# Month: March 2019

## How to calculate your debt to asset ratio (+ check if it’s good)

Here’s what debt to asset ratio means:

When you’re a business (i.e. you have your own business or side hustle), your debt to asset ratio represents the total amount of debt you owe compared to your total amount of assets.

This determines how much lenders will be willing to give you AND helps you be aware of how much you owe to creditors.

If you’re an individual, the debt to asset ratio won’t be as relevant to you…but your debt to INCOME ratio will be. That’s the number representing the total amount of debt you owe compared to your income.

Mortgage lenders, bank loans, and anyone giving you credit will take a look at your debt to asset/income ratio in order to determine how much they’re willing to lend to you.

Your debt to asset ratio (or debt to income ratio) could mean the difference between securing a loan for your business or home, and not getting a single dime from a lender.

To help you get a better understanding of it, let’s break down what debt to asset ratio might look like in real life.

## Explain Like I’m 5: Debt to asset ratio

Let’s say an unemployed acquaintance of yours, we’ll call him Jeff, asks to borrow \$10 from you.

What do you do?

• “Do I trust Jeff?”
• “Will Jeff pay me back?”
• “Whoa, why is the guy from Hamilton on the \$10?”

Hard to answer these questions, right? Now pretend a third person, your mutual friend Mary, tells you that Jeff borrowed \$100 from her last week and hasn’t paid it back. Now what do you do?

In a nutshell, this is debt to asset ratio.

However, that’s not the only debt ratio you need to understand. In IWT fashion, we’re going to give you the rundown on three debt ratios that are going to matter the most to you, your life, and/or your business. They are:

It’s so important to keep these numbers in mind to be aware of your debt (if you have any that is), because when they’re out of whack they can stifle your ability to make some big purchases.

## Debt to asset ratio: Important for businesses

(NOTE: If you’re not a small business owner or don’t run your own side hustle, you can skip down to debt to income ratio.)

Like your credit score, your debt to asset ratio is a number. One that shows you how much of your assets — things like your cash, investments, inventory, etc. — were paid with debt, including:

(Pretty much any instance that you owe money to someone.)

The way you calculate your debt to asset ratio is simple: Take the amount of debt you owe and divide it by the value of the assets you own. Then, take that number and multiply it by 100 so you get a percentage. That’s your debt to asset ratio.

It’ll look something like this:

Dollar amount of debt you owe ÷ Dollar amount of assets you own =
Debt to asset ratio

And then:

Debt to asset ratio x 100 = Debt to asset ratio percentage

It’s really that simple.

### What is a good debt to asset ratio?

The higher your debt to asset ratio is, the more you owe and the more risk you run by opening up new lines of credit.

According to Michigan State University professor Adam Kantrovich, any ratio higher than 30% (or .3) may lower the “borrowing capacity” for your business. That’s why it’s so smart for you — especially if you’re a business owner or freelancer — to know your debt to asset ratio.

However, the amount your debt to asset ratio affects your business will vary from industry to industry.

For example, businesses that offer internet services generally don’t require a lot of debt up front to start. That means they’ll typically have lower debt to asset ratios on average.

However, industries such as production or retail require a LOT of debt up front in order to get started. As a result, it’s not uncommon to see higher debt to asset ratios among them.

Check out the chart below to find out the average debt to asset ratio in a few different industries.

 Industry Average debt to asset ratio Internet services and social media 25% Consumer electronics 34% Energy 108% Technology 110% Utilities 228% Retail 289%

From CSI Market (a market analysis organization)

“Holy crap, Ramit! Why are businesses like utilities and retail so high?”

Businesses like utilities and retail require a whole lot of initial capital up front to cover initial costs of things they need to run their business (infrastructure, products, manpower, etc.). As such, the average debt to asset ratio for those businesses will be higher.

Many lenders such as banks and mortgage companies may take this into consideration when they’re lending to you and your business.

Say you’re a small business owner looking to get a new loan for your venture. After totaling everything up, you find that you owe about \$25,000 in debt and own about \$100,000 in assets.

After dividing your debt by your assets and multiplying that number by 100, you discover that your debt ratio is 25% — which is just about the average if you work in internet services and stellar if you work in retail.

However, if those numbers were flipped (you owe \$100,000 in debt and own only \$25,000 in assets), your debt to asset number would be 400% — which is just awful no matter what your business does.

### A note on debt to equity ratio

Sometimes, lenders will look at a business’s debt to equity ratio instead. Chances are this doesn’t apply to 99.999% of you. But so you know, debt to equity looks at a company’s debt compared to shareholder equity (the value of the shares) and is calculated the same way as debt to asset ratio:

Dollar amount of debt you owe ÷ Dollar amount of shareholder equity =
Debt to equity ratio

And then:

Debt to equity ratio x 100 = Debt to equity ratio percentage

However, general consensus for most industries is that it should be no higher than 2 (or 200%).

“But Ramit, I don’t have a big company or business. Does any of this matter to me?”

Yes! Because there’s a formula that creditors and lenders use to assess the risk of individuals like you.

## Debt to income ratio: Important for individuals

If you plan on ever getting a mortgage for a house, you need to make sure your debt to income ratio is in check.

This number compares your gross monthly income to your monthly debt. Banks and other lenders look at this number to determine how much of a risk you are to lend to. The more of a risk you are, the less of a chance they’ll lend to you at all.

Much like your debt to asset ratio, calculating it is simple:

Dollar amount of monthly debt you owe ÷ Dollar amount of your gross monthly income = Debt to income ratio

And then:

Debt to income ratio x 100 = Debt to income ratio percentage

Let’s run an example scenario:

Say you owe about \$1,000 in debt month-to-month and make \$75,000 a year (\$6,250/month). We’d then take 1,000 divided by 6,250 in order to get our debt to income ratio, like so:

1,000 ÷ 6,250 = .16

Multiply .16 by 100 and you have 16% for your debt to income ratio….but what does that number mean?

### What is a good debt to income ratio?

The lower the number is, the better. According to Wells Fargo, the ideal debt to income ratio is 35% and below. That said, most lenders will provide you a loan up to 43-45%.

So if your debt to income ratio amounted to 16% like in the example above, you’d be in good shape for a home loan.

If your debt to income ratio is a little higher and you want to lower it, though, I’d like to help you out.

After all, being in debt is the #1 barrier to living a Rich Life, and not only is it a financial burden, but it can also be a HUGE psychological burden as well.

For example, a while back I ran a survey of my readers who were in debt, asking them a seemingly simple question: How long until you’re out of debt?

Take a look at the results:

34% (the majority) of respondents DIDN’T KNOW how long it would take until they were out of debt.

Debt is just as much of an emotional issue as a financial one. That’s why throwing a personal finance book at someone in debt or showing them a debt calculator produces little to no change.

If someone’s too afraid to even open the envelopes that will tell them how much they owe, “information” is not what they need. Instead, that person has to be willing to take action THEMSELVES before anything will change.

In fact, you can start getting out of debt TODAY through a 5-step system I’ve developed.

Just check out my popular article on how to get out of debt here.

## Get out of debt and live a Rich Life

So that’s your debt to asset ratio. It’s a good way to keep an eye on your personal finances and an element to consider if you want to get a loan.

But eliminating debt is just the first step on the journey to living a Rich Life.

If you want to learn my best strategies for creating multiple income streams, starting a business, and increasing your income by thousands of dollars a year, download a free copy of my Ultimate Guide to Making Money below.

Just enter your name and email below to get instant access to the Ultimate Guide to Making Money.

## How to make a million dollars (with advice from actual millionaires)

We spoke with two millionaires who were able to earn their money through a powerful combination of two things:

And we’ll show you exactly how to do both. But first,

## Introducing: The real millionaires we talked to

Our millionaires are…

### Luisa Zhou

Luisa had a great job with a healthy six-figure income, but she decided one day that she wanted more.

That’s when she started her first side hustle consulting people in digital advertising, and now teaching aspiring entrepreneurs how to launch their own business the right way.

She’s since scaled her business and was able to earn a whopping \$1.1 million in sales in less than 11 months. You can read about her journey here, on our sister site GrowthLab.

With three kids to take care of, Shannon knew she had to really learn the art of the grind in order to quit her job and take her freelancing seriously.

That’s how she was able to grow her freelance CPA consulting hustle into a full-fledged business (Badger and Badger CPA) that she runs with her husband. It’s helped earn her her first million dollar year in 2017.

“It was a huge mentality shift to how much can I ramp it up while still working full time in my other job,” she says. “There’s a quote by Dave Ramsey that goes: ‘Live like no one else, so you later can live like no one else.’ My husband and I were really disciplined when we got started, and it made the process less difficult.”

And now, these two millionaires are going to divulge their strategies on how they got to where they are — and how you can do it too.

## How to make a million dollars

Remember, our two millionaires were able to earn their money through a powerful combination of two things:

1. Investing and saving
2. Earning more money through side hustles

Though you can actually make a million dollars on investing and saving alone, you can watch your net worth explode if you combine them both — which I suggest you do.

## Part I: Investing and saving

### Step 0: Get out of debt

The number one barrier preventing people from living a Rich Life is debt.

That’s why this is Step 0. Before you even think about investing, saving, or earning more money, you need to take steps to get out of credit card debt.

“A [freelancing business] is not the solution to your money problems,” Luisa says. “If you’re struggling to pay your bills or are in debt, the first thing you want to do is get a job that can help you. That’s the easiest way to really help you first.”

That’s why getting out of debt was also a priority for Shannon when she and her husband/business partner first got married.

“When my husband and I were first married, we were really disciplined about getting out of debt and saving,” Shannon says. “We paid off all of our debt out of college. We paid off all of our car debt. And now we’re paying off our house.”

Paying off your credit card debt is one of the most important investments you can make into your Rich Life. I’ve written extensively about this before, both on the blog and in my New York Times bestselling book.

If you’re in debt and want to learn more about my system, I highly suggest you read my article on how to get out of debt fast.

### Step 1: Save money for when you need it most

By saving money, you give yourself the freedom to earn more money.

That’s why it’s important to set savings goals.

To find out how much you need in your emergency savings fund, you simply have to take into account three to six months worth of:

• Utility bills (internet, water, electricity, etc)
• Rent
• Car/home payments
• Food/groceries

Basically, any living expense that you have should be accounted for.

You should also start an account exclusively for your emergency savings fund. Most banks allow you to create a sub-savings account along with your normal savings account. (You can even name them too!) So create one for your emergency fund.

And you can start putting money into the account through my favorite system: Automating your personal finances.

The process only takes one to two hours at the most, but once you set it up, you don’t have to worry about it again.

Here is a 12-minute video of me explaining the exact process I use below.

### Step 2: Invest in your future

Investing your money is the best way to guarantee you become a millionaire. In fact, I promise you, if you follow the systems below you will eventually become rich.

Shannon knows that too.

“My husband and I have been putting 10 – 15 percent of our earnings into our retirement accounts for a while now,” she says. “We also have a 529 plan for each of our kids.”

When it comes to accounts for retirement, you have two options:

1. 401k
2. Roth IRA

These are retirement accounts. That means you’ll be able to accrue gains with big tax advantages with one caveat: you promise to save and invest long term. That means you can buy and sell shares of almost anything as often as you want as long as you leave the money in your account until you get near retirement age.

Let’s take a look at each one.

#### 401k: Free money from your employer

A 401k is a powerful retirement account offered to you by your employer. With each pay period, you put a portion of your pre-tax paycheck into the account. That means you’re able to invest more money into a 401k than you would a regular investment account.

But here’s the best part: Your company will match you 1:1 up to a certain percentage of your paycheck.

Say your company offers 3% matching. If your yearly salary is \$150,000 and you invest 3% of your yearly salary (~\$5,000) into your 401k, your company would match you that amount — doubling your investment.

Check out the graph below that illustrates this.

This is free money!!! If your company offers a match, you should ABSOLUTELY take part in their 401k plan.

For more on 401k’s, be sure to check out my article on how the account is the best way to grow your money.

But 401k’s are only one part of the equation when you want to start saving for retirement. The other account you should get is a Roth IRA. And ideally, you have both.

#### Roth IRA: The best long-term investment

A Roth IRA is simply the best deal I’ve found for long-term investing.

Remember how your 401k uses pre-tax dollars and you pay income tax when you take the money out at retirement? Well, a Roth IRA uses after-tax dollars to give you an even better deal.

With a Roth, you put in already taxed income into stocks, bonds, or index funds and pay no taxes when you withdraw it.

For example, if Roth IRAs had been around in 1970 and you’d invested \$10,000 in Southwest Airlines, you’d only have had to pay taxes on the initial \$10,000 income. When you withdrew the money 30 years later, you wouldn’t have had to pay any taxes on it.

Oh, and by the way, your \$10,000 would have turned into \$10 million.

That’s an exceptional example, but when saving for retirement your greatest advantage is time. You have time to weather the bumps in the market. And over years, those tax-free gains are an amazing deal.

#### How to open a Roth IRA account

To open up a Roth IRA, find a brokerage account. There are many out there, so I highly suggest shopping around and taking a look at the options out there.

Certain factors you want to consider when looking at brokers can be:

• Minimum investment fees
• Customer service
• Investment options
• Transaction fees

A few brokers I suggest, though, are Charles Schwab, Vanguard, and E*TRADE.

These brokers offer fantastic customer service and are well-known in the investment community for their great stock options.

Special note: Most brokers typically have minimum amounts for opening a Roth IRA, usually \$3,000. Sometimes they’ll waive the minimums if you set up an automatic payment plan depositing, say, \$100/month.

Also, it’s worth noting that there’s currently a yearly maximum investment of \$6,000 to a Roth. (This amount changes often so be sure to check out the IRS contribution limits page to keep updated.)

Once your account is set up, your money will just be sitting there. You need to do things then:

1. First, set up an automatic payment plan so you’re automatically depositing money into your Roth.
2. Second, decide where to invest your Roth money; technically you can be in stocks, index funds, mutual funds, whatever. But I suggest investing your money in a low-cost, diversified portfolio that includes index funds such as the S&P 500. The S&P 500 averages a return of 10% and is managed with barely any fees.

For more, read my introductory articles on stocks and bonds to gain a better understanding of your options. I also created a video that’ll show you exactly how to choose a Roth IRA.

NOTE: After you invest in your retirement accounts, you can actually stop right there. After many years, your money will compound and earn you well into the millions if you continue investing.

Say you’re 25 years old and you decide to invest \$500/month in a low-cost, diversified index fund. If you do that until you’re 60, how much money do you think you’d have?

Take a look:

\$1,116,612.89.

However, if you want to be able to hit a million dollars sooner than that, there’s only one really good option: Earning more money through a hustle.

## Part II: Earning more money

The reason earning money is one of my favorite ways to get to a Rich Life is simple:

There’s a limit to how much you can save, but no limit to how much you can earn.

If you’re willing to put in the work and develop a hustle that’ll scale and grow, you can earn as much money as you want. And while there are a lot of ways you can make more money, my favorite way is by starting a freelance hustle.

That’s what Shannon and Luisa did, and they’re going to show you how.

### Step 3: Find a million dollar business idea (it’s easier than you think)

One very common misconception about starting your own freelance hustle is that you need to come up with the “perfect” idea to do it — when that couldn’t be further from the case.

“People think that they need a cool crazy idea like the next Facebook to make a significant amount of money,” Luisa says. “But what most people don’t realize is that they already have the skills to make a million dollars.”

I know it’s difficult to imagine that you might have profitable skills already — but you do. In fact, Shannon has a perfect solution to find out those skills: Look at what your friends ask you to help them out with. That’s how she got her start as a freelance CPA consultant.

From Shannon:

“I had a colleague who needed help sorting through her finances. She asked me to help her out, and she became my first client. Then I had another friend who started a law office and needed help, so I helped them out with all of their accounting. I’d meet with them to make sure that they were still compliant and help with their tax returns.

It just started with helping people as a hobby, but then my husband pointed out that I was getting clients without even trying. Eventually, I was able to start a freelancing business from it.”

That’s not the only way you can find a profitable freelancing idea either. There are actually 4 questions you can ask yourself right now to find an idea you can leverage for your hustle.

1. What do you already pay for? We already pay people to do a lot of different things. Can you turn one of those things into your own online business? Examples: Clean your home, walk your pet, cook you meals, etc.
2. What skills do you have? Now, what do you know — and know well? These are the skills you have that you’re great at — and people want to pay you to teach them. Examples: Fluency in a foreign language, programming knowledge, cooking skills, etc.
3. What do your friends say you’re great at? I love this question. Not only can it be a nice little ego boost — but it can also be incredibly revealing. Examples: Workout routines, relationship advice, great fashion sense, etc.
4. What do you do on a Saturday morning? What do you do on a Saturday morning before everyone else is awake? This can be incredibly revealing to what you’re passionate about and what you like to spend your time on. Examples: Browsing fashion websites, working on your car, reading fitness subreddits, etc.

Find an answer to those questions and I promise you you’ll find a great freelancing idea.

### ACTION STEP: Find a profitable idea.

Spend about 10 – 20 minutes now writing down five answers for each of the four questions above. Once you’re done, congratulations — you now have 20 potential business ideas that you can grow into a flourishing side hustle.

For now, just choose one business idea. It’s okay, you can always change it later. For now, we’re going to just try one out and try to find a client with it.

### Step 4: Find your first client

In order to start earning money, you need to find the people who will give you money for your ideas.

But the question is…how? Where do you find these people?

For Luisa, that meant going online and finding out where her clients lived.

“I spent a lot of time on Facebook groups talking with potential clients answering their questions about advertising,” Luisa says. “That’s when I found my first client.”

You can do the same thing.

• Who is my client?
• Where do they go when they want to look for a solution to their problems?
• Where are they ALREADY looking for solutions to their problems?

At this point, you’re also going to want to niche down your market in order to really tailor your services and draw in customers.

“Stay in your niche,” Shannon suggests. “We had a few instances where we veered from the niche and we paid for it dearly. It might feel cheesy to sit down and figure out what your target market is or what your goals are for the company, but you have to do that. All that legwork needs to be done upfront. It’s just practical.”

A few questions to jumpstart your research:

• How old are they?
• Where do they live?
• What are their interests?
• How much do they make?
• What books do they read?

Using this information, find out what your clients need by going to the places they go.

For example:

• Want to pitch to moms that blog about children? Go to The Mom Blogs and start with the ones under “Popular Blogs.”
• Looking for physical or massage therapists within 50 miles of your house? Yelp should get you started easily.
• If you want to do large dog grooming and sitting, well there’s probably a local pet store or dog park near you where owners are all congregating just waiting for you to offer them a solution.

Here are a few suggestions of some other great sites freelancers can use to find business online:

Once you find a potential client, you’re going to want to reach out to them and pitch your services.

### ACTION STEP: Find a client and email them (with scripts).

Find your client using the information, I’ve outlined above. Once you’ve done that, you can reach out to them using this handy script:

CLIENT’S NAME,

I saw your post on X and visited your website. I noticed that you’ve recently started using videos too.

I’ve been doing video editing for three years and I’d like to offer to help you edit your videos and get them optimized for the web.

That would make them look more professional and load faster, which is important for your readers. And you’d free up time that you could use to create new content.

We can discuss the details, of course, but first I wanted to see if this is something you might be interested in.

If so, would it be okay if I sent you a few ideas on how to help?

Best,

Ramit Sethi

A few takeaways:

• There is zero fat in the pitch. Every word counts and is needed to help really sell the benefits of working with you.
• Don’t mention payment. There’s nothing that will kill a potential client’s interest in you more than pushing prices on them before they’re ready.
• Stress the benefits. This email shows the client why it would be in their best interest to buy from you in the third paragraph.

Once you get a client using this email, congrats! You just secured your first client — but it doesn’t end there. You need to actually do the work for them, and that means continually adding value.

### Step 5: Invest again — but this time, in yourself

Investing takes many shapes. It’s not all stocks, bonds, and retirement accounts. Investing can also be in yourself — and it’s something you need to do if you want to earn a million dollars. Be continually curious.

From Luisa:

“I’ve always been big on investing [in myself]. Even in my previous businesses it’s been a lot of me putting in the cash into my business. I invested in my site. I invested in a copywriter to teach me how to make copy. I invested in someone to teach me how to make sales calls.

Thankfully, I knew what I didn’t know, so I invested heavily in those things. I’m not a big risk taker. But I do believe in calculated risk. After all, I am my best asset. My top priority is myself or my business.”

I love this. It hits on an idea that all IWT readers should embrace: Be continually curious.

Ask questions when you don’t understand something and don’t be afraid to seek out more information through books, courses, or schooling. It’s only then that you can hope to truly live your Rich Life.

That’s why my team and I have worked hard to create a guide to help you invest in yourself today: The Ultimate Guide to Making Money.

In it, I’ve included my best strategies to:

• Create multiple income streams so you always have a consistent source of revenue.
• Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below — and start blowing up your net worth today.

## What Really Goes on at MMM Headquarters

#### I’d love to retire early, but then what?

Although I retired about thirteen years ago, and continue to be retired, about one year ago I opened up a little business on Main Street here in Longmont, Colorado. It is a multi-purpose gathering space, under the guise of a coworking space, with the typical-for-me grandiose name of “Mr. Money Mustache Headquarters”. Or, MMM-HQ for short.

At the time, I wrote a blog post about it, and promised to keep you updated on how it was going. Since then, many people have been asking for updates. Approximately one group of random roadtripping Mustachian tourists has stopped by each day to peer in the windows*. And several people are considering opening their own coworking spaces in other cities, if the case for it looks good.

Although this HQ is a small scale thing (we are hovering at about 50 members and I’d love to get to 80), it has provided me with some great lessons in both life and business, which are long overdue for sharing.

Plus, I can now fully vouch for the idea as a good one for other people to pursue, given the right situation. Owning a coworking or other community-oriented space can be both a good business and a great life choice, for people before or after the early retirement stage.

So, here’s what I’ve learned after launching into the most unexpected business of my life so far:

1: Owning a business can be like a having mental health therapist that pays YOU:

As I always say, early retirement is great, but it doesn’t mean you’re allowed to stop working. You need to accomplish something meaningful with almost every one of your days, whatever “accomplish” and “meaningful” mean to you. You also need to get out of your house, strain your muscles, have positive interactions with other humans, and experience at least a bit of hardship. These are simply parts of the recipe for Human happiness, like a series of buttons you can press to get more of it.

A therapeutic January morning in the Prisonyard Gym with special guest Jesse Mecham

So in my case, adding HQ to my life has been a very nice way to press more of those buttons. Almost every morning, I walk or bike or jog the 1.2 miles down to the building bright and early, open up all the doors for some fresh air, put on some music, and sweep the floors or make coffee or set things straight in preparation for the day. Then I head out to the patio and the “Prisonyard” outdoor gym beyond to do some basic weight training before I get sucked too deeply into computer work or any to-do lists.

As the day goes on, there will be a random stream of members and conversations and tasks and meetings and errands around town, which is just unpredictable enough to keep each day fun.

And the best part of it all is that it’s completely optional work. I can choose not to visit, and the members take up the slack and care for the place themselves. I can go on vacation and nothing blows up while I’m gone.

Owning a coworking space has all the benefits of having a really good office job where you like all of your coworkers, except without the accompanying obligations or politics. I refer to it as my therapist because a visit never fails to put me in a good mood, no matter how I felt before deciding to head down there. And a healthy and reliable way to make yourself feel great is an important part of any life.

2: It’s easy to arrange big events, but slower to create a consistently buzzing daily scene.

The year started big, with about 90 people crammed in for the first pop-up business school. Then, the vibe flipped around completely as we moved on to just a few people hanging around during normal days, working on laptops or perhaps the squat rack. But there have also been a pretty good series of after-hours events including barbecues, potlucks, regular meetups of the Northern Colorado Mustachians Group, a visit and Q/A session with YNAB founder Jesse Mecham, a Virtual Reality demo night, a music jam or two, and various charity and learning events and markets.

The annual Beer Club charitable meeting, comprised mostly of my neighborhood Dad friends.

On the down side, it takes more work to meet and sign up each new member than I expected, and we tend to lose more than expected, as people who signed up early but realized they don’t really need a coworking space have dropped out. And in the classic Blogger’s Dilemma where the demographic of the audience often reflects that of the writer, we end up with quite a high percentage of well-to-do white males in our 30s and 40s, which could lead to the term “Broworking Space”. But I’m trying to break this trend!

On the upside, the community side has been just as good as I had hoped. Thanks to the magic of our private Slack group, Members of HQ have been helping each other with both business and leisure pursuits on a daily basis and the connection has helped all of us including me. I often joke that my primary purpose for this coworking space is as a “Friend Harvesting Machine”, and it is living up to that promise.

3: The Money Side of Things

In principle, coworking is a good business model because it works a bit like a gym: you can have a large number of members sharing a common space because not everyone is there every day. This is why there are so many companies expanding into the business like WeWork, Regus, Proximity, Galvanize, and a zillion more.

But like any business, your income and spending need to be balanced.  I’ve deliberately gone low on both sides, by starting with an affordable building and subsidizing it with my own mostly-unpaid labor. Because of this, the \$2500 per month income (50 members at \$50 each) is enough to sustain the place including property taxes, utilities, maintenance, beer (and artisinal coffee from one of our own members!) The downside of this approach is that our space is smaller and less fancy than other coworking spots. It was really just one big room until I opened the Tinyhouse conference room in June.  Since the space is still way underused on any given workday, we could easily double this to 100 members, which would bring the business up to \$60,000 of gross annual income – more than enough to sustain any reasonable lifestyle with very part-time hours.

Normal coworking spaces will tend to have a much larger building, with hundreds of members paying between \$150 and \$300+ per month for semi-private working spaces, or more for fully dedicated offices. This leads to higher rent and utility costs, plus the need for at least one full-time administrator and even a receptionist (although both can be the same person, which could be you if you are motivated.) The end result is a good income stream, at the expense of a business that requires real work on a fixed schedule.

So you can see why MMM-HQ is taking the slower paced road, for now.

4: So, should I start my own? (or join one?)

If you’ve got the time and energy, hell yes!

If you are thinking of opening a space in roughly the MMM-HQ model (or already have one), feel free to give me the details by dropping me an email via my about->contact form. Before doing so, I’d suggest you

• start by putting up a good website with your proposed building/location, amenities, monthly cost and your contact info.
• Then share it around with anyone you know who may be interested and get feedback.
• Then email me with that you have so far.

At this point, I will link to it from my own HQ page, which will then become a directory for a network of community-oriented Mustachian coworking spaces. You can gather interested parties first before taking the plunge, although I would suggest that you only do this if you are financially well established and not overly dependent on the whims of bank financing.

Although I would (of course) charge no franchise fees, we could still set up an informal sharing arrangement where members of any Mustachian Headquarters affiliate location would be free to visit any other one.

And if you are wondering if joining a club like this is a worthwhile use of your own fifty bucks a month, I have to say it’s hard to see the downside as long as you use the amenities and like socializing with other people. If free coffee, beer, work space, an outdoor gym, tool library/workshop and access to fifty local entrepreneurs is not worth it to you, then I’m not sure what is!

*Out of respect to the members who are in there trying to get real work done, please don’t show up unannounced – instead, join one of our public meetups if you happen to be in the area, which I always announce on Twitter and usually Facebook too.

## How to cancel a credit card (without killing your credit score)

I have a credit card I’d like to cancel, but I don’t know if I should. I’m afraid it’ll hurt my credit score. Today I’m going to walk you through in real time as I evaluate this decision. Then I’m going to explain how to cancel a credit card, no matter why you want to do so.

I normally don’t pay much attention to my credit score. I know that it ranges between 800 and 820, so I don’t worry about it. With a score like that, I’m considered to have “exceptional credit”, and that’s good enough for me. (Kim’s very proud that she has a higher credit score than I do, by the way.)

That said, for the past several years I’ve been carrying a credit card that I don’t want or need. It’s a Chase British Airways card that I signed up for in 2011. It’s a fine card, but I never use it because I have better ones. My primary credit card right now is the Chase Sapphire Reserve, which I use for 99% of my personal credit transactions.

Basically, I’m paying \$75 per year — the British Airways card’s annual fee — for nothing…except to maintain my credit score. I don’t like it. I’d rather cancel the card and take a temporary hit to my credit. But is it bad to cancel a credit card? And if it’s bad, how bad is it?

I’ve decided to document the process! Let’s find out together.

## My Current Credit Score

To start, of course, I need to learn my current credit score.

First, I visited Credit Sesame, a free credit-monitoring tool that I use maybe once or twice a year. When I last checked in January 2018, Credit Sesame said my credit score was 814:

Today, Credit Sesame says my credit score is 816:

My credit score has remained roughly the same over the past twelve months. (As a side note, I think it’s hilarious that Credit Sesame thinks I should open lots of new credit cards to boost my credit score. Can you guess what the company’s revenue model is?)

Next, I went looking for a second opinion. Because I’m a Chase customer, I have access to their “Credit Journey” feature, which provides free VantageScore monitoring. (VantageScore is a competitor to the popular FICO score. Both scores are numerical representations of your credit history designed to give lenders a quick way to evaluate whether or not to do business with you.)

Here’s my current VantageScore according to Credit Journey at Chase:

Yay! It’s the same as reported by Credit Sesame. As of today, let’s call my credit score 816.

Credit Journey also gives you a one-year history of your credit score so that you can spot trends. Here’s how my score has fluctuated over the past twelve months. (I’m not sure what’s responsible for the recent downward slide. I haven’t been doing anything with credit…)

For added insight, Credit Journey provides a credit overview so that you can see the status of various factors that go into making up your credit score.

This is useful, I suppose, but Credit Sesame’s diagnostic tools are a little more robust. Credit Journey doesn’t explain that my lack of credit diversity is the largest factor preventing me from having a higher score. Credit Sesame makes this very clear. (That’s the red D in the screencap I shared earlier.)

Note: If you don’t have a Chase credit card and don’t want to use Credit Sesame, you can also get your free credit score from NerdWallet. The only catch? You have to create a NerdWallet account.

## What Happens If I Cancel a Credit Card?

Perhaps most relevant for my current situation, however, Credit Journey allows you to simulate your credit score given a variety of changes.

• What happens if you take on a new loan?
• What happens if you cancel a card?
• What happens if you add a new credit card?
• What happens if one of your accounts goes to collections?

With the Score Simulator, you can see how certain changes will affect your credit score.

Unfortunately, this Score Simulator is a general-purpose tool. It doesn’t let users exercise precise control over their input. So, for instance, I’m unable to model canceling my Chase British Airways card specifically.

However, I’m able to model what happens if I cancel my oldest credit card. Because I cancelled all of my cards when I was digging out of debt in the early 2000s, my oldest card is a Capital One credit card that I acquired in 2007. That’s not too far off from the British Airways card that I took out in 2011.

To test what might happen if I cancel my Chase BA card, I toggled the “cancel your oldest card” switch:

Voila! I was instantly able to see that — according to this tool — canceling my BA card will, at most, ding my credit score by twenty points. The actual impact would probably be a little less.

My current credit score is great. According to one score simulator, cancelling a card will have a minimal effect on my score. So, why am I still nervous? I’m not sure. To assuage my fears, I contacted credit expert Liz Weston, author of Your Credit Score. “Does cancelling a credit card hurt your credit score?” I asked, and I explained my situation.

She wrote back with a nice, meaty answer:

It’s actually hard to predict how big the impact will be and how long it will linger, but really you don’t need to worry about it for number of reasons. Those include:

• When scores are as high as yours, even a larger drop in points wouldn’t affect you on a practical level. Once your scores are in the 760 range, you typically get the best rates and terms offered by lenders.
• Credit score simulators are just that – simulators. They can estimate what might happen to your score(s), but the reality can vary. The outcome of an action depends on various information in your credit report.
• Scores take into account the average age of your “trade lines,” or credit accounts, as well as the age of your oldest account. That’s why you often see cautions against closing the oldest account. However, age of accounts is a fairly small part of your score, and the damage doesn’t happen immediately, since the closed account will continue to be reported and its age factored into your scores. A bigger deal when closing accounts is your credit utilization. Shutting an account removes the available credit limit from the calculations, and that may have a bigger effect on your score.
• The credit score you’re looking at can (and probably will) differ from the credit score(s) a lender may use, which means the impact could differ as well. The formulas for VantageScore and FICO in general aren’t the same. Plus, they each have been updated (in FICO’s case, multiple times) and lenders may use older versions or ones that have been tweaked for their industries, such as the FICO Auto Score 8 for auto loans.

That’s a fairly long answer to your quick question! In general, it’s a good idea to avoid closing accounts when you’re trying to build your scores or if you’re in the market for a major loan. Once your scores are high, however, closing the occasional account shouldn’t cause you undue worry.

Weston brought up a point I hadn’t considered: Canceling a credit card affects not only my age of accounts, but also my credit utilization. I have a \$20,000 credit limit on that Chase BA card, so cancelling it will mean that I’m using a larger percentage of my available credit.

That said, I don’t actually carry any sort of credit balance. I pay my bills in full each month. As a result, my utilization should remain relatively low. Plus, if I do decide my score gets dinged too much, I’ll take the Credit Sesame approach to building credit: I’ll take out a new card, one without a fee.

## How to Cancel a Credit Card

If I do choose to cancel my British Airways card, what’s the process? Closing a credit card account is easy, but if you decide to do it, you should do it correctly.

If you plan to close several accounts, do one at a time. When choosing which accounts to cancel, first eliminate cards that charge you fees. Cancel new cards before old cards. (Remember: the age of the account affects your credit score.) Consider keeping cards that offer good rewards programs.

Before you cancel a credit card account, pay off the balance or transfer it elsewhere. Never attempt to cancel an account on which you still owe money. I’ve heard horror stories of banks raising interest rates on people who do this.

1. Contact your credit card company. You might be able to cancel your account online, but most companies make this difficult (or impossible). You’ll probably have to call. This so the sales rep can persuade you to keep the account open, of course. When this happens, remain firm. Take notes!
2. Send written confirmation. After the call, use your notes to draft a follow-up letter like this one. Mail it to the card issuer.
3. Check your credit report. After you receive confirmation that the card has been canceled, it may take several weeks for the change to be reflected in your credit report. It is your responsibility to verify that your report is accurate, so keep tabs on it. Like me, you may also want to monitor your credit score to see if there’s any damage.
4. Once you’re certain the account is closed, cut up your credit card! Hurrah!

Should you cancel your credit cards? Only you can make that call. Do what makes sense for you and your situation. If you think it’s more important to maintain your credit score, and if you’re sure you won’t abuse them, then keep the accounts open. But I think it’s a mistake to keep your credit cards if they cause you woe. (Plus, each open account is another possible source of identity theft!)

If you have trouble with compulsive spending, it’s best to cancel your accounts. Don’t just cut them up, but cancel them. When I was having trouble with credit, I canceled my accounts, which bought me time to learn to manage money responsibly without an ever-present temptation to spend.

In the end, this all seems worth it to me. If I cancel my British Airways card, my credit score drops from 816 to 796 but I save \$75 per year. Because I have no plans to make any moves that rely on my credit score in the near future, this sounds like a smart move. I’m going to do it!

The post How to cancel a credit card (without killing your credit score) appeared first on Get Rich Slowly.

## What to do if you win the lottery

Today I’m going to teach you what to do if you ever win the lottery, a massive inheritance, or any other huge infusion of cash.

1/3 of lottery winners go bankrupt and I’ll be damned if I’m going to let that happen to you. So just listen and do what I say, please.

## RULE #1: Shut The Hell Up

Shut your mouth right now, seriously. Do not tell anyone. Do not tell your boss, your loud-mouthed cousin with the mustache, or even your kids. You can tell 1 person: your spouse. And then tell them this: Shut The Hell Up. This is your new motto for the next 6 months.

Lotto winner Mavis Wanczyk (who won the 758.7 million Powerball) did not follow this advice and decided to tell her boss, the press, and therefore the whole world. Immediately after, random people came out of the woodwork and the police have had to watch her house.

Here are the scariest people who will try to find you, in descending order:

• Kidnappers who will hold you for ransom
• Scammy “wealth managers” who will bleed you dry
• Uncle Joe, who wants you to invest in his dumb idea for a themed bar

DON’T DO IT. You can always choose to reveal your new wealth later once you have the proper precautions set up. But once the genie is out of the bottle, you can never put it back in. Be quiet and tell no one for now.

I get it, you don’t have a lawyer. Now you do. You call up the biggest, most white-collar law firm in the country (just google “highest paid law firm”) and tell them you want a lawyer to help with taxes and trusts. When they ask why, tell them “I’ve recently come into some money and I’d like someone to coordinate my affairs.” They will charge you \$500 or \$600/hour. Pay it, happily.

This lawyer is now your conduit with the outside world. Who contacts the lottery to tell them about the winning ticket? Not you (see Rule #1). Your lawyer will handle that. Who do they make the check out to? Is it to you? Oh hell no. Your lawyer will set up an anonymous trust for you.

Your other new best friend is your financial advisor. Considering I hate most financial advisors and most of you don’t need one (see page 153 of my book for why), this might seem unusual. However, you just received millions of dollars out of the blue. It’s worth a few thousand bucks to get set up. Go to napfa.org to find a fee-only financial advisor who can guide you through the next few months of setting up your new financial systems.

## RULE #3: Do not change anything (with 3 exceptions)

You know all those movies about how a group of criminals gets away with a heist, but one idiot gets the entire crew caught because he goes out the next day and buys a fur coat and a \$200,000 car? Do not do that.

For 6 months, don’t change anything. No new car, no extravagant trips, don’t quit your job. Your lawyer and financial advisor will help you get set up. This falls under Advice Everyone Says But Nobody Takes: When someone dies or you get a huge amount of sudden money, do not change anything for 6 months.

If you really need to quit your job, when people ask what you’re doing now, your line is, “I’m doing some consulting.” However, if you were a cashier at 7-11, I’m not sure if people are going to believe you’re a consultant. Anyway, your call.

I know most of you won’t follow this advice, so I came up with a list of acceptable things to spend money on:

1. Extra guac at Chipotle
2. Taco Bell Mexican Pizza
3. I also hereby authorize you to buy every product from iwillteachyoutoberich.com/products

After 6 months? Just don’t spend it all in one place.

## If you haven’t won the lottery (yet…)

Let’s be real, 99.999999% of you reading this right now have not and will not ever win the lottery. But luckily, winning the lottery isn’t the only way to make a lot of money.

If you want to live a rich life, you can build it for yourself — with much better odds than Powerball.

My team and I have worked hard to create a guide to help you do just that: The Ultimate Guide to Making Money.

In it, I’ve included my best strategies to:

• Create multiple income streams so you always have a consistent source of revenue.
• Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below — and start blowing up your net worth today.

What to do if you win the lottery is a post from: I Will Teach You To Be Rich.

## 7 best income generating assets to invest in today

Below are seven income producing assets that you can invest in to start earning you passive income.

I’ve split the list up into two ways: Safe and risky. The former are assets I consider to be more conservative and proven that you can start investing in. The latter are a bit more aggressive — but can yield great results if done right.

## Safe income producing assets to invest in

These are conservative, low-risk income producing assets. The trade-off to its low volatility though is that you won’t earn as much as more aggressive assets. It’s still a good idea to have a few of these in your portfolio to ensure proper diversification.

### Asset #1: Certificates of Deposit (CDs)

A certificate of deposit, or CD, is a low-risk financial investment offered by banks.

How they work is simple: You loan the bank money for a set amount of time known as a “term length” and you gain interest on the principal during this time.

A typical term length is anywhere from three months to five years. During this time, you won’t be able to withdraw your money without taking a penalty hit. BUT it’s pretty much assured that your money is growing at a fixed rate.

The interest rate varies on how long you are willing to invest for. The longer you loan money to the bank, though, the more you can earn.

And since CDs are insured by the FDIC up to \$250,000, they’re incredibly low risk.

But there are a few drawbacks:

• Inflation. The average inflation rate in the U.S. over the past 60 years is 3.7% — which stands on the high end for most CD interest rates. This means you can actually lose money if you keep your money in CDs because of inflation.
• Low aggressiveness. If you’re young, that means you can stand to be a lot more aggressive with your investments (because you have more time to recover from any losses). Your potential for growth is much higher. This allows you more wiggle room to invest in riskier assets and potentially earn more money.
• Length of investment. You might not be able to part with your cash for a long time — especially if you have other financial goals in the near future (buying a home, vacation, weddings, etc.).

If you want a low-risk investment that ensures you peace of mind, CDs might be for you.

### Asset #2: Bonds

Much like CDs, bonds are like IOUs. Except instead of giving it to a bank, you’re lending money to the government or corporation.

And they work similarly to CDs as well — which means they’re:

• Extremely stable. You’ll know exactly how much you’ll get back when you invest in a bond.
• Guaranteed a return. You can even choose the amount you want a bond for (one year, two years, five years, etc.).
• Smaller in their returns, especially when compared with aggressive investments like stocks.

If you want to know exactly how much you’re getting back, bonds are a great investment.

For more check out our article on bonds here.

### Asset #3: Real estate investment trusts (REITs)

The U.S. Congress established real estate investment trusts, or REITs, in 1960 to give people the opportunity to invest in income producing real estate.

REITs are like the mutual funds of real estate. They’re a collection of properties operated by a company (aka a trust) that uses money from investors to buy and develop real estate.

They’re a fantastic choice if you want to get involved with real estate investing but don’t want to make the commitment of purchasing or financing property. Like with most blue-chip stocks (more on those later), REITs pay out in dividends.

REITs also focus on a variety of different industries, both domestic and international. You can invest in REITs that build apartments, business buildings, or even healthcare facilities.

In all, they are a straightforward way to get involved with real estate without having to eat the upfront cost of buying property. To get started, go to your online broker and purchase a REIT like you would a typical investment.

One I suggest? The Vanguard REIT ETF (VNQ). This is Vanguard’s ETF fund that tracks a REIT index from MSCI Inc, a noted investment research group.

If you don’t know how to do that, that’s okay! Check out our article on mutual funds to find out exactly how you can open one.

## Risky income producing assets

The following are riskier investments that might require more active management on your part. The earning potential for these investments is high. If you put the time and effort into these assets, you might find yourself with a nice sum of money to show for it.

### Asset #4: Dividend yielding stocks

Some companies pay out earnings to their shareholders each quarter via dividends. These are known as “blue-chip stocks” and tend to be reliable and able to weather most economic downturns.

Many investors like to add a few dividend paying securities via blue-chip stocks in their portfolio to ensure that they receive earnings consistently throughout the year. And while some like to hand pick individual shares to invest in, you can get started by investing in index funds that specialize in high-yielding dividends.

A few suggestions below:

• Vanguard Dividend Appreciation Fund (VDAIX)
• Vanguard High Dividend Yield Index Fund (VHDYX)
• Vanguard Dividend Growth Fund (VDIGX)
• T. Rowe Price Dividend Growth Fund (PRDGX)

### Asset #5: Property rentals

Renting out property seems simple enough:

1. Buy a house or apartment building.
2. Rent out the rooms to tenants for a nominal fee.
3. The rental checks come in like gangbusters each month while you sip piña coladas and make passive income.

Hell, that DOES sound awesome — but it’s also a complete oversimplification. In fact, renting out property is anything but relaxing. That’s because you’re responsible for all facets of the building you’re renting out as the owner. That includes repairs, maintenance, and chasing down tenants who don’t pay you rent.

And god help you if they do miss a rent payment. If that happens, you’ll have to find another way to pay your monthly mortgage payment.

You CAN make money from renting out properties (many people do!). It’s just that doing so can negatively affect your finances in a BIG way. Check out our house poor article for a good example of that.

If you’re interested in purchasing properties to rent out, be sure to check out our article on buying a house for more.

Luckily, with the rise of services like Airbnb, you can just rent out a spare room in your house and not worry about buying a separate apartment unit. You simply sign up for the platform and take advantage of short-term rentals. You’ll still have to deal with certain pains of property management but you’ll be able to leverage property you already own (e.g., spare bedroom in your house).

### Asset #6: Peer-to-peer lending

Also known as “crowdlending,” peer-to-peer (P2P) lending allows investors to essentially act like a bank. You loan money to others via a peer-to-peer lending platform (such as Lending Club), and later they pay you the money back with interest.

Unlike a bank though, the person seeking the loan doesn’t have to deal with financial background checks or incredibly high interest rates due to things like bad credit history.

P2P lending isn’t without risks though. In fact, relying on someone with crappy credit to pay back a loan might be one of the riskiest financial investments you make. But if you’re willing to devote yourself more to learning about the platform and use money you don’t mind losing, it could be a very fruitful financial investment.

### Asset #7: Creating your own product

This is one of my favorite ways to make money. Not only is it low cost but it’s also easily scalable — meaning the sky’s the limit for your earning potential.

And you don’t need engineering or carpentry skills to create your own product either. In fact, you probably use products every day that you can create too:

• E-books
• Online courses
• Podcasts
• Webinars
• Whatever!

These digital information products are perfect ways to earn money without sacrificing overhead.

BUT they come at a cost: Your time and energy. Not only do you actually have to create the product, you also have to make sure that the product will sell.

That’s why we’ve devoted our sister site, GrowthLab, to helping entrepreneurs create, grow, and scale their businesses. Check out the site today for more information on how you can get started with information products too.

## Earn more money today

Income producing assets are a great way to supplement your income through your investments.

If you want to learn how to make even more money, my team and I have worked hard to create a guide to help you earn more today:

The Ultimate Guide to Making Money

In it, I’ve included my best strategies to:

• Create multiple income streams so you always have a consistent source of revenue.
• Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below — and start earning more today.

## What Everybody Is Getting Wrong About FIRE

Fig 1: Suze Orman’s opinion of our lifestyle, as captured in a crazy interview on Paula Pant’s Afford Anything podcast.

In case you hadn’t already noticed it in the news, it seems we are hitting a  turning point in how the rest of the world perceives this lifestyle that you and I have been enjoying.

First, we were ignored. Then, there were a few stories that just focused on the strange lives of  Mr. Money Mustache a few other freaky magicians, cataloging our feats of extreme frugality like “spending less than 100% of your money on a car” or “occasionally eating food from one’s own kitchen.”

But time went by, and our numbers kept growing. And we weren’t just thirtysomething white male tech workers anymore, we were women and men of all ages and professions in all different countries, absorbing blogs and podcasts from a thousand different sources.

Vicki Robin, author of Your Money Or Your Life came out of retirement to write a new edition of her foundational book on the subject of financial independence* and some prominent filmmakers have spent the past year making a documentary called Playing with FIRE about all of this too.

And suddenly, instead of just a blogger or a few millennials here and there, the media is starting to call it the Financial Independence Movement. And this is a big deal, because when it comes to cultural traditions, perception pretty much defines reality.

But when you look it up by Googling the FIRE Movement, you still get a pretty mixed bag of arguments.

The New York Times article looks very positive. But there’s another one in there called “Why I Hate the FIRE Movement”, another that complains our ideas are a “Massive fallacy of composition”, and any number of others saying that we have got one aspect or another wrong.

There’s a tricky paradox going on here: the more people you reach, the bigger the range of misconceptions that will come up, potentially cockblocking your movement before it really takes off.

So, with that in mind, let’s clean up the biggest bits of WRONG that are preventing the latest round of several million new arrivals from fully enjoying the fruits of their own labor.

Because as soon as you stop making excuses for why these ideas can’t possibly work for you, you can start actually doing them and seeing the benefits – today.

1: This is ALL WINNING and there are NO DOWNSIDES.

If you think there is even the slightest flaw with the ideas behind FIRE, you’re probably just not understanding it correctly. Because the whole reason for doing any of this is to lead the happiest, most satisfying life you can possibly lead.

Sure, there are a few tricks behind the curtain – I’m going to make you occasionally tackle some moderately difficult stuff instead of the lazy, easy things you are accustomed to doing. But this too is a win, because a lazy life is a sad, depressed, unsatisfying life. We are going to lift you up OUT of that bullshit. So from now, you can assume that any objections can be solved. Zero complaints allowed.

2: It Doesn’t Matter How Much Money you Make

Sure, many of the people most passionate about FIRE tend to be tech workers and doctors who happen to make a lot of money. When people with lower salaries notice this fact, they tune out and assume the ideas won’t work for them. When in fact, they work even better, the further down the income scale you go.

When I tell a Google employee earning \$200,000 per year that she should not burn through too many \$10.00-plus-tip glassses of wine at happy hour, she can rightfully respond that each one represents only about ten minutes of her after-tax pay. But what about the guy getting by on \$20k? A ten-dollar expenditure is ten times more of a blow to his finances, and an even bigger portion of his monthly surplus income, if he has any surplus at all.

I’m not telling low-income people that they can retire in five years. I am telling them that they can make their lives better, RIGHT NOW, by spending less money on certain things that don’t improve any of our lives. Ten dollar drinks are one easy example, but there are dozens of other ones that I’m suggesting.

And dozens of ten-dollar bills start to add up to real money pretty quickly, which is something most people don’t realize. The vast majority of wealthy people are the ones who have figured out that a

At the opposite end of the scale, earning more income will rarely solve your financial problems: most high-income people are still within just a few paychecks of insolvency, because it is possible to blow almost any paycheck, simply by adding or upgrading more cars, houses, and vacations.

A fundamental truth in society is that most people are pretty bad at math. At the core, these FIRE ideas are simply about taking some solid math, combining it with principles of human happiness, and then distilling it down into a list of simple tactics that will get you way ahead in all areas of life. The benefits go way beyond money.

3: FIRE Is Not Really About Early Retirement

Everybody uses the FIRE acronym because it is catchy and “Early Retirement” sounds desirable. But for most people who get there, Financial Independence does not mean the end of your working career.

Instead it means, “Complete freedom to be the best, most powerful, energetic, happiest and most generous version of You that you can possibly be.”

Does this mean you will quit commuting through traffic into a lame corporate office to sit in meetings about products you don’t really care about? Yes.

But does it mean you won’t work hard at things that are important to you, for the rest of your life? NO!

The people who lob this “retirement is bad” complaint against us are often the lucky ones – a professor who loves researching and teaching, or an established doctor who loves saving lives and happens to enjoy the work environment she has created for herself. But in real life, over half of people are in jobs they genuinely do not enjoy, and which they would immediately quit if they didn’t need the money.

Early retirement means quitting any job that you wouldn’t do for free – but then continuing right ahead with work in something that works for you, even when you don’t need the money.

If you’re lucky enough to find a job this good early on in your career, then congratulations, you can have the benefits of early retirement even before you have the huge nest egg. But don’t fool yourself  – having the financial independence side of things is very powerful as well.

And because of this tendency of early retirees to go on through life and keep earning more money – at least occasionally – the issue of running out of money is even more remote. Most of us end up with a higher net worth every single year, even decades after turning in the keys to the cubicle.

4: You Can Be Happy on ANY Level of Spending

As a society, we’ve been trained to assume that having a bigger budget is always better, and cutting back always means some sort of compromise. The Suze Orman interview above is just dripping with that assumption. The amazing news in this department, which will save you millions of dollars, is that this is complete bullshit!

Happiness is your goal in life, and it comes from meeting certain core Human needs. The thing is, that there are many ways to meet each of these needs – some of them free and some of them shockingly expensive.

For example, improving your physical health is one proven way to be happier. But you can accomplish this with a \$2500 per month personal trainer or a \$100 set of barbells from Craigslist. Same happiness, vastly different cost.

And as it turns out, there is a similar hack for every single one of life’s major expenses. You can meet all your needs at little or zero cost – it just takes a bit of skill. At this level, you would be able to save almost all of your income.

Or, you can substitute a bit more money and a bit less skill to meet those needs in an (only slightly) more efficient lifestyle, like the one I try to lead. This might allow you to save half or two thirds of your income.

Or, you can spray money in every direction randomly, trying to meet an unfiltered list of wants and needs, and end up with a random but very expensive life, while remaining almost broke throughout the entire thing. This is what most people do, and it leads to saving almost none of your income.

All three choices are possible to do with great happiness. But in a bit of a paradox, the last and most expensive choice is the most difficult one in which to find happiness, because you end up with so many distractions and so little free time.

5: It Doesn’t Depend on A Booming Stock Market

I started this blog soon after the crash of 2009. Now we’re in the boom of 2018. Another market crash of epic proportions is coming sometime, probably pretty soon.

Our uninformed opponents think that FIRE-style early retirees are extra vulnerable to this. But in reality, it’s just the opposite: we are on a safe island, far above the choppy seas of the everyday economy. Because here’s how it really works:

• We have low and easily controlled expenses – remember, we got here precisely by being good at controlling our spending.
• The stock market always fluctuates, and crashes are an expected and healthy part of the system. Then Human ingenuity continues its magic, we keep on striving and inventing great things, and the market goes back up. Stock market volatility is already built into the math we used to design this plan. Relax.
• Even in the event of a permanent collapse (for example the end of the US or world economy), the FIRE practitioner would still come out ahead: instead of focusing your energy on leasing BMWs or dressing yourself up fancy, you have learned to live happily and work on your skills, health, and friendships. It’s a package that will make you wealthier in good times and bad.

6: Education, Health Care, or High Cost of Living areas are Comically Tiny Obstacles

FIRE is simply about making smart decisions with your spending so that you waste less money.  This means that you have way more money available to work with.

The potentially costly monsters mentioned above are simply things that cost money. So if you get better at managing your money, do you think these problems will loom larger, or smaller, in your life?

For example, my son will be reaching University age in just five more years. I haven’t bothered to set aside any money for this part of his education, because we already had way more than enough before he was born!

On top of that, financial independence gives us many more options to handle any unexpected expense, whether it’s education, health, or anything else. For example, as a team my son and we parents could easily:

• shop around to find the most cost-effective way to get any given degree (start with community college for the first two years, compare different schools, etc.)
• earn more merit scholarships to get through even an ivy league school for free.
• earn more money to pay for any cost shortage
• bypass university entirely and simply start a business
• move to another state or even country in order to qualify for local tuition rates or more reasonable medical rates
• use personal relationships to get cheaper or free education or medical care in exchange for helping teachers and doctors with something they need from us.

These are just a few ideas. The point is, every problem can be solved, and financial independence simply gives you more mental and money power to solve these problems.

7: The Only Thing To Fear, is Fear Itself

In the interview, Suze Orman goes on and on about what might go wrong, and how you need an incredible amount of money saved to protect you, just in case. But this thinking is completely backwards – money will not cure your fear, as megamillionaire Suze proves so clearly.

If you are afraid of what might happen in the future, you have a mental problem rather than a financial problem. So you should work on that first, by training your mind and body:

• Start each day with at least a one mile brisk outdoor walk – before you even attempt to work.  This drastically improves your hormonal balance and reduces stress and fear.
• Completely avoid the daily news cycle, especially on TV or radio. If you insist on being a world events junkie, just read the Economist once per week. Focus on optimistic sources of information – like this blog!
•  Seek out and hang out with more optimistic friends. Remove negative or gossipy friends from your daily life.

Because my brain has a math side I can’t turn off, I tend to see the world in terms of numbers rather than just emotions. And this is incredibly helpful, because by understanding probability, it helps me set up my life to ensure a much more joyful stream of those happy emotions.

For example: many people avoid cycling because they have heard from friends that it is very dangerous. But by doing so, they replace bike trips with sedentary car or bus trips, which clog their arteries and compound into fat gain and other medical issues which really are dangerous.

A lifetime of bicycling in average conditions might give you a 0.2% chance of untimely death due to accident – which can be slightly higher or lower than car driving depending on where you live. But a lifetime of drinking soda and skipping your cycling and barbell workouts gives you at least 50% higher chance of dying ten years earlier due to medical complications, while cycling reduces those health risks (and costs) considerably. So which activity is really the dangerous one?

With this in mind, which of these activities is more risky?

• working ten extra years in a job you don’t love so you can have an extra million saved up in case you encounter heath problems later.
• quitting that job right now and investing those ten years into living a healthier and less stressed life with more exercise, better relationships, and a more diverse range of skills. Focusing on you instead of your bank account.

We’ll skip the spreadsheets for now and just boil this into a list of habits that really do give you the best chance at a good life: more happiness, better health and less negative stress.

• Physical health FIRST: your brain is a system of meat and tubes, just like the rest of your body. The whole system will only perform well if you place its wellbeing first, before anything else. Salads and barbells every day, no goddamned excuses.
• Mental health NEXT: feed your mind with happy input and learn to practice mindfulness, educational reading, and meditation daily, which is simply a workout for the brain.
• Daily hardship and Learning: if you are not sweating and learning and doing something difficult and solving problems, you are not living fully. Find a way to scale back the pampering and achieve more with your own body and mind.
• Indulge, but only with Moderation and Self-Mockery: this country is rich enough that you can become wealthy even without perfect self-discipline – even on minimum wage. But the moment you think you deserve or need whatever indulgence you are currently treating yourself to, you have lost the game. Luxuries and treats are just short-term pleasurable distractions, like any other drugs. Indulge if you can afford them, but you’re not missing one ounce of happiness if you choose to go without at any given moment.

So that’s the FIRE movement.

It’s a system of living your best life in all ways rather than just the financial, based on our best understanding of human nature, with a bit of math and science behind it. Like science itself, it’s not a dogma or a religion, but more of a self-aware system that invites questions and experiments. It’s always open for modification or improvement, but like science itself, there’s nothing for a rational person to hate. Who hates learning?

The reason it has spread to millions of people is that it works. People try it, they like the results, and so they share it with their friends, and the cycle repeats. There’s no stopping an idea or a movement like that.

*and guess who had the honor of writing the foreword for the new edition?

Note that I use Amazon affiliate links to point to any Amazon products mentioned, which allows this blog to earn money – so many thanks if you use them.

## Twenty years of U.S. government inflation data

sourced from: https://www.getrichslowly.org/inflation-data/

Inflation is the silent killer of wealth. Year after year, the purchasing power of your dollar (or pound or euro or yen) gradually erodes. My father was one of those “hide money under your mattress” type folks because he believed that was the best way to keep his cash safe. He was wrong.

If you sit on your money, it doesn’t maintain its value. It loses value.

At his Carpe Diem blog, economics professor Mark Perry recently published a new version of the following chart, which visualizes the effects of inflation on certain consumer goods and services.

As you can see, this chart tracks 21 years of inflation data: from January 1998 to December 2018. (Perry uses official Consumer Price Index data from the U.S. Bureau of Labor Statistics.) He writes:

During the most recent 21-year period from January 1998 to December 2018, the CPI for All Items increased by exactly 56.0% and the chart displays the relative price increases over that time period for 14 selected consumer goods and services, and for average hourly earnings (wages). Seven of those goods and services have increased more than average inflation…The other seven price series have declined since January 1998.

In the chart, the black line indicates average inflation over the past 21 years. Red lines indicate items that have increased in price at rate faster than inflation; blue lines have decreased in price relative to inflation.

If you read the accompanying blog post — and especially the comments that follow — you’ll see that people are quick to jump to partisan conclusions regarding this chart. “The more expensive stuff is a result of socialism and government regulation!” “The less expensive stuff is open to free market competition.” (These comments aren’t surprising considering the blog is published by a conservative think tank.)

I believe these responses are overly simplistic. Besides, they miss the really interesting stuff.

For instance, look at the price of televisions. According to the CPI, the price of TVs has declined 97% in the past 21 years. I think we all know that’s not actually the case. TVs have grown more expensive, along with most everything else. So, why does the data state otherwise?

A fundamental problem for the goods and services in the CPI sample is that their characteristics, not just their prices, change over time as the retailers introduce new versions of items and discontinue the older versions. In many categories of items, this is the primary time when price change occurs. The new version of the item may provide additional benefits or, in some cases, reduced benefits. This change in benefit is quality change.

To measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.

To compensate, the CPI uses a technique called “hedonic quality adjustment”.

As new features are added to existing products, economists attempt to model what the new features are worth if broken down to their constituent parts. In 1998, your television was a boxy beast. In 2018, it’s probably a big, slim wall-mounted display with dozens of nifty features. Each one of those features has a value that gets included in the inflation calculations.

If you could have purchased a modern TV in 1998, it would have cost a small fortune. And in 2018, an old CRT TV would only cost a fraction of what it did back then.

It’s also interesting to note that the cost of manufactured goods (like cars, toys, and TVs) has declined more than the cost of services (such as medical care and education). I’m not sure why this is the case, but it’s true.

When I look at this chart, I see something else. It appears to me that those things that are most useful or most necessary have had the highest price increases. Those things that are least necessary have seen the biggest price drops. If I had more time, I’d dig deeper into the data to see if this is actually the case.

Inflation statistics are one thing. Actual experience is another. When Kim and I complain about prices, food is what bugs us most. Nowadays, dinner in an average restaurant runs about fifty bucks. That would have bought a fancy dinner in 1998. Even my standard two cheeseburger meal at McDonald’s costs more than \$5 now. (I don’t get it very often, but it seems like it should cost \$3.) Groceries show similar increases.

Home prices seem outrageous in Portland still. Health care prices also seem crazy. We also think most entertainment options — movies, sporting events — are exorbitant. I think books are spendy too. (Do I sound like a grumpy old man yet?)

Meanwhile, clothing seems cheaper to me than it did two decades ago. (And I say this as a guy who used to shop at thrift stores!) Now that we’re preparing to buy a new car, vehicle prices don’t seem that bad — at least not for the low-end models we’re considering.

As a final note, I’m puzzled by the items the chart chooses to track. They seem arbitrary. Why show toys and televisions but not energy or transportation? Why, specifically, cell phones? Why not entertainment and recreation? And so on.

I’d love to see a similar chart with a more robust set of data. (Maybe this is a job for Zach from Four Pillar Freedom?)

The post Twenty years of U.S. government inflation data appeared first on Get Rich Slowly.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Changing pay schedules
2. Thoughts on Credit Parent
3. Protecting expensive jewelry
4. Consolidating retirement savings
5. Thoughts on sous vide cooking
10. Which credit card first?
11. Rescue dog destroying carpet

Last week, my wife went to visit her sisters and my children went to visit their grandparents, leaving me home alone for several days.

I did my normal work tasks and got some work done in advance. I had a few friends over a couple of times, and visited a few friends. I did some reading. I got a bunch of tasks done on my to-do list.

By the end of the week, though, I missed Sarah. A lot. She’s my best friend and the love of my life. Things are better when she’s here.

I also missed my kids. A lot. I realize that ten years from now our house is going to be this quiet and it’s not something I’m particularly looking forward to.

The last week was enjoyable. I got a lot of little things finished up. Yet, at the same time, I’m very glad it’s over. I’m glad my family is home.

## Q1: Changing pay schedules

I am a new mom switching gears in my career (going from a position with a 2 hour daily commute to one 5 minutes from home). The pay cut will even itself out factoring in commute costs, but I will be going from a biweekly pay schedule to monthly. Any advice for making that change easier? Planning tips?
– Ella

During my professional career, my pay schedule has changed several times. I’ve been biweekly, monthly, twice monthly, and a few other schedules as well over the years.

If you have a good system in place for keeping the bills paid on a biweekly pattern, my suggestion would be to have your new paycheck go directly into a new checking account, then have biweekly (or twice monthly) checks moved automatically from that new checking account to your old one.

So, let’s say your old biweekly check was \$1500, and your new monthly check is \$3500. You could move to a twice monthly transfer of \$1,750 and everything would work out quite nicely, or you could just transfer \$1,500 every two weeks (though you’d want to be very careful for the first couple “three paycheck months”) or \$750 every week. This would allow you to keep all of your current bill paying systems in place just like they are.

This was the best system for us as we transitioned to mostly receiving monthly income before we had a strong enough financial foundation to keep a healthy buffer in our checking account.

## Q2: Thoughts on Credit Parent

What do you know about a firm called Credit Parent (mentioned in the NYT’s column by Ron Lieber) that offers to freeze a minor’s credit with all 3 credit reporting agencies for a small fee. We would like to use it if the firm is reputable.
– Tamia

Tamia is referring to this March 8 article by Ron Lieber that discusses using Credit Parent to freeze their child’s credit reports to avoid any illicit use. This was actually a follow-up to Lieber’s earlier article, You Should Freeze Your Child’s Credit. It’s Not Hard. Here’s How., that got more into the reasons for why you should do this.

It turned out that actually freezing your child’s credit through one of the credit bureaus, Equifax, was harder than they expected. Lieber pointed to Credit Parent as a service where, for \$35 per child, they’ll handle freezing your child’s credit at all three credit bureaus.

The thing is, you’re largely just paying Credit Parent to fill out a few online forms for you, and you still have to fill one out to give Credit Parent enough info to make requests for you.

Rather than paying for that service – which seems fine, but it’s mostly just paying for something you can do yourself – you might as well just fill out the forms directly with the credit bureaus.

It’s a minor hassle to get it done. I don’t see any obvious red flags with Credit Parent, so the real choice is paying them \$35 to do this or just doing it yourself with the links above.

## Q3: Protecting expensive jewelry

I recently received some very nice jewelry as a gift from a relative. An appraisal indicated that the pieces are worth quite a bit of money. I’m not sure what I do with them now–insure them? Safe deposit box? I’m not really excited about taking on a recurring payment in order to be a responsible caretaker of these pieces, so I’m looking to minimize costs.
– Brittany

You have a decision to make, and it’s one I can’t make for you. The safest place to keep that jewelry is in the safe at the bank, but that comes with the annual fee of renting that safe deposit box. You can keep it pretty safe at home, but it’s going to almost definitely be less safe than that bank vault.

My decision process would center around the neighborhood I live in. Is the crime rate low? Are there burglaries with any frequency? Have you ever been broken into? Have there been break-ins near your home? The safer your neighborhood, the more I would feel okay keeping the jewelry at home.

If I did keep it at home, I would hide it in an unorthodox place. There are a lot of places to keep jewelry hidden that are hard to find. You could freeze them in an ice cube tray and leave that tray in your freezer. You could put them in the bottom of a coffee cup in the back of your cupboard. You could literally bury them in a small container in the soil of a potted plant. There are many, many places to hide something small in your home.

You might want to also check your renters insurance or your homeowners insurance to see what theft coverage is like in case it would be stolen if you kept it at home. It’s likely that unless this jewelry is incredibly valuable that your insurance would cover the loss. Unless the piece is a family heirloom, this would be an angle I would definitely investigate.

## Q4: Consolidating retirement savings

We just entered retirement at the beginning of 2019. We are consolidating my spouse’s three separate 401k plans into a single IRA account at Vanguard, where she currently has a Total Stock Market Index Fund account, a Total Bond Market index Fund account and a Total international Stock index Fund account. She also has a Money Market account for parking cash short term. Do we need additional mutual fund accounts, to further diversify? Any suggestions or comments.
– Eric

I think that is an extremely diverse portfolio, and I’d leave it just like that.

Within the IRA, I would probably keep all of the money you expect to take out in the next three years in the money market fund, the money you expect to withdraw in the following seven years in the bond fund, and the rest of it split in some fashion between the two stock funds – 50-50 is probably fine. I would withdraw from the money market as needed and rebalance everything in the same fashion annually.

The reason is that I would use the money market for short term savings, the bond fun for intermediate term savings, and the stock funds for long term savings.

Rebalancing would mean that you just move money around so that, again, you have enough for three years in the money market, enough for seven more in the bond fund, and the rest is split 50-50 between the two stock funds. I’d do that annually.

## Q5: Thoughts on sous vide cooking

A friend of mine has a water bath system where he puts steaks and other things into Ziploc bags and then puts them in a big water bath and cooks them slowly for hours. This water bath has a little heating device on it that keeps the water at a specific temperature. The steak is mostly cooked when it comes out and then he just sears it on both sides for supper. Is this a good alternative to a slow cooker?

I’m almost certain that you’re talking about some kind of sous vide setup. Sous vide is basically what you describe – it’s water bath cooking with a device that carefully controls the temperature of the water. This technique is often used in restaurants for precise temperature control and flexibility. I believe a similar method is also used in hospitals to prevent food borne illness with temperature control.

Sous vide cooking has the advantage of being pretty flexible in terms of timing. I’m not sure about having a steak in one all day long, but I know that a thick steak would have a multi-hour window where it would be perfectly cooked when you pull it out of there and then sear it.

I have an Anova sous vide device that I received as a gift a few years ago and I’ve enjoyed using it. In my experience, though, a slow cooker is more flexible in terms of the variety of things you can easily make cooking them all day long. Rather, it works well for weekend cooking, when you can start something at 11 AM or 3 PM depending on the needs of the recipe and just go on about your business and eat supper flexibly between 5 PM and 7 PM.

It does make many dishes really well, though. I absolutely love the eggs it produces, whether scrambled or not. Steak works really well. Some vegetables work well if you put some butter in with them while cooking – carrots come to mind. You can also make some amazing cheesecake in a jar in a sous vide system – I’m not kidding, it’s truly amazing for the effort involved. In general, anything with a bit of fat in it works fine, and if there isn’t any fat, you’re going to want to add a bit of butter or some other external fat.

I wouldn’t use it to replace a slow cooker, though, as slow cookers are just more versatile. I wouldn’t consider it a necessary kitchen investment at all, though it can be fun to play with and it does a few things really well.

## Q6: Really bad 401(k) options

I have been looking at my 401(k) and man the investment options are really bad. All of the investments even the supposed index funds have investment fees of at least 0.6% and most are over 1%. Vanguards funds are all like 0.1%. I have been comparing them. My employer does a match on your first 6% contributions but is it still worth it with investments that bad?
– Terry

I did the back of the envelope math on this and I’m pretty sure that any contributions you make that get a full employer match are still well worth it, even with these terrible investment fees.

To clarify, a 1% fee means that each year, 1% of the value of that investment is eaten up by the investment house. They usually don’t do it all at once – they’ll gobble up a tiny tiny fraction of it each day or week or whatever, depending on their policy.

But let’s say you have \$100,000 in an investment that has a 0.1% fee and another \$100,000 in another otherwise identical investment that has a 1% fee. Both return, say, 7% a year. After 40 years, the 1% fee investment will be worth about \$1.01 million, and the 0.1% fee investment will be worth \$1.44 million.

That seems like a huge difference, and it is, but it doesn’t make up for the literal doubling in value you get from snagging that employer match. You’re better off with the 1% investment with the full employer match than the 0.1% investment without the match, even with the terrible fees.

Still, I’d avoid anything with a fee above 1% like the plague. Just don’t put your money in there.

I won a \$100 gift card to REI in a raffle drawing last month. I was unfamiliar with the store so I looked online and it looks like good but high priced outdoor stuff. Looked around for a place to sell it but it looks like you lose \$20 of value everywhere I’ve looked. Suggestions for good use?
– Suzan

Do you ever go camping or hiking? If so, wait until you know you need a particular piece of equipment, then head to REI with your gift card and get it there. While the item might be expensive, you’ll be happy with it. REI usually sells good stuff, though fairly pricy as you noted.

If you are just not an outdoor kind of person, you might want to consider using it to buy gifts for people or, even better, to gift it to someone you know who does use outdoor stuff. Do you know a couple who does outdoor stuff that’s getting married soon? Do you have any family members who enjoy camping or hiking? Save it and gift the card to them, or else use it to buy something they’d like and give them the item as a gift.

If you really want to sell the card, you can turn it into about \$86 in Amazon credit pretty quickly at Cardpool.com, which I’ve used in the past to sell gift cards. As you noted, however, it does sell for about \$80 in cash.

One of those options should work well for you.

In an effort to cut down on monthly spending I cancelled my Spotify account. I haven’t had it for three weeks but I have found that I really miss it and I can’t find a decent free alternative. Tried to listen to free but I hate the ads and the shuffle play and how I can’t skip anything. Tried listening to Youtube videos and it works okay at my desk but awful on my phone. Suggestions?
– Emily

Honestly, I think the \$9.99 a month for Spotify Premium is probably justified for you. It is pretty evident from this email that you actually use Spotify a lot and actually value it. That is something that often isn’t true. Many people subscribe to services like Spotify and rarely use them while forking over the \$9.99 a month.

You clearly use it a lot. You clearly value it. Unless your budget is so tight that this would make the difference between eating or paying rent or something, I think it’s justified.

Pay for it by eating at home a couple of nights a month when you might otherwise go out or get delivery. Make some spaghetti and take the rest as leftovers to work or to class or whatever. That will more than pay for the Spotify.

The key to frugality isn’t to deprive yourself of stuff you really value. It’s to cut back on the things you don’t actually value that much and not get into anything new without a lot of thought and research. I don’t think that applies to Spotify – it’s something you value.

My son knows a lot about internet security and he says that I should have different passwords everywhere and that I should change them every three months. I am trying to figure out how to practically do this.
– Marcia

There are a couple of ways to do this.

One is to use a password management tool like 1Password that will store all of your passwords for you. It will create complex passwords for each site and all you have to do is copy and paste them over. When you want to update a password, you log onto the site you want to change, have 1Password make a new password for you, and copy it over. It’s pretty easy once you get used to it.

Then, just change that formula every three months. Maybe your new formula is your mom’s birth month followed by the first letter in the site followed by the first zip code you remember followed by the fifth letter in the site followed by your sister in law’s name. So your new password might be 6g32135lMary or something like that.

The trick is to have a formula you can always put together using something distinct about the site combined with distinct information from you, and to change that formula occasionally when you reset your passwords.

## Q10: Which credit card first?

I got a big raise and promotion at work which results in me bringing home about \$115 more per weekly paycheck. I have been slowly paying down credit cards over the past year so I want to kick payback into high gear. I have three cards and I know the default method is to pay them off by interest rate.

However one of the cards has an offer on it where I can cash advance once for 0% interest for 12 months but then that money turns into the cash advance interest rate which is high.

So my thinking is that I do the cash advance and pay off the high interest card. But then I don’t know what card to pay off next.

– Jeremy

You haven’t given me enough information to really give you an accurate answer. What really matters is how much debt is on each of those cards and, to a lesser extent, what their interest rates are.

Without knowing that, my best advice to you is to pay off whatever card has the highest interest rate right now. That will probably get you pretty close to the optimum route, though it might not be perfect depending on the interest rates on each of the cards.

So, do the balance transfer, examine the two remaining cards, and put your extra payments toward whichever card has the highest interest rate among them. If you still have that 0% balance transfer when it expires, switch to that one immediately for your extra payments.

## Q11: Rescue dog destroying carpet

We have a new rescue dog that’s wonderful most of the time. But whenever we leave, he goes to a spot on the carpet and starts chewing on it until we get home. He has actually ruined a few spots on the carpet with hours of chewing. The Rescue League thinks it is a way to deal with fears of abandonment and I love the dog and feel so bad for him but I don’t want our carpet destroyed. We have tried giving him chew toys and other things and spraying down the carpet but he keeps going back to the spot on the carpet. At this point the carpet probably has to be replaced anyway. What would you do?
– David

If I were in your shoes and I really loved the dog, I would probably just leave the carpet damaged and assume that he would damage replacement carpet, too. You might want to consider replacing it with flooring that he can’t damage, like wood or laminate.

I would focus on working with the dog’s abandonment issues and not sweat the carpet too much. I’m not a dog expert – I know you’re looking for suggestions on how to minimize the cost of all of this – but I would simply try to teach him that you are not pleased with the damaged carpet. You might also want to leave for short periods and return and compliment him if he didn’t damage the carpet. At the same time, I think a doggy like this one needs a lot of love, so I would make sure the dog feels secure and loved.

I probably would keep the carpet for a while until it’s so bad that you don’t want guests around, then replace it with something he can’t chew or destroy. I think at this point that’s probably your minimal financial cost in terms of fixing this situation, but that will stay pretty much the same regardless of whether you keep the dog or not at this point. I’d definitely do what’s best for the dog.

## Q12: Is CD laddering back?

In some of your earliest articles before interest rates dropped several years ago you wrote about CD laddering as a strategy. You said that it wasn’t a good move any more after interest rates dropped a lot so I forgot about it but I recently saw that some money managers are recommending CD ladders again. Thoughts?

I actually saw the same thing, mainly in this New York Times article by Ann Carrns.

First of all, what is a CD? A CD, or certificate of deposit, is a way of depositing money at a bank. You’re basically giving the bank a certain amount of money and pledging not to withdraw it for a certain period of time. If you don’t touch the money, you’ll earn a very nice interest rate over that period, better than a savings account; the interest rate is set when you deposit the money and is higher with the longer you’re agreeing to leave the money there. If you do have to touch it, you can, but you’ll pay a penalty and often wind up losing a little money on the deal.

What is CD laddering? The idea of a CD ladder is that you go to your bank and buy multiple certificates of deposit from them that expire at different times. This ensures that at least some of your money is about to come out of a CD at any given time, which can be good if you might need to use some of it in the future but you’re not sure when.

So, you might buy a 12 month CD each month, for example, and then in the twelve months following that, you always have a CD maturing so you can get the money out. You might use that money to just buy another 12 month CD, or you might actually have another purpose for that cash.

I personally feel interest rates are too low to really use CD ladders right now. I don’t have any of our money in one. If you start to see interest rates on CDs in the 4-5% range again, then I’ll be interested, but as of right now, it’s not of interest to me. I don’t want to lock up my money for the relatively small gain over what I’d get in a savings account.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Questions About CD Ladders, Pay Schedules, Jewelry Safety, Gift Cards, and More! appeared first on The Simple Dollar.

## My life philosophy: 50 lessons from 50 years

sourced from: https://www.getrichslowly.org/my-life-philosophy/

Happy birthday to me! Today, I turn fifty. Holy cats, that’s old! To celebrate, over the weekend I replaced the tape deck in my 1993 Toyota pickup so that I can listen to my Taylor Swift cassette. (You think I’m joking but I’m not.)

The funny thing is, I don’t feel like I’m fifty. Okay, my body feels like its fifty, but my mind doesn’t. I suppose that’s something that everybody says as they get older: “I feel younger than my age.” But it’s true!

To celebrate my 50th birthday, I’m going to indulge in my annual tradition. I’m going to share fifty nuggets of wisdom I’ve picked up during my life on this Earth.

I’m no wiser or smarter than anybody else. And I’m certainly no better. But I am an individual. I’m my own person with my own personal preferences and personal experiences. These have all jumbled together over the past fifty years to give me a unique perspective on life (just as you have a unique perspective on life). To quote my favorite poem:

Much have I seen and known; cities of men
And manners, climates, councils, governments,
Myself not least, but honour’d of them all;
And drunk delight of battle with my peers,
Far on the ringing plains of windy Troy.
I am a part of all that I have met…

So, these fifty nuggets of wisdom are things I’ve found to be true for me — and, I believe, for most other people. (But each of us is different. What works for me may not work for you.) These beliefs make up the core of my personal philosophy of life.

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 article I update every year on my birthday.

Some of these ideas 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 fifty principles I’ve found to be true during my fifty 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?”

• 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 to our current country cottage, 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.]
• 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.]

• 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.]
• 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.]

• 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.
• 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.
• Time is more valuable than money. You can always make more money…but you can’t make more time. This isn’t permission to spend lavishly on anything and everything just because you might get hit by a truck tomorrow. It is, however, an invitation to consider what’s important to you and to focus on that. It’s encouragement to get clear on your personal mission statement and to build your life around it.
• 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 has evolved from my philosophy when I was forty or thirty. And I’m sure that my philosophy at sixty will have changed in ways that I cannot foresee right now.

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?

The post My life philosophy: 50 lessons from 50 years appeared first on Get Rich Slowly.