market Index Fund (FSTMX).
  • If the stock market makes you nervous, or you want to spread the risk, put some of your money into a bond fund like Vanguard’s Total Bond Market Index Fund (VBMFX) or Fidelity’s Total Bond Market Index Fund (FTBFX).
  • If you want diversification with less work, invest in a low-cost combo fund like Vanguard’s STAR Fund (VGSTX) or Fidelity’s Four-in-One Index Fund (FFNOX).

After that, ignore the news no matter how exciting or scary things get. Once a year, go through your portfolio to be sure your investments still match your goals. Then continue to put as much as you can into the market — and let time take care of the rest.

That’s it. Seriously. Do this and you should outperform most other individual investors over the long term. (If you want more info on this investment strategy, check out my 5000-word article on how to invest.)

This strategy isn’t just great for investing novices. Even market professionals endorse it. In his 2013 letter to shareholders, for instance, Warren Buffett outlined what will happen to his vast wealth when he dies. Most of it will go to charity; some will go to his wife. How will his wife’s money be handled?

“My advice to the trustee couldn’t be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors…”

Are there other investment strategies that might provide similar returns? Sure.

In the future at Get Rich Slowly, we’ll explore value investing, dividend investing, and the Permanent Portfolio. Each of these approaches has merit. But each of these approaches also requires greater education, sophistication, and attention on the part of the investor.

Unless you know for a certainty that you have this knowledge, sophistication, and attention, you’re better off sticking with index funds.

The Bottom Line

Do I practice what I preach? You bet! All of my money is in index funds and individual bonds. Here are my top four holdings as of today:

[My Top Holdings]

That gives me an overall asset allocation that looks like this:

[My Asset Allocation]

I’m 49 years old and have 80% of my portfolio in stocks, 10% in bonds, and 10% in other investments. I do still own 1115 shares of now-worthless Sharper Image stock. I keep it to remind me of my past stupidity.

One of my personal goals over the next few years is to gain the knowledge and sophistication necessary to dabble in other forms of investing. (I believe I have the mindset already.) For now, I’m content heeding Warren Buffett’s advice. It’s served me well.

Exercise: Whether you’re new to investing or already have millions in the market, it’s important to define your investment philosophy. To start, create an investment policy statement, which is like a blueprint for your investments. An IPS will help you decide how much to invest in stocks and how much to invest in bonds. It’ll also help you stay on course instead of trying to take shortcuts (by doing things like chasing hot stocks) or panicking when things fall apart (such as during 2008’s market crash).

Note: I’m migrating old Money Boss material to Get Rich Slowly — including the articles that describe the “Money Boss method”. This is the eighth of those articles.

Look for further installments in the “Money Boss method” series twice a week until they’ve all been transferred from the old site.

Foolish money mistakes (and how to avoid them) Get Rich Slowly

At Get Rich Slowly, my goal is to help you make the best possible decisions with your income and spending. Having said that, we’re all human. We all mistakes. We all do dumb things with money. And I feel like April Fools’ Day is the perfect time to talk about some of the stupid things we’ve done in the past.

Let me give you an example (or three) from my own life.

To begin, I’ll retell a classic tale of my financial foolishness, one that has delighted my readers for over a decade. It’s all about how I paid $1500 for a “free” Frisbee.

The Not-So-Free Frisbee

On the first day of college, I opened my first bank account. The gym was filled with registration tables, not just for classes and clubs, but also for banks and credit cards. Since I was receiving a small stipend to cover living expenses, I needed a checking account.

The two banks vying for attention used different methods to attract students to their tables. A small local bank had a sign that promised “free checking”. A large national bank gave away a Frisbee to anyone who opened an account. The choice seemed easy: I wanted the Frisbee.

I signed up for my checking account, deposited my money, and got my free Frisbee. I spent the afternoon on the quad tossing the disc back and forth with my roommates. When it was time for dinner, I took the Frisbee up to my room, put it in the closet, and never used it again. Ever. But I had that checking account for nearly two decades.

Classes started. I forgot about the Frisbee and the checking account. The next month, I received my first bank statement. There was a $5 service charge. It didn’t seem like a big deal. I figured it was part of the package, part of being a grown-up. My parents had always paid a service charge on their checking account, and I expected I always would too.

For the rest of my college career, I paid $5 per month to maintain my checking account. When I graduated, I continued to pay $5 per month. During the 1990s, that fee increased to $8 per month, but I barely noticed.

In fact, I paid a monthly fee for checking from September 1987 until June 2004. For 202 months — nearly seventeen years — I paid for the privilege of writing checks. Then, when I started turning my financial life around, I left the major national bank and moved to a local credit union. I’ve had my checking account at that credit union for nearly fourteen years now and have never been charged a fee of any kind.

One foolish choice as I entered college cost me nearly $1500 — enough to buy about one hundred Frisbees. And that’s just one of the foolish financial choices I’ve made in my life.

The Wasted Windfall

By the mid 1990s, I had accumulated over $20,000 in credit-card debt. And I was digging the hole deeper every day.

On 21 July 1995, my father died after a long battle with cancer. Before he died, he managed to take out a very bare bones life insurance policy. (He hadn’t thought to acquire life insurance before he contracted cancer. After he got sick, nobody would insure him. Or, more precisely, one company would — but only minimally.) When the dust from his death had settled, Dad had managed to leave each of his three sons $5000 in life insurance money.

A smarter man than I was might have taken this money and applied it directly to his $20,000 in credit card debts. That’s not what I did. Instead, I put $1000 toward my debt and patted myself on the back. I took the other $4000 and bought a fancy new computer — a Macintosh Performa 640CD DOS-compatible — and lots of computer games. Then, to make matters worse, within weeks I maxed out my credit cards again, effectively negating the $1000 I had put toward debt reduction.

There’s no question: The old J.D. was foolish with money. But even after I started reading and writing about money, I still made some foolish mistakes.

True story: I still owned that Macintosh Performa 604CD DOS-compatible personal computer until last autumn. After Kim and I returned from our cross-country RV trip, my ex-wife contacted me. “You still have a bunch of computer stuff in a shed at my place,” she said. “Can you get it out of here.” One of those computers was that twenty-year-old reminder of my foolishness. I gave it (and all of the other computer stuff) to a middle-schooler I know.

The Imbecilic Investor

As I began to manage my money wisely during the mid 2000s, I made sure to fully fund my Roth IRA every year. But I hadn’t yet discovered the virtue of index funds, so I put my retirement money into individual stocks. But not just any individual stocks. I thought I was savvy enough to spot beat-up stocks that were bound to recover. Hahaha. I was wrong.

In the fall of 2007, for instance, I had dinner with a friend who worked in the corporate office of The Sharper Image, a company that manufactured fun and fancy gadgets. The company’s stock was in the toilet, but my friend said that management was certain that things would soon turn around. It was just a passing remark in a much larger conversation — he wasn’t trying to get me to buy the stock — but it planted a seed in my brain.

The next day, I had to decide how to invest $3500 of that year’s Roth IRA money. I should have done some research. I should have put the money in index funds. (I had just begun learning about index funds, but hadn’t yet become a die-hard proponent of them.) Instead, I bought $3500 of Sharper Image stock at $3.14 per share. I was gambling, plain and simple. And I lost.

Within a few months, The Sharper Image declared bankruptcy. Overnight, the value of my investment dropped from $3500 to $200 — and then to zero. It’s still worth nothing today, over a decade later. It will never be worth more than that. Yet I keep those 1115 shares in my Roth IRA just to remind me of how foolish I was.

Money Mistake: Sharper Image

Everbody’s a Fool Sometimes

It’s not just me, of course. We all make mistakes now and then. Some of them are minor, but some of them are doozies. Last year, I asked members of the Money Boss group on Facebook to share some of their biggest money mistakes. Here are a few of my favorites.

First up, Nate tells how he and his wife bought a timeshare…and wish they hadn’t:

Money Mistake: Timeshare

Then there’s Amy, who made the same mistake I see people make again and again and again: Cashing out their retirement accounts when they switch jobs.

Money Mistake: Cashing Out Retirement

Adam regrets not being more motivated when he was younger. Instead of working hard, he just goofed around. (Oh boy, can I relate to this one!)

Money Mistake: Not Working

Megan wishes she had started tracking her spending at an earlier age:

Money Mistake: Not Tracking

Richard’s biggest mistake was buying into the traditional advice that you only need to save ten or twenty percent of your income for retirement. Life many of us, he eventually realized that by saving more, he could have more:

Money Mistake: Not Saving

A lot of readers mentioned they made mistakes by marrying somebody who had different financial aims than they did. But Tyler was the only one who realized his mistake was keeping his wife in the dark:

Money Mistake: Not Sharing

I’m sure you have made money mistakes in the past too. Maybe you’re still making them — or suffering the consequences of past mistakes. Feel free to share your story in the comment section below!

Coping with Mistakes and Setbacks

As I said, even smart people make mistakes. That’s part of being human. But smart money managers do what they can to minimize the effects of mistakes before they ever occur. Here are two ways you can mitigate the damage caused by foolish choices:

  • Educate yourself. The more you know, the better choices you’ll make — and the better you’ll be at anticipating problems. Read personal-finance books, magazines, and blogs. Most importantly, talk to people you know who have control of their finances. Learn from their mistakes so you’ll be more likely to avoid similar pitfalls in the future.
  • Be prepared. Your work as CFO of your own life involves both offense and defense. You practice defense when you practice preparation. The best way to prepare? Boost your profit margin! The larger your saving rate, the larger the buffer between you and disaster. Maintain an adequate emergency fund. Keep your insurance up-to-date. Make use of barriers and pre-commitment so that you’ll do the right things automatically. (The more you remove the human element from the equation, the safer you are.) Create a cash buffer to allow you take advantage of both emergencies and opportunities.

Even when you’re prepared and educated, you’re still going to make mistakes and suffer unexpected setbacks. It’s important to know how to pick up the pieces after things fall apart. Here are some strategies for minimizing the damage:

  • Don’t panic. When you suffer a setback or realize you’ve made a mistake, try to relax. Don’t freak out. Take an hour or two to distract yourself. Better yet, sleep on the problem. It’s amazing how a little time can help you gain perspective.
  • Believe in yourself. Though you may not know exactly how to solve the problem at hand, trust that you’ll find a solution. You’re smart. You’re resourceful. You’re competent. Stay positive, solve the problem, and learn from the experience.
  • If possible, undo the damage. Some mistakes are reversible. Suppose you just blew a bund of money on new clothes or are feeling buyer’s remorse over your new Nintendo Switch. Return the items. Or, if that’s not an option, immediately sell them to recoup some of your loss.
  • Evaluate your options. Obviously, some mistakes are not reversible. If you accidentally change lanes into another car and total both vehicles, there’s no undoing the damage. So, make the most of the situation. Compile a list of options. Keeping your long-term goals in mind, figure out the best course of action. This will help you avoid making rash decisions.
  • Don’t let it get you down. From personal experience, I know how tempting it can be to ease the pain by spending more money. But compulsive spending just makes it more difficult to reach your goals. It makes you feel worse, not better. Fight the urge to practice “retail therapy”. Stay away from your Amazon account. Don’t let one problem snowball into two or three.
  • Learn from your mistakes. Figure out where you went wrong. How did that traveling salesman convince you to buy those overpriced steak knives? What can you do to avoid making the same mistake in the future? Don’t beat yourself up, but take a calm, rational look at how you can make better choices next time.
  • Don’t dig a deeper hole. Money spent is money spent. Just because you’ve already sunk $200 into a gym membership you never use doesn’t mean you need to keep spending money on it. Cut your losses by getting out as soon as possible.
  • Keep your goals in mind. A setback is just that: a temporary roadblock on your journey toward something more important. Make peace with the past and keep your focus on the future.

Setbacks are disheartening but remember: Failure is okay. Mistakes are lessons in disguise. There’s a Japanese proverb about perseverance that translates as “fall down seven times, get up eight”. Successful people fail just as often as unsuccessful people; the difference is that successful people learn from their mistakes, get back on their feet, and resolutely march in the direction of their desires.

Becca on Coping with Rejection

If you’ve made some foolish choices or had some bad stuff happen to you — or both — don’t give up. Use the mistakes to launch yourself on a new path. It’s never too late to change direction and start making smarter choices. Build your future from the ashes of the past.