The optimization trap ~ Get Rich Slowly

Since returning to Get Rich Slowly in October, I’ve begun to receive more and more email from readers with questions about what they should do with their financial lives. I love reading what people have to say, and I love trying to help (when I can).

Often the folks who write to me are focused on frugality. They want to make the most of their grocery trips, their book budgets, and so on. Sometimes the questions come from people who want to know which index fund to choose: Is it better to buy Vanguard’s Total Stock Market Index Fund (VTSMX) or Fidelity’s Spartan Total Market Index Fund (FSTMX)?

In other words, many of the emails I receive — regardless the sender’s financial situation — are about what’s best to do with their money.

I think it’s great that GRS readers are making deliberate decisions about their financial lives. It’s awesome that they’re looking to optimize their saving and spending, that they’re clipping coupons and fretting over how to get the best returns on their investments.

However, I worry that sometimes people pay too much attention to small details, to minute aspects of personal finance, while neglecting the Big Picture. It’s easy to fall into what I call “the optimization trap”, to believe that tiny tweaks will make more of a difference than they actually do.

Here’s a real-life example from a reader named Dave:

We get coupons in our Sunday paper. I’ve contemplated getting rid of the paper because it’s sometimes difficult to have the coupons subsidize the monthly cost of the paper. (The paper costs $12.45 per month.) Many times it ends up being a push. Should I ditch the coupons altogether and cancel the paper or stay the course?

Dave’s dilemma is a perfect example of the optimization trap in action. He’s spending $150 per year on a newspaper. By clipping coupons, he’s able to defray some of that expense — but not all of it. Should he cancel his subscription?

My response? This isn’t an important financial decision. Even if Dave only recovers half of his newspaper expense via coupons, it’s only costing him $75/year. If he uses the paper and enjoys it, and if the $75 per year is worth it to him, then he should continue getting the paper.

Meanwhile, I worry that Dave (and people like him) are missing the Big Picture. Small economies are a terrific way to optimize your spending, but they’re a terrible place to start. If you’re at the beginning stages of getting your financial house in order, it’s far more important to ask questions like:

  • How much of your budget goes to housing?
  • How much do you spend on transportation?
  • Have you taken steps to boost your income?

It’s great that Dave wants to be sure he’s getting value from his newspaper subscription, but he should be concerned with this sort of small optimization only after he’s taken care of the Big Picture. Let me say this once again: It’s far more important to get the big stuff right than it is to optimize the small stuff.

Look, I don’t mean to pick on Dave here. Far from it. (Turns out Dave gets a kick out of frugality. “I get excited about saving $2 on sunscreen!” he told me in a follow-up email.) But I want to use his situation to warn Get Rich Slowly readers about the optimization trap.

A lot of times, the optimization trap is a way to avoid dealing directly with more important issues. It’s easier to focus on which online savings account is best than it is to actually put money into that savings account. Choosing to move to a smaller home requires sacrifice; fussing over your newspaper subscription does not. The difference, though, is that the former can help you build wealth while the latter might save you six bucks a month.

Does it make a difference which index fund you choose? Sure. Some. But that’s not nearly as important as choosing to invest in the first place. Does it matter that your home-brewed spreadsheet projects the exact date you’ll reach Financial Independence? Not really. But it’s vital to your financial success that you have a sense of purpose, that you know what your money is for.

I’m not saying that optimization shouldn’t be on your financial to-do list. It should be. But it should be near the bottom of the list, not the top. Optimization is about taking what works and making it work better. You don’t optimize something that’s broken. If your budget is broken, you fix it by making big moves not tiny ones. Once you’ve made the big repairs, then you can concern yourself with optimal performance.

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Teaching kids about money ~ Get Rich Slowly

A few years ago, I polled my Twitter followers to ask: “What did your parents teach you about money? Anything? Did it work?

A lot of folks responded to say that their parents were poor examples:

  • @MoneyMateKate wrote: My parents didn’t teach me — I taught them! I was paying my own dental bills (no insurance) from age 12 onwards with babysitting dollars.
  • @liberryteacher wrote: My parents never had any money, and life was hard. So they taught me by example that that was not a good way to live.
  • @mike_strock wrote: My parents gave me money whenever I asked. Needless to say, that wasn’t helpful later in life. I’m learning!
  • @tcita wrote: My parents taught me absolutely nothing: no chores, allowance, budgeting, spending money, savings — nothing. Though I guess that taught me value of work.

But not all parents fail at training their children about money. Plenty of folks picked up good habits from the Bank of Mom and Dad. Here are some of my favorite anecdotes and tips:

  • Pam from The Turtle Path (a running blog) told me: In junior high, my parents gave me $400 at the beginning of the year (instead of a weekly allowance). They told me I could do whatever I wanted with it, but they weren’t giving me any more money the rest of the year, so don’t ask.
  • @Elle_CM wrote: My mom (and grandma) emphasized always saving a chunk of any income you receive. We used to make Saturday deposits at the bank.
  • Via Facebook, Cynthia wrote: As kids, if we were at the store and saw something we wanted, my dad would say, “Did you bring your money?”
  • @mattwakefield wrote: My dad taught me about the stock market by using a 1/100 scale model of the [stock] market. Got hooked early!
  • @EverydayFinance wrote: My father insisted on no credit-card debt and said, “Everything in moderation.” It worked like a charm.
  • @kingkool68 wrote: My parents printed family checks for my allowance. I could write checks to my parents in first grade! They also gave me monthly statements.

Teaching your children about money is one of the best things you can do to ensure their future success. Financially aware kids become financially aware adults.

How do you teach kids about money — especially if you haven’t yet figured out money for yourself? This is a tough question for me to answer since I have zero experience raising children. That said, I’ve paid close attention to the experiences of my friends and family over the past twenty years. While I don’t have any personal experience with this subject, I’ve observed what has and has not worked for others.

Teaching Kids About Money

The Opposite of SpoiledSome parents try to shield their kids from the family finances, but this often does more harm than good. From the parents I’ve spoken to, the ones whose kids seem to have the best handle on money are the ones who’ve seen how Mom and Dad deal with money, both the good and the bad. If they see the challenges you face, they can prepare for them in their own lives.

A few years ago, I chatted with New York Times columnist Ron Lieber about his book The Opposite of Spoiled, which is all about “raising kids who are grounded, generous, and smart about money”.

“How do children become spoiled?” I asked.

“They’re not born that way,” he said. “We do it to them. Nobody wants to raise a spoiled child, yet it happens all the time.”

“When we talk about spoiled children,” Lieber told me, “the opposite qualities are modesty, patience, thrift, generosity, perspective, perseverance, courage, grit, bravery, prudence, and so on.”

“The thing is,” he continued, “you can use money as a central tool to teach kids about every single one of these. Instead of shying away from the topic, what if we put money at the center of family conversations? What if we assumed not that money subverts values but contributes to them? Because it does. This is the path to financial literacy and financial education.”

From what I’ve seen, there are four steps parents can take to teach their kids smart financial habits:

  • Set an example. Model the behavior you want your kids to learn: If you want them to save, save. If you don’t want them to become compulsive shoppers, curb your own compulsive shopping.
  • Be prepared. Have answers before you need them. Know how you’re going to handle specific situations like allowances or begging for candy in the grocery store. (I know one couple who deflect begging by simply saying, “Sorry, that’s not in the budget.” I love it!)
  • Be consistent. Kids do best with clear, consistent expectations, so think carefully about your family’s money rules before setting them. Don’t be so rigid that there’s no wiggle room but once you’ve set a policy, apply it consistently and fairly.
  • Be honest. Share your success and failures. Tell your kids what you did right and what you wish you’d done differently. Explain your thought process each step of the way.

Most of all, make this learning process interactive. Involve your kids in frugal activities that teach them self-sufficiency, such as gardening, baking, home improvement, and so on. Teach them to comparison shop at by having them help at the grocery store. As they get older, make them financial apprentices: Show them how to pay bills, check a credit score, and buy a car. Teach them that managing a household is a team effort.

Providing Hands-On Experience with an Allowance

One of the best ways to teach kids about money is to give them hands-on experience with an allowance. When they have their own cash to manage, kids are better able to learn the value of saving and the difference between wants and needs.

There are two schools of thought about how allowances ought to be provided.

  • The first says that the money should be tied to grades, chores, and behaviors. This gives kids an incentive to do the right thing. But critics argue that tying an allowance to these actions sends the wrong message. Kids should stive for good grades regardless of what (or whether) they’re paid, say the critics, and doing chores is part of belonging to a family.
  • The second camp says that you should give the allowance without expecting anything in return. Using this method, kids learn about money even if they don’t make good good grades or do their chores. But some people believe this method leads to an “entitlement mentality” in which the kids expect something for nothing.

Most families are probably best off with some sort of hybrid approach: Provide a minimal base allowance that’s paid no matter what, and then add incentive pay for certain chores and behaviors.

Tip: If you want to incentivize good grades without money, consider rewarding with something else your child values: a later curfew, a trip to a concert or pro sporting event, golf lessons, more time with friends. This should encourage the behavior you want without tying it to money.

Whichever method you choose, use the allowance as a chance to teach your children the value of money. Instead of letting them spend it on whatever they want, consider a system that divides the money for specific goals.

You might, for example, use three jars (or envelopes) labeled:

  • Save (30%). This money is for long-term goals, such as buying a bike or a baseball mitt. Let the child decide on the goal — with your help.
  • Share (10%). The money in this jar (or envelope) is for giving to somebody else. Your kid can decide where it goes — whether it’s a charity or just somebody else in need (even a sibling!). The point is to share with others.
  • Spend (60%). There are no restrictions on the money in this jar. Your child can spend it on comic books or bubble gum — whatever strikes her fancy.

A decade ago, my friend Lisa tried this system. She wrote a guest post here at GRS about how she had her kids divide their allowance into four jars: Spend, Save, “When I’m Old”, and Donate. (If you don’t want to use jars or envelopes, you can now purchase money-savvy piggy banks with slots for Save, Spend, Donate, and Invest.)

An allowance is a great way to teach kids about money

Final Thoughts

Last month, my friend Doug from The Military Guide told me about how he raised his daughter to become a financially capable young woman.

“We got her involved from a young age,” Doug said. “My daughter got to see how my wife and I made financial decisions. But the best thing we did was to start her on an allowance. We gave her money and let her do what she wanted to do with it. She made some mistakes, sure, but we were there to help her. And I’m glad that she made those mistakes when she was thirteen years old instead of 23 or 33.”

I think Doug’s approach was smart. So far, it seems to be paying off. Now that she’s an adult, his daughter is making smart choices and is well on the path to future financial independence.

Many of us were raised with faulty and/or incomplete money blueprints. We entered adulthood not knowing how to handle money responsibly. I believe one your most important jobs as a parent is to give your children accurate, reliable money blueprints that will help them establish a solid financial foundation — then construct a life where they don’t have to worry about money.

Ultimately, the most important thing is to get your children thinking about and interacting with money from an early age. It’s better for them to make money mistakes at thirteen years old than at thirty!

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A magazine for teen entrepreneurs ~ Get Rich Slowly

Teen Boss magazine“What in the world are you doing?” Kim asked me the other day. We were in line at the grocery store, and I had just placed a magazine in our pile of stuff. “Are you buying a fashion magazine?”

“It’s not a fashion mag,” I said. “Look! It’s awesome! It’s a magazine targeted at teaching teen girls how to become entrepreneurs.”

And that’s how I discovered the wonderful world of Teen Boss.

Last summer in an interview with the blog Fashionista, Teen Boss editor Brittany Galla said that the magazine aims to fill a glaring market gap: “With the influence of Shark Tank and social media, we’re seeing a huge increase of tweens and teens who are looking to create their own business or dream about running their own business one day.”

Up front, let me say that Teen Boss isn’t perfect. In fact, there are lots of folks who think the magazine is awful. Slate called Teen Boss “a horrifying artifact of our time“.

While the critics are right that the content in Teen Boss skews shallow and superficial, I think they’re wrong to dismiss the magazine entirely. I believe that, on the whole, Teen Boss is exactly the sort of thing we should be encouraging our kids to read. It’s positive. It’s inspirational. It encourages self-reliance.

There’s no doubt that much of the magazine’s content is focused on fashion and social media (which is why some adults have a problem with it). I’m okay with that. Lots of adult entrepreneur publications are focused on social media nowadays too.

A horrifying artifact of our time?

My issue of Teen Boss profiles dozens of teen entrepreneurs, including:

The issue of Teen Boss I purchased also includes business advice from adult CEOs, a collection of business lessons from fictional characters, a huge section on creating a vision board, and examples of business ideas that did not work out.

My products make girls feel empowered

I started an online cooking show

My lollipops are good for your teeth

Despite its flaws, I think Teen Boss is awesome. I’m sad that adults have been so quick to dismiss what looks like a positive, inspirational publication. Would they rather have our kids reading Seventeen and People?

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A Legal Guide for Unmarried Couples: Frederick Hertz Attorney, Lina Guillen Attorney: 9781413323795: Books

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The cost of pet ownership ~ Get Rich Slowly

This article is part of relationship month at Get Rich Slowly.

As a dental hygienist, my girlfriend Kim meets lots of interesting people and has lots of interesting conversations. Last week while cleaning a patient’s teeth, the topic turned to pets.

“Two years ago, we didn’t have any animals,” Kim told her patient. “We were on the road in an RV. Today? Today we have three cats and a dog. Honestly, I’d be fine with more animals. We love them.”

“We love our animals too,” her patient said. “We might love them a little too much. Recently, we moved. I’d say 90% of that decision was based around our dog. Is that wrong?”

Kim laughed. “It’s not wrong,” she said. “We did something similar ourselves.”

Pets are expensive, Kim and her patient agreed. Are they worth it? Yes. Yes, they are. But as with most things in life, pet costs can quickly get out of control if you let them. It’s important to find a balance between the needs of your animals and your own financial well-being.

For the past two years, Kim and I have been working to find where that balance is for our family.

Meeting Tahlequah

Near the end of our 15-month RV trip around the United States, Kim and I stopped to visit my cousin in Tahlequah, Oklahoma. For a week, we left behind modern life to enjoy the slower pace in this isolated 100-acre creek hollow. We enjoyed the communal meals (during which several families dined together at once). We marveled at the light show provided each evening by the fireflies. (There are no fireflies in Oregon.) And we lavished love on all of the animals: the cows, the chickens, the cats, and the dogs.

Especially the dogs.

A few weeks before we arrived, one of the farm dogs had given birth to a litter of puppies. Kim fell in love with them. “I think I want to take one home with us,” she said.

“Maybe on our way back through,” I said, trying to be the voice of reason.

Kim meeting puppies

Our plan was to turn east toward Memphis, Mississippi, and Alabama. We’d then drop down to the Gulf Coast, cut over to New Orleans, then make our way into Texas. “Dallas isn’t far from here,” I said. “When we get there, then we can decide whether or not we want a dog.”

For the next month, Kim and I spent our evenings reading about dogs. Both of our families had dogs when we were growing up, but neither of us had owned one as an adult. We learned about different training philosophies. We discussed discipline. We discussed costs. We discussed what adding an animal would mean for our relationship as a couple.

“Do you still want the dog?” I asked Kim a few weeks later as we pulled into Dallas.

“Yes, I do,” she said.

After spending a few days with my pal PT (from PT Money), we returned to my cousin’s farm in Tahlequah. Kim’s puppy was still there. “Hello, Tahlequah,” Kim said as she petted the pup. “How would you feel about moving to Oregon?”

Tahlequah seemed happy about the idea. Kim was even happier. She turned to me and smiled. “With this dog, I thee wed,” she said. And that’s how we entered a new phase in our lives.

Puppy Love

We’ve now had Tahlequah (or Tally, as we call her) for 18 months. The experience has been awesome and frustrating at the same time.

Tally is a mutt but she’s 100% hound (a mixture of beagle and mountain cur, the latter of which is the newest registered breed at the AKC). She’s ruled by her nose. If she gets on a scent, her entire brain shuts down and instinct takes over.

Yesterday, for instance, I was walking her off-leash (with permission) through the neighbor’s property. She stumbled upon the spot where the local deer had bedded down the previous night and she was off like a bolt, streaking across other neighbors’ properties (without permission). It took ten minutes to get her back on leash. (Or just now, as I was writing this paragraph, she spotted the squirrel that lives under our house. She’s now barking barking barking incessantly out the window and she will not stop.)

Mostly, though, we love her — and she loves us. Kim and I have become those obnoxious pet parents who take their dog with them everywhere. (We’re not even ashamed of it!)

Driving with Tahlequah

At first, adding a puppy to our lives seemed like a reasonable financial decision. Before we picked her up, Kim and I spent maybe $100 or $200 on puppy supplies, such as a crate, a collar, a leash, and a variety of toys and tools. After we left my cousin’s house, we stopped for a couple of days in southern Kansas. While there, we took Tally to the vet for a checkup and her first series of shots. That vet visit was under $100. (In retrospect, that’s because we were in southern Kansas.)

“This dog isn’t so expensive,” I said. Hahaha. Little did I know…

Pets Are Expensive

Upon returning to Portland in June 2016, the cost of pet ownership began to mount.

  • First, vet visits here are more expensive.
  • Second, once we had settled at home, we began acquiring more dog stuff: toys, treats, and so on.
  • Third, Tally turned into a destructive force of nature.

In under six months, our puppy probably did a couple thousand dollars worth of damage. This is embarrassing to admit, but it’s true. Tally destroyed shoes — including Kim’s favorite pair of leather boots. (Eventually we realized that if we sacrificed one pair of shoes to her, Tally would leave the other shoes alone.) She ate eyeglasses. She devoured my dental retainer. She gnawed on the furniture. She peed on the carpet. She scratched at the doors.

“This dog is expensive,” I said.

Apparently, Kim and I are gluttons for punishment. One animal was not enough. Within a month of returning to our condo in Portland, we decided to expand the family. We picked up two kittens from a local rescue. And not two ordinary kittens. Two sickly kittens.

Over the next few months, Avery and Bagheera made several vet visits, both to get their initial checkups and booster shots, and to make sure they were recovering from whatever respiratory infection they’d suffered from as babies. Meanwhile, we discovered the cats could be just as destructive as dogs. Our kittens were hell-bent on shredding anything made of cloth or paper. They peed on the bed. They destroyed the blinds.

“These cats are expensive,” I said.

All Creatures Great and Small

Throughout last winter, Kim and I enjoyed bonding with our three beasts. The five of us made do in our condo. We walked the dog through the park next door. The cats got a taste of the outdoors from our balcony — but they wanted more. In the evening, all of us snuggled together while binge-watching All Creatures Great and Small.

“Maybe we should move,” Kim said one day last March.

“What do you mean?” I asked.

“It doesn’t feel right to keep these animals trapped in a fourth-floor apartment,” she said. “They’re wild beasts. They want to be outside. They need space to roam.” I agreed with her.

While the animals weren’t the only reason we decided to move last year, they were certainly a major consideration. As we hunted for houses in April, we looked for a lot where we could let the beasts outside to roam. Eventually, we opted for a one-acre lot in a semi-rural neighborhood. It was a good choice.

This place is like dog heaven. We have a large fenced yard that Tally can use whenever she wants. At least once per day — sometimes twice — we take her on a two-mile walk through the neighborhood. She sniffs and sniffs and sniffs, tracking the squirrels and deer and coyotes. She digs in the ditch to uncover mice and moles.

Meanwhile, the cats love it here too. They’re able to hunt whenever they want. (In 45 days this year, they’ve caught twelve critters.) They like going outside to bask in the sun. There are plenty of trees to climb and dark places to hide. With the cats, though, there’s an element of danger. As I said, there are coyotes here, and we lost Bagheera to them at the end of October. (Yes, I’m aware that many people believe cats should remain indoors. Kim and I believe exactly the opposite. We’re aware of the risks faced by outdoor cats, but believe its cruel to keep them confined inside.)

After Bagheera disappeared, Kim and I had a discussion. How many animals should we have here at our country cottage? “You shouldn’t ask me,” Kim said. “If it were my decision, we’d have a whole farm: goats and horses and chickens and cows. Plus, more cats and dogs.”

I’m not willing to turn this place into a full-fledged farm but I was willing to bring home two new kittens. At the end of November, we added Savannah and Bisbee to our menagerie.

We now share our home with one dog, three cats, and a whole lot of chaos.

Our current crop of cats

Enough Is Enough

Because I’ve been carefully logging every penny I spend, I’m able to see how much our animals cost us. Last year, I spent $1763.25 on the pets. Kim — who does not track her spending — spent several hundred dollars too. My best guess is that we’re paying $200 per month (or about $7 per day) to care for our companion animals. They are not cheap.

Our pet spending (2017)

In the nearly three months we’ve had the new kittens, I’ve spent $1076.83 for their initial examinations and shots. On Monday, we took Tally and Avery for their annual checkups. The dog cost us $376.38 and the cat cost us $404.45.

That’s $1857.66 I’ve paid to the vet in three months. To be fair, I shouldn’t have any additional pet fees this year — barring illness or injuries — but there are still ongoing expenses for food, treats, toys, litter, and petsitting.

“Wow,” Kim said on our drive home from the vet. “That was twice as expensive as I thought it would be.”

“Yeah,” I said. “I hate how much it costs. I mean, I want to make sure our beasts are healthy, but where do you draw the line? How much is too much to spend on a cat? Or on a dog?”

“I’m willing to spend as much as we need to keep the dog healthy,” Kim said. “But we live in the country. Our cats go outside. As much as I love them, we have to be realistic about it. They have great lives, but those lives will probably be short.”

“Well, now that everybody is up-to-date on their basic shots, now that we know everybody is healthy, maybe it’s time to stop doing annual checkups for the cats,” I said. “What do you think about taking them in only if they’re sick or hurt?”

“I think that’s how it should be,” Kim said. “That’s how we did it when I was growing up.”

“Same here,” I said.

Special offer: My brother Tony owns a business that produces animal nutritional supplements, including dog treats. For the rest of 2018, he’s offered to give GRS readers a 20% discount (and free shipping) on orders for dog products totalling over $20! Visit Majesty’s Animal Nutrition and use the promo code tally20 at checkout. (I have zero financial stake in this, by the way.)

Cutting the Cost of Pet Ownership

Kim and I have decided that, in effect, our cats only have catastrophic health care coverage. (Although I’m worried that this could be a false economy. We’ll see.) Meanwhile, we’re discovering ways to cut the cost of pet ownership — especially on the everyday stuff. For example:

  • We’ve been drying dry dog food and dry cat food from Amazon via their “subscribe and save” program. About once every three months, we need an extra bag of food. When we do, I buy it at Costco.) We also buy treats via Amazon.
  • We’re buying wet cat food at the local Wal-Mart, which seems to have the best prices.
  • We’ve learned to buy our pet toys at the thrift store, not the pet store. Two weeks ago, for instance, we bought Tally six or seven stuffed animals (stuffed animals intended for kids, not for dogs) and paid less than $20. Once garage sale season begins, we’ll explore that route too.
  • When we can remember, we buy cat litter in bulk at a local pet store. It’s way cheaper than buying smaller packages.
  • When possible, we’re paying people we know to take care of our animals when we’re gone. Not only is this better on our pets, but it’s less expensive for us.

Thankfully, Tally’s destructive nature has diminished as she’s become a teenager, which saves us money. She hasn’t shaken it completely — she ate my best hat a few weeks ago — but mostly she’s learned what she can chew on and what she can’t. (More importantly, Kim and I are very vigilant about leaving stuff where the dog can get to it.)

We would love to hear experiences from other pet owners. Do you have animals? How much do they cost? How much do their annual vet visits cost? Do you have pet insurance? Why or why not? If you do have it, how do you feel about it? What other tips do you have for keeping the cost of pet ownership low?

On a semi-related note, here’s an amazing story about a woman who adopted an older dog — only to discover it’s the same dog that she had to give up when she was a girl.

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Should you give money to your adult children? ~ Get Rich Slowly

This week’s reader question is an example of why I love the “ask the readers” feature here at Get Rich Slowly. I get to write about situations that otherwise would never occur to me!

Karen writes because she’s having trouble with two of her kids:

I keep getting sucked into helping two of our children who can’t seem to get it together. I don’t want to see them on the street but they keep making dumb mistakes. What do you do when faced with a kid going to prison for lack of funds to pay fines? What about a different kid who is at risk of becoming homeless? This is tough to watch. (I really prefer dogs!) When does helping a family member financially become enabling? Or is it always enabling?

I find this situation fascinating because there’s a disconnect between my general advice about giving money to adult children and my specific advice for Karen.

Why You Shouldn’t Give Money to Adult Children

My standard advice is: Don’t help your kids financially. Doing so harms both you and your kids. A decade of reading about money and hundreds of conversations with parents have brought me to this conclusion: Giving adult children financial support is, generally speaking, a bad idea.

Some people don’t want to hear this, especially coming from me. (I have no children, so that disqualifies my advice in the eyes of some folks…as if it’s impossible to recognize that a person has a broken bone if you’ve never had one yourself!)

But it’s not just my opinion. In The Millionaire Next Door [my review], authors Thomas Stanley and William Danko devote two entire chapters — 69 pages! — to “economic outpatient care”, the substantial financial gifts some parents give their adult children (and grandchildren). Their research indicates that “the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more”.

The authors note that some forms of economic outpatient care, including subsidizing an education and funding business ventures, have a strong positive influence on the recipients. (They teach the children “how to fish”.) But most financial assistance simply creates a cycle of dependence:

What is the effect of cash gifts that are knowingly ear-marked for consumption and the propping up of a certain lifestyle? We find that the giving of such gifts is the single most significant factor that explains lack of productivity among the adult children of the affluent.

Stanley and Danko write about four specific ways in which cash gifts to adult children create problems:

  • Giving encourages more consumption than saving and investing. In particular, Stanley and Danko warn about gifts of house down payments.
  • Gift receivers in general never fully distinguish between their wealth and the wealth of their gift-giving parents. They believe they are entitled to the things their parents have, and feel resentment if the wealth is given to somebody else.
  • Gift receivers are significantly more dependent on credit than are non-receivers. They use credit in order to sustain their lifestyle of consumption between gifts.
  • Receivers of gifts invest much less money than do non-receivers. The authors claim that gift receivers are “hyperconsumers”, only thinking of now. They have come to expect that their financial needs will be met by their parents, so they don’t plan for the future.

I’ve known people who received financial assistance from their parents or grandparents. Most of these people have struggled with money in some way. They spent too much. They didn’t feel the need to take a job. They put off making financial decisions because there was no need to do so. One time, for instance, I had an affluent friend who received a $25,000 gift from his grandparents. Rather than invest the money, he bought himself a new car. (There was nothing wrong with his old car.)

Obviously, not everyone who receives financial assistance from their parents will fall into this trap. But accepting such gifts often leads to trouble.

Note: There’s another downside too. When parents give money to an adult child, they’re compromising their own financial health. They’re sacrificing saving for retirement (or other goals), which means they’re hurting themselves as well as their kids! In my own life right now, I’m watching as two different sets of parents struggle to make ends meet because they’re giving up money they need for themselves in order to help children who are perfectly capable of providing for themselves — except they were never encouraged to leave the nest.

What If Your Kid Will End Up Homeless?

Now, having said all this, what about Karen’s situation? She has one child who is at risk of going to prison because she (or he) hasn’t paid some fines. The other is at risk of ending up homeless. Should Karen simply sit back and allow her children to suffer?

I’ve had two weeks to think about this question. Some days, I feel as if there’s no way Karen should let her kids go to jail or end up homeless. Other days, I feel like she should absolutely let them experience the consequences of their actions. Most of the time, however, I feel like this is a tough call and not something a stranger can decide.

So, I tried to practice some financial empathy. I ask myself what I would do if I were in Karen’s shoes. What if I did have kids? What if they made some stupid-ass choices? (That’s how Karen described her kids when she wrote to me, which cracks me up.)

Honestly, I don’t know what I’d do. I have no clue what the right decision is in this situation.

What do you think? Is it always a parent’s duty to protect their children, even when they’re adults? If you ended up in jail because you did something dumb with money, would you expect your parents to bail you out? If you were at risk of becoming homeless, would it be your mom and dad’s responsibility to help you? What’s the right choice here? Is there one?

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Super Business Girl ~ Get Rich Slowly

Long-time readers know how much I love child entrepreneurs. This probably stems from my own experiences having kid-sized businesses when I was young. Whatever the reason, I can’t get enough stories of kids who build their own businesses and learn to take charge of their lives from a young age.

Here, for instance, is a 2014 story about Asia Newson, an 11-year-old girl from Detroit, Michigan. She runs a company called Super Business Girl.

Asia, who must be fourteen by now, has help from her parents but she’s the driving force behind Super Business Girl. Together, they manufacture and sell what their website describes as “the world’s best candles“.

Asia’s poise and entrepreneurial savvy have garnered a lot of attention. The founders of one Detroit start-up incubator believe she has a better understanding of business than most adult entrepreneurs. They’re helping her develop her skills. In return, Asia is teaching what she knows to other kidpreneurs.

Here’s Asia’s January 2015 appearance on Ellen, which sheds some more light on this young businesswoman:

“My daddy was a candle salesman,” she says. “He also made candles. He taught me and I loved it, loved it, loved it.” More than making candles, Asia loves selling them. Her enthusiasm is infectious. I wish that when I was a salesman for so many years, I had loved it the way she loves it! I might have been better at the job.

Asia has grand ambitions. She wants to go to college, become a lawyer, become mayor of Detroit, and then become President of the United States. I think she just might meet all of those goals. I wouldn’t bet against her!

For now, though, if you’re in the market for some candles, go check out Asia’s online store at Super Business Girl.

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GRS is on winter vacation

Hey there, GRS fans. Just a quick note to let you know that I’m taking a short break from the blog.

In part, this is because Kim and I (and the dog) are in the middle of a Real Life vacation to the Oregon Coast. It’s been too cold and windy and wet to spend much time outside, but we’ve all enjoyed hunkering down at our AirBNB, watching the Olympics, playing games, and reading books.

But this break is also because I’ve been so focused on the editorial side of the site that I’ve been neglecting the rest of the business. And make no mistake: In the nearly nine years since I sold Get Rich Slowly, it truly has become a business.

Instead of writing about money, for the next week (or two) I’ll be:

  • Fulfilling requests from my web designers. They’re dutifully working on the GRS redesign, but I’ve become a sticking point. They can’t proceed until I get them some info, and that’s going to take several hours.
  • Working with my tech guy to reinstate the GRS forums. I was under the mistaken impression that nobody used the forums here any more. I was wrong. There are several die-hard fans who have been pleading with me to bring them back. (I had to kill them when I moved the site to a new server after re-purchasing.) We believe this is a non-difficult task, but it will take some brainwidth.
  • Monetizing the site in a variety of ways. At the moment, Get Rich Slowly is generating about $1500 per month. That’s fine for a hobby, but not for a business. I can’t hire help at $1500 per month. Fortunately, most sites of this size generate much more income, and I believe GRS can too — without compromising the reader experience. But it’ll take several days of time and energy to get this sorted. My goal isn’t to make a boatload of money but to have enough cashflow to pay people to do the stuff I don’t want to do. (All I really want to do is write.)
  • And so on.

Plus, there are tons of other unfinished tasks behind the scenes. When I re-purchased this site in October, I should have taken a couple of months to work on the non-editorial stuff before announcing I was back. But I’m impulsive. As soon as I took possession, I went full-bore into writing mode. It’s been fun, don’t get me wrong, but my single-minded pursuit of publishing new material has seriously hampered every other aspect of the site.

I hope to be back publishing full-time by March 1st. If I’m especially productive, that’ll happen sooner. (I really want to be back by next Sunday, February 25th.)

All of that said, I know myself. I can’t possibly keep silent here. Instead of full-fledged articles, expect lots of short tangentially-related material over the next seven to ten days.

It’ll be frustrating for me to keep (relatively) silent for a week or two, but I know that the long-term rewards will be worth it. For now, thanks so much for reading Get Rich Slowly and thank you for your patience.

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Back to normal (mostly)

Hey, everybody. Just a quick note to let you know that Get Rich Slowly is ready to resume normal operations…sort of.

I took the past week off to work on business stuff behind the scenes. Turns out that there’s way more to do than I had expected — and I had expected a lot. My attention really does need to move from the editorial aspect of this site to the business aspect.

Having said that, I’m not willing to just abandon you, the readers. Besides, I made an audacious goal of publishing 500 articles at Get Rich Slowly in 2018!

After talking with some trusted advisers, I think I’ve found a solution.

  • I’ve assembled a small team to help me work on the business stuff over the next couple of weeks (or months). Kathleen and Michael are both long-time friends and GRS fans. I’m bringing them on as paid consultants to help me tackle some of the biggest issues.
  • To relieve some of the burden on the editorial side of things, I’m going to severely curtail new material. It won’t vanish completely, but it won’t be the focus for the next few weeks.
  • Rather than leave this blog barren, I’ll accelerate the process of migrating my Money Boss articles to GRS. I had been moving them at the rate of about one per week. That’ll jump to 4-5 articles per week. If you’ve read through the Money Boss archives, you’ll have seen this material before. If not, it’ll be new stuff.

So, that’s the plan: Reduce new material, but fill the gap with articles moved from Money Boss. Meanwhile, bring on help so that we can take care of the business stuff more quickly.

One side effect of all this is that I’m currently much more interested in guest posts than I usually would be. If you have a guest article that you believe would be beneficial to GRS readers, let me know. (And, as always, if you have a question for the readers or a “reader story” you’d like to share, feel free to submit it!)

We’ll resume normal operations tomorrow with Kamie’s update on her year-long no-shopping experiment…

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My no-shopping experiment (part two) ~ Get Rich Slowly

This guest post from Kamie is part of the “money stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all stages of financial maturity. Today, Kamie shares an update on her resolution to break her shopping habit in 2018.

Hello again, everyone. It’s been a few weeks since I started my no-shopping experiment, and it’s time to give you an update on my progress.

The first week of not shopping was very interesting for me. I found myself wandering around, trying to figure out things to do when I wasn’t working. Shopping used to be a hobby for me, an escape, a way to fill the time. Eventually, I found productive ways to use my free time.

Productive Use of Free Time

One of the things I did was clean out our cupboards and drawers. As I did this, I realized just how much stuff we obtain over time. By the third day, I had three garbage bags full of junk and garbage. I also found items that were brand new that had never been used. I realize that is not okay, but that’s how it is.

For some of these things, I created a “present box”. This is a box with all of these things I have never used but are actually pretty cool. I can give them as gifts in the future. (I guess this sounds like re-gifting, but I actually purchased these items a while back for myself.) This helps me in a couple of ways:

  • First, I’m getting rid of unused clutter.
  • Second, I won’t have to violate my “no shopping” goal by buying gifts.

I hope to have every drawer cleaned out by spring or earlier!

Next, I had to figure out what to do when I was out of the house. As I said, normally I would go shopping. Instead, I’ve been substituting the gym.

I’ll admit, the gym is an added expense, but I already have an existing membership, so why not use it? If you were doing a no-shopping experiment, this might violate your definition “shopping”. For myself, I’ve decided this is within my rules. Going to the gym has proven to be a very logical and healthy decision. It gives me somewhere to put my extra energy and get out of the house at the same time. I’m loving the exercise. It’s a great way to stay focused!

But here’s the big question: Have I purchased anything?

Conquering Coffee

Unfortunately, people make mistakes. Yes, I goofed up. I bought a song off iTunes. No big deal, right? Wrong! I realized right after I had done it that it wasn’t a necessity. It was a habit! You don’t realize just how many little habits you have when you are trying to be achieve something. [J.D.’s note: I have an iTunes habit too. It’s something I’m working on.]

I was really bummed when I realized that buying songs from iTunes would violate my “no shopping” rule. I love to get new music! To fight this, I took time to make some new playlists out of the music I already have. This way, it sounds new to me! (Secretly, I’m crossing my fingers that my husband will buy music and I can steal it because we have a joint account! Is that cheating?)

As I mentioned in my first installment, one big issue I’ll have this year is Starbucks. Normally, I spend a lot at Starbucks. And I’ll confess that I’ve bought coffee there a couple of times this year. I have cut down a lot, no doubt, and I’m trying to steer clear…but it’s difficult.

To fight my Starbucks habit, I’ve started taking coffee with me from home in the morning. I’ve also made sure that I have everything I need to make coffee and tea at work.

These changes have had some unexpected side effects. Not only am I saving money, but I’m also saving time, especially since I’m no longer driving to Starbucks on my breaks. Plus, I’ve started bring my lunch to work too. I’m saving time and money two ways with this plan.

I don’t think I’ve licked my Starbucks habit yet, but I’m making progress.

Revising My Rules

Next, I decided to update my list of what I can purchase. When doing something like this, you have to decide what’s important and a necessity for you. Everyone is different. Something that’s necessary to me might not be necessary for you. Over the past month, I’ve had to re-evaluate my own definitions.

For example, I added hair products and face creams to my list of acceptable items — but only when I run out completely. (No shopping for the sake of shopping!) Healthy hair and skin are important to me, a part of basic hygiene. I don’t think buying personal care products counts as “shopping” as long as you’re not over-indulging.

This is a fine line, right? I really had to think about this one and break it down in my mind. But I’ve found that setting limits on when and how often I can purchase items has helped immensely.

When Free Isn’t Free

I had my next realization while watching TV one night.

A commercial came on with two women who were talking about earning cash back from shopping. “That makes sense,” I thought. “It’s like getting a gift with your purchase. You’re getting something for free.”

Then it hit me. It’s like my husband is always trying to tell me: “If you’re spending more money in order to get something for free, then it’s not free. You’ve just spent another $50.”

The same thing was happening in the commercial. The women were spending more money to get more money back…but it was only like two percent. “Why would they do that?” I thought. “It makes no sense.”

But the most exciting thing that’s happened since I started this no-shopping experiment is the support I’ve received from my family and friends. (Full disclosure: J.D. is my brother-in-law.)

In fact, my mom is now doing this challenge with me! Having somebody to do this with actually makes it fun. I don’t feel like I’m on my own, struggling with the ups and downs.

The first few weeks of this have been interesting. Despite a couple of slips, I’m determined to keep going. I’m learning to be logical about how to accomplish my goals. Plus, I’m saving money and time too! But the best thing is having my mom and husband on board. We’ll see how it goes from here…

Reminder: This is a story from one of your fellow readers. Please be nice. After twenty years of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are. Unduly nasty comments on reader stories will be removed or edited.

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