A Reader Explains How Control Your Cash Turned His Life Around

October 12, 2012

 

Milton (Bradley)

We’re exaggerating, but not egregiously. We recently received an email from a reader named Milton (a real email, not one we concocted to create a mailbag with.) He understandably requested anonymity, but here’s the gist of it:

I’ve been enjoying your blog since I discovered it (via the Simple Dollar– talk about a fortunate turn of events) and am reading through all of the entries (having already read your ebook… twice).  I read the one about the site Digging Out From Our Mess, [NB: A site we’ve lambasted on here, and for good reason] and clicked the link to their site.  Based on their About page and updated totals, in almost exactly three years they’ve managed to reduce their debt load by a whopping NEGATIVE $281.39. I found CYC after I’d already started my own deprogramming and had eliminated my debts, and have begun investing and building wealth.  But even at my worst (read: dumbest) I don’t think I was this bad at personal finance.  At the very least, I didn’t think it was a good idea to trumpet my ignorance to the web-surfing world.

300 million more like him, and this country could be a superpower again. We asked Milton to explain how he – a presumably ordinary cat with the same hopes and desires as most of us – started building wealth and this is what he had to say:

I live and work in New York City.  I’m the IT Manager for a mid-sized engineering firm.  I’ll be 44 in about two weeks, and am single with no children.  I have three sisters and no brothers.  My parents were born in Puerto Rico and came to the mainland US in their late teens.

You refer to your own “deprogramming”, which implies that the old you thought it was awesome to incur debts and not care. Is that accurate?

Yes. We grew up poor and didn’t learn about money and finances.  Like everyone else I know, my parents didn’t teach us about money.  My father never learned English and worked at menial jobs his whole life, squandering what little money was left after expenses.  My mother stayed home with us and did what she could with what little we had and didn’t build up any savings.

God, how depressing. And how typical, to think that life’s purpose is misery. It was a common belief in Milton’s father’s generation and those previous, and still a fairly common one today. (That’s a comment about the menial job, not a joke about having 4 kids.)

It wasn’t all bad.  Among the lucky breaks were that I did not go to college and avoided many of the pitfalls of growing up in an impoverished area.  I’ve never used tobacco or illegal drugs, I rarely drink and I don’t gamble.  After jumping from one job to another for about 3 years, I settled into my current job and within 8 years had been promoted from mail clerk to computer specialist.  At 29 I was making more than twice as much money as my father had ever made (adjusted for inflation).  Even my financial ignorance had a bright side.  Thanks to my mother’s distrust of credit and debt, I didn’t get my first credit card until I was 27.  I was debt-free and had a $1,000 line of credit. So there I was, making good money with only a few monthly expenses.  Just like Dad, I’d spend whatever was left after the bills were paid.  Unlike Dad, I had a LOT of disposable income to dispose of.  Computers, home electronics, art supplies, novelty gadgets, exercise equipment… anything that caught my eye was as good as purchased.  I had the money, why not enjoy it?  As my credit limits rose so did my spending and my interest rates (up to 29.99% at times).  I funded my 401(k), but only about 1/3rd of the maximum.  At some point I had actually set up my withholding so that I was only getting back a relatively small refund each year, which I then dumped into a savings account that was earning .3%. I’m not the sort to spend much time looking back at what cannot be changed, but I cringe whenever I think of where I could be today if I’d had a better understanding of money when I was young.

Of all the dumb things to do (and we all do dumb things), Milton picked some of the least dumb ones. The standard vices aren’t just of dubious morality, they’re expensive. Fortunately, the ones he picked were easy to fix: if you want a greater 401(k) contribution, contribute more to your 401(k).  

 

What made you see the light? 

I think that getting older and paying more attention to finances is what woke me up.  I was getting to that age where you start to think about retirement options, and I also realized that I was paying around $750-800 a month in finance charges on my credit card debt.  Gads, it makes me ill to think about that again.  After a couple of aborted attempts, I managed to wipe out around $24,500 of debt in around 18 months (helped in large part by the $12,000 that was sitting in that savings account… sigh).  A few months after that, I finally stopped wasting money and started building up my savings (Trent would’ve been proud of my emergency fund).  Happily, it was around that time that I found your site and finally began to understand how it is that I could make my money work for me instead of the other way around.

Milton emphasized his point with a sigh, so we won’t pile on, but you see what he did there? Every personal finance site in existence tells its audience to “create an emergency fund“, which is horrible and self-defeating advice. Why? Because it implies that you’re not in an emergency right now. Milton was, and didn’t realize that having a debt load twice the size of your savings counts as an emergency. (Nor did he realize, at least not immediately, that there’s a way to halve said debt load which is so easy that it’s easy to miss.)

 

How have you begun investing and building wealth? That is, what have you invested in (beyond the stuff you were investing in before, like 401[k]s and stuff)?

I am fully funding my 401(k) now and paying attention to where my 401(k) funds are allocated.  I opened an account with Vanguard and put some of my savings in a mutual fund and the rest into a brokerage fund.  I’m invested in ETFs and a bond fund (specifically, VTI VNQ VXUS and BND).  When my profit-sharing bonus comes in at the end of the year I am planning to invest in a few stocks as well.  I will be looking for stable and profitable companies with good fundamentals. I plan to try my hand at real estate within a year or two.  I’m hoping that the housing market and interest rates stay depressed for a few more years. (NB: Douche.) I have vivid dreams of owning multiple homes on 15-year fixed-rate 2.95% mortgages that I can pay with spare cash (deep breaths… deeeeep breaths…).  It’s a challenge for me to do something risky, but it’s too good an opportunity to pass up.  I live in a co-op and do not want to buy a house in New York City; I am researching locations where I can get a good deal on a modest house in a good area. I have other plans that involve comic book artwork (which I dabbled with in the ’90s) and I might see returns from that sooner.  At worst, it will provide some extra money that can go 100% towards wealth-building.  If the stars align, this plus a few rental properties might allow me to retire early.  And of course, I pay all of my credit card balances in full every month. (Italics ours, not that they were needed.)

How much time do you spend on this? 

Too much, because I started investing 2 months ago and I’m still at that anxious stage.  I’ve already gotten it down from checking my finances several times a day to 3 or 4 times a week.  By the end of the year I should have that down to once a month.  Long-term, I intend to stay on a once-a-month schedule for my investment accounts and a quarterly schedule for my 401(k).

Is there any advice you’d give people who are just discovering CYC for the first time? Like, what recommendation worked better for you than you thought it would? (Or what would you avoid?) 

The most useful thing would be to follow your advice about removing emotion from the equation.  I imagine that a lot of people who read your site become indignant at the implication that they’re doing a lousy job of managing their finances (and in some cases, their lives).  A defensive attitude is an obstacle that can derail their attempts to get their finances (and lives) in order.  It may sting to be told that what you’re doing is stupid, but the sooner you realize that what you’re doing IS stupid the sooner you can stop doing that and start doing something smart.  The best advice in the world won’t do any good to a person who leaves in a huff because they think failure should be rewarded with a pat on the back.

Couldn’t have said it better ourselves. Although we did say it differently, in the footer: This is personal finance for people who want results, not coddling. Milton’s doing fine (repeat: fine) and there’s no reason why you can’t, either. He didn’t grow up with any inherent advantages, obviously. The closest thing he had to one was his abstemious mother and her example. On balance, that’s a lot to compensate for a diligent if financially unsavvy father, in a house with 6 hungry maws, where English wasn’t even the first language. To recap, and this couldn’t be simpler if we used puppet theater:

  • Don’t flush money down the toilet (drugs, alcohol, gambling.)
  • Fund your 401(k) to the max, and get the matching funds. Free money.
  • Treat consumer debt with aggressive therapy, i.e. living ascetically until the debt’s all gone. The occasional “splurge” defeats the purpose, and keeps you poor longer, if that’s what you’re into.
  • Then, once and only once that’s done, can you start investing. Investing, not speculating. Speculation is for rich people. The aspiring don’t have that luxury: they need to build wealth methodically before building it in riskier ways.

What else should Milton do? He’s on a smarter path than the vast majority of people. He needs to spend less time checking his investments, but he acknowledges as much. We can blame that on how new he is to investing. It’s like when a formerly sedentary person develops and commits to an exercise-and-diet routine. Once you do, it’s only natural to weigh and measure yourself abnormally frequently. Then, when the pounds and inches start falling off more slowly (because you’re getting closer to perfection, and thus there’s less room for rapid improvement), you eventually start checking the numbers less and less often. Milton bought assets, sold liabilities, and is now enjoying the inevitable increase in wealth that follows. Spend your money on things that further your wealth, don’t spend it on things that don’t, and you’ll get rich no matter how otherwise stupid or lazy you are. It never fails. You don’t even have to be smart like Milton.

Filed Under: Making Smart Choices, Newsflash Tagged With: , ,

Remember To Breathe (228/365)

August 15, 2012

Today’s guest post is by Trent Hamm of The Simple Dollar. Trent lives in small-town Iowa and loves to give advice that’s both helpful and profound. This is part of a series in which he repeats himself. Not just within the post, which is his signature move, but across several posts.

 


In the past, I’ve discussed how you can save huge amounts of money by washing your hands, turning on the oven light, brushing your teeth (complete with instructions), developing a clothes-wearing rotation, swimming in a t-shirt and bra or other underwear, brushing your teeth, spending 5 hours planning your vacation for every hour you spend actually on vacation, brushing your teeth, counting the grains of salt you season your food with, brushing your teeth, closing off some of the rooms in your house, sleeping, eating breakfast, eating breakfast (reprise), drinking water, spending hours gathering the supplies to make your own laundry detergent instead of just spending a few bucks on a bottle, then doing it again, and again, and a 4th time, not smoking, drinking less, and brushing your teeth. That’s when I’m not conjuring up imaginary people to write emails that I then answer, usually by recommending a board game or a method of doing some painfully obvious task.


Today, having exhausted every conceivable activity save one, I’m going to simply mention a wonderful way of saving money that always works. Use it, and you’ll simply find yourself several hundredths of pennies ahead of where you’d be otherwise.


Breathe. Every time you find yourself gasping, or your lungs are a little low, just open your mouth (or your nostrils) (or both) and simply take a big deep breath. You’ll be bringing air into your respiratory system, which will keep you alive for a few more seconds than if you hadn’t.



Of course, it’s important to remember your surroundings when you’re doing this. If you’re in a gas chamber, one that uses hydrogen cyanide, you’re probably not going to want to take a deep breath. The same goes if you’re rioting and see police using tear gas. Also, if you’re attempting to assault a woman, and she sprays you with mace, taking a deep breath will not be recommended.


This wonderful method has been used by me for years – and also by my wife and children – and I can simply say that it works wonders. When combined with the right proportions of nitrogen and other gases, your lungs will simply move the oxygen to your bloodstream and simply emit carbon dioxide into the atmosphere in its place.

Which brings up an important point – don’t forget to exhale. It’s also known as “breathing out”. Just simply reverse the procedure that you used to draw the air into your lungs in the first place.


The wonderful financial benefits of this strategy are not to be underestimated. For one thing, you’ll save on ambulance visits. Not breathing is a fairly common reason for being transported to a hospital via ambulance. If you breathe, you’ll have simply eliminated that reason. And ambulance trips are not inexpensive. Which makes inhaling (breathing in) a pretty big money-saver.


Another wonderful thing about breathing in (and its partner, breathing out) is that you can do it while performing other money-saving activities. For example, when I find myself preparing my family’s weekly meal plan, or making one of my multiple weekly visits to the grocery store, or spending an hour tearing ads out of magazines because I think ads are invasive and occupy too much of our time (chew on that one for a second), or clipping coupons (which my inconsistent mind has chosen not to consider to be a form of advertising), I’ll often find myself inhaling and exhaling. Do this in concert with the other money-saving tips I love to theorize about, and you’ll simply double your saving power.


Did I mention that I was featured, inadvertently, on Cracked last month? The author wrote a piece entitled “7 Useless Money-saving Tips People Were Paid To Write”, and guess what one person was responsible for 42% of them? It took me the better part of a year to notice that Control Your Cash devotes (at least) one day a month to my punchline of a website, so it stands to reason that I didn’t notice the Cracked article until now. Actually, considering I’m not really Trent, I still don’t know about it.


Unfortunately, if you want to make fun of me in the comments for my stilted and arid manner, my endless repetition, my pathological cheapness, or my exalting of everyday knowledge as revolutionary truths, you can’t. I finally disabled the comment system on my own site after figuring out that if I replaced it with Facebook commenting, anonymous people couldn’t chime in on on how my site has gone downhill, not that it was perched atop K2 to begin with.


This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Of course, I happened to choose a year that has 366 days in which to repeat this tripe. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project. She’s also my cousin, or possibly niece, but I’m trying to keep that quiet for some reason.

Filed Under: Newsflash Tagged With:

Who’s Worth Reading?

July 11, 2012

There is a respite from all the drivel you’ve been reading. Enjoy.

 

Almost no one.

Today we’re recommending the tiny fraction of personal finance bloggers other than ourselves who, for lack of a more convoluted expression, get it. This isn’t one of those reciprocal-link things where we compliment other bloggers so they’ll return the favor and thus improve both parties’ Alexa rankings. We’re just trying to avail you of other sites that reach the same conclusions we do, though not necessarily from the same starting place. This isn’t an exhaustive list, and we’re qualifying it as such only because we’re bound to inadvertently leave someone off. Our apologies in advance. Here’s who you should be reading, if you’re going to read anyone:

Afford-Anything. The brainchild of Paula Pant, an Atlanta 20-something who has all the pluses of a journalist (inquisitiveness, a respect for the English language) with none of the drawbacks (self-righteousness, naked agendas.)

Her writing is crisp and forthright, and her subject matter is original. Like everyone else on this list, she practices what she preaches. She’s a freshman real estate investor who understands that you can either complain about your station in life and look for scapegoats, or you can take uncomplicated steps to build wealth. Paula isn’t hung up on frugality, but she’s also not going to waste money for the sheer enjoyment of it. She likes to travel, but she hates the idea of financing it. Our kind of girl. (Sorry fellas, she’s taken. By a guy who knows his way around a tool box, no less.)

 

Financial Uproar. Nelson Smith is a 29-year-old “chip guy” in Drumheller, Alberta, a little town 50 miles northeast of Calgary. His job is to ensure that the requisite number of bags of Doritos (or pretzels, or whatever) find their way into the retail store with the corresponding point-of-sale display. It’s not particle physics, but it’s a way for Nelson to make a nice living without committing undue time.

Which frees up hours to write one of the funniest sites in any subject. Nelson has opinions, and believes he’d be wasting his time if he wasn’t sharing them with you. He thinks (or rather, knows) that certain investment strategies are stupid while others aren’t. Most bloggers would rather do anything in the world than take and defend a position. Nelson does, every week, peppering his findings with a humor that’s part venomous, part juvenile (our description of which is intended as a compliment.)

 

6400 Personal Finance. Another 20-something, Dave is an army officer stationed at Schofield Barracks, Hawai’i. He recently returned from Afghanistan, where he handled more responsibility than do most civilians twice his age. If you didn’t know what Dave did for a living, you wouldn’t need to be too smart to figure it out from his martial and uncompromising style.

Dave means business. All it takes is one paragraph, sometimes even one sentence, for you to perceive his disdain for fools and foolishness. He does have a sense of humor, but it’s an acerbic one buried under a broad compulsion to snap people out of their bad habits.

We’d bet that Dave has never used the word “consider”, as in “consider adding an extra $20 to your monthly credit card payment.” He’d tell you to quit screwing around and pay the thing off in its entirety, but not before pointing out how irresponsible you were to have incurred said debt in the first place.

The site is named after the number of mils in a circle, a mil being a unit of angle. (A professional marksman requires greater calibration than that measured by the relatively coarse 360 degrees of a civilian circle. And thus for personal finance, too.)

 

Timeless Finance. Our newest discovery is the work of Joe Wood, a “purchasing specialist” in Toronto. Forget every stereotype you have about obsequious, mousy Canadians. Joe spells out what many people don’t want to hear about the banality of consumer debt and the cost of inaction. Timeless Finance is an antidote to the homogenous mass of personal finance blogs that usually consist of nothing more than an overextended writer lamenting her situation and not taking any of the obvious steps to fix it. (And let’s just say that if Joe’s posts ever become half as brazen as his emails, Timeless Finance could one day knock off Control Your Cash as the most hated personal finance blog in existence.)

 

Len Penzo. The only blog on the list whose founder we’ve met in person, the namesake of the site is an engineer who lives in Southern California with his beautiful wife and 2.3 kids in a house that we can only assume is surrounded by a white picket fence. The senior entrant on our list (a comment on the site’s age, not necessarily its founder’s), Len writes in an easily digestible, matter-of-fact style that’s both engaging and amusing. His blog isn’t overly technical, but rather contains common sense observations about both the micro and macro levels of personal finance. (The latter of which means, in so many words, that his political views are in lockstep with ours.)

Len’s blog is family-friendly, rarely delving into even PG territory. You can share his posts with your grandmother, something you probably wouldn’t want to do with a random entry on Financial Uproar.

Len is also so unfailingly courteous that you wonder what deep family horror he’s hiding beneath the surface. Except that we met his parents, and they were a delight too.

 

DQYDJ.net. It stands for “Don’t Quit Your Day Job”, and it’s the work of PK and his crew of like-minded writers. He’s a software engineer who lives in Silicon Valley, and who maintains the most technical of the sites on this list. Sample topics include everything from basic economic concepts like the income effect, and minimum wage laws (and why they’re bad) to more practical matters like the role of gold in your portfolio and the perfect credit card spending strategy. PK is a polymath who complements his pieces with killer interactive charts and other visual aids, as opposed to the stolen photos with cryptic captions that we like to use here. DQYDJ also includes occasional detours into pop culture and other non-financial topics.

 

Sterling Effort. The work of another software developer, this site is the antithesis of the coupon-clipping and balance-transfer nonsense that you can easily find by swinging the proverbial dead cat. Honestly, how many ways are there to tell people how to save miniscule amounts of money?  27-year old Ash Willis (and a partner) are based somewhere in the United Kingdom (sorry we can’t narrow it down any more than that.) Their driving directive is eerily similar to ours, although delineated in a refined British vernacular that we couldn’t hope to duplicate:

Children go to school. They learn how to interpret poems and solve differential equations, but at no point are they taught about money. Sterling Effort was created to stuff some financial knowledge into those of us who grew up without being taught how money really works; how to make it, save it and grow it.

 

The Oblivious Investor. Mike Piper is a 28-year-old CPA (although he looks like a middle-school student) who lives in St. Louis. He’s advanced way beyond the theoretical arguments (“Should I employ Dave Ramsey’s debt snowball?”) that have already been decided, instead focusing on nuts-and-bolts matters. For instance, Mike breaks down funds by category and objective, telling you what’s worth investing in and what isn’t. He takes what could be dreary subject matter and summarizes it beautifully. Mike manages to do this because he refuses to communicate in the pointless and counterproductive corporatespeak that plagues every realm of modern life and that wastes countless hours.

All these sites’ authors have the following in common:

  • Originality.
  • Curiosity.
  • An interest in knowledge, if not for its own sake then for how it’ll benefit them financially.
  • Literacy.
  • An engaging writing style.
  • An ability to get to the point quickly.
  • An understanding that being responsible helps you build wealth, and that there are common habits that are guaranteed to keep you poor.

…all of which distinguish them from the swamp of boring and repetitive personal finance sites that litter the internet. None of the above will ever regale you with stories about how much debt they’re choking under, how difficult it is to get out, or how they’re going to start applying themselves to good habits as soon as they take that expensive vacation they’ve been dreaming about and thus deserve. Anytime any of our favorite bloggers shares a first-person story, it’s to illustrate a point, rather than to assuage their own egos.

If you can’t stomach Control Your Cash (and lots of people can’t, although they don’t typically make it this far into a post), subscribe to all of the above sites and you’ll learn more about building wealth (and thus freeing up your time) than you will just about anywhere else.

Filed Under: Healthy Living, Making Smart Choices, Newsflash
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