Get Rich Slowly, one of the most popular personal finance blogs, is also one of my favorites. Blogger J. D. Roth openly describes his own money struggles and successes, including how he paid off $35,000 of debt. I asked him to share his secrets. Excerpts from our E-mail conversation:
You speak honestly about how you overcame your own debt struggles. What do you think made it possible for you to pay it off? Was there a turning point?
I didn't overcome my debt all at once. It took time. I was $35,000 in debt in 2004. I was still $30,000 in debt in 2005. But I gradually added new techniques—cutting costs, exercising frugality, increasing income—until by the end of 2007, I had achieved a sort of snowball effect. I only had a $10-a-month positive cash flow in late 2004, but by the end of 2007, I had over $1,000 per month in positive cash flow. It was mind-boggling. Even though I see the numbers every day, I can hardly believe them as I type them. I don't remember what the turning point was. In late 2004, two friends recommended different books: Your Money or Your Life and The Total Money Makeover. I read both and was blown away. I wondered if the things they described were really possible. Three years later, I realize those books speak the truth.
What strategies do you still use in your post-debt life?
Perhaps not surprisingly, I haven't changed anything in my post-debt life. I've only been debt free for three months, remember. All the money I was paying toward debts is now being routed toward savings. That's the only change I made. (Well, I did splurge and buy a five-year subscription to XM Radio, but that's it.) I figured that if these habits were so effective at getting me out of debt, maybe they'd be just as effective helping me to build wealth. It's difficult, actually, because now I have a bit of cash. My natural urge is to go spend it. I really want a MINI Cooper (I hate my car), but I'm resisting temptation. At first I told myself, "You can buy one on credit when you get out of debt." That was silly, of course, so when I got out of debt, I told myself, "You can buy one when you've saved $10,000 for your emergency fund." I'm not there yet, but already I know it won't happen. I'm not sure when I will buy the MINI Cooper. Probably when my current car dies.
What is the hardest thing for you about writing about money? Do you ever hesitate to share so much with your readers?
It's difficult to write about my mistakes. I'm just an average guy. I'm not some Wall Street wizard, and I'm not a trained financial planner. I'm just a guy who reads a lot and who shares what he learns with his readers. I'm gradually learning good habits, but I still make mistakes. Sometimes I hesitate to share these mistakes with my readers. For example, do I dare tell them that I lost nearly all of my 2007 Roth IRA contribution to a speculative stock pick? [That pick was Sharper Image; read more details here] I preach the virtues of index funds, and for the most part I follow that advice. (Over 95 percent of my retirement funds are index funds.) Yet here I chose to bet on an individual stock, and I lost big time.
Ultimately, I will choose to tell my readers this story, because that's what my blog is all about: telling the truth. I want to help people learn, and if the best way to teach them is through my own mistakes, so be it.
If you could get everyone struggling with money to follow one or two pieces of advice, what would they be?
Don't give up. I've been there. I know the frustration of living paycheck to paycheck. I know what it's like to be buried in debt. I tried all sorts of quick fixes, but none of them worked. The only thing that made a difference for me was, make small, steady progress toward my goals. It took time—a lot of time—but eventually I succeeded. But the key for me was taking the time to learn about smart personal finance (by reading books) and then having the patience to put the advice into practice. What money mistakes do you still make?
Aside from betting my yearly IRA contribution on a lousy stock? :) I've actually curbed most of my mistakes. I don't make impulse purchases anymore. I don't sink a ton of money into comic books (one of my former vices). I don't buy things I cannot afford. But I do engage in a couple of practices that cost more than they should. These aren't necessarily mistakes, but they're not smart.
For example, I'm a sucker for Apple products. I'm a Mac fanboy. I pay a premium for my computers. I get great pleasure from my computing experience, though, so I'm happy to do so. But buying a new Mac when I need a computer isn't a tremendous cost. More worrisome is my continued high expenditure on food. My wife and I like to dine out, and we like to fix nice meals. Even though we maintain a vegetable garden and small orchard (very small), we still spend a lot on food. This is probably the biggest weakness in my spending.
Based on your interaction with your readers, what do you think are the most common money mistakes others make?
Great question. I don't know if there's any one answer to this. Everybody is different. I often say, "Do what works for you"—each of us has different financial struggles, and each of us needs to take a different path to overcome them. What's your biggest long-term financial goal as of today?
Another great question, and one I've been wrestling with lately. For a long time, my goal was to pay off my debt. When I did that, my goal became to quit my day job and write full time. I just accomplished that and suddenly find I don't have any other goals in front of me. I do have some short-term goals for 2008 but nothing that stretches out on the horizon. Like anyone, I'd love to save enough to be able to live off my investments and retire early. But other than that? I don't know. I think this is something I'm going to wrestle with over the next few months.