9 Things Soloprenuers Should (and Shouldn’t) Emulate from ‘Entourage’

Did you know that HBO made a show loosely based on Mark Whalberg’s possy of friends? It’s called Entourage and the cast (the Chase Men) are a lot prettier than their real-life counterparts. Perhaps this was a Walbergian fantasy.

In fact, HBO considered making the show into a direct documentary. But Walberg’s violent past was too much for the early aughts audience. They instead chose a satirical approach which was probably a good idea.

Walberg is executive producer and he had a say in almost everything that went into Entourage. Walberg is an entrepreneur as well as a successful Hollywood actor. And the satirical comedy Entourage gives a glimpse into some of what you should (or maybe shouldn’t) do to get to the top.

1. Have a Loyal Crew Like Vincent

Many of us start out as solopreneurs. It can be a lonely business. Sure, we have friends we see on occasion, but they aren’t going in the same direction as we are.

Just like the President of the United States, Vincent was nothing without his friends and those with whom he surrounded himself.

Ari gold, Turtle, Johnny Drama, and Eric Murphy each contributed something to Vincent’s life. Eric or “E.” is an honest Abe who helps Vincent make decisions. He’s not afraid to speak his mind especially when Vincent refers to the area around his crotch as his “airspace”.

We all need an E. in our lives to balance out our impulses.

Ari Gold is his business manager. He doesn’t get along with “E.” at first. Ari supplies Vincent with opportunities.

This is the holy trinity of Entourage. If we cut the rest of Vincent’s crew, the show would go on just fine.

Have a holy trinity. People you trust with your life. One to push you to your limits and another to temper your passion.

2. Don’t Let Success Get to Your Head

The decision to forget about Walberg’s past is an unfortunate decision. Walberg (Vincent) did not grow up rich. He was the youngest of 9 kids.

He grew up in Boston and his parents divorced when he was 11. At 14, he dropped out of school and became a criminal. He stole, sold drugs, and did side hustles (the illegal kind). He eventually hit the bottom of the barrel when he beat a Vietnamese man bloody and went to jail.

After jail, he vowed to turn his life around and put his energy toward more constructive pursuits. His luck really turned when his brother Donnie from the then popular band New Kids on the Block.

When Reality Still Sneaks In

Instead of his journey from rough and criminal to stardom, the producers decided a sugar-coated version of Walberg was needed. Where do we begin Entourage? In a mansion.

Walberg is already rich. And that seems to the whole point. We’re supposed to glory and dream of the high life where we can get away with almost anything in Hollywood because “money”.

It’s why some successful people fail. They take their success for granted and let important things slide.

Vincent was the only one (ironically) not chasing the dollar in the show. But even Ari would get caught up in the dollar amount sometimes. And it was E. who would bring Vincent back in those moments.

Vincent got it right when he said, “I came from nothing. And as much as I love all the toys, I really don’t need them.”

This should be your mindset. Chase only things that add value to your life and are in line with your personal goals and standards. The money will never be enough.

3. Fail Often

Kilian Jornet climbed mount Everest twice…in two weeks. He holds the record for the fastest climb. His motto? Fail often.

You see this time and again in Entourage. Vince takes a gig like Medellin, it fails, nobody wants to work with him, and he keeps trying.

The biggest ballers in history are the people who failed the most. J.K Rowling got rejected over and over, persisted (while living on food stamps), and is now one of the richest women in the world. Henry Ford failed at five businesses before succeeding with automobiles.

Rowling even says, “It’s impossible to live without failing at something. Unless you live so cautiously that you might as well not have lived at all. In which case, you fail by default.”

Taking calculated risks is a major part of any business. You take out a loan hoping to make enough to pay it back and then some. You hire people hoping they are productive and make you more money than you pay them.

Nothing you do in this life is without risk. And when you do fail (and you will), you must have the will to get back up and keep trying even if it means doing something completely different.

9. Diversify: Don’t Keep All Them Eggs in One Basket

Yeah, brand consistency is great. And each “egg” should be uniform and pretty and well painted. But everyone who gambles knows you shouldn’t put all your chips on one square.

If things go sideways on one gig, you should have other gigs going to hold you up. This is what makes Vince’s life interesting for a while. He tries things like singing at birthday parties or tried his luck in fashion.

If one industry gives up the ghost, then you’ll know that the others will prop you up until you find a replacement.

Perhaps you go into app development and you also do web development on the side. Your apps fail, then you’ll end up with a great job in web development.

Keep Your Friends Close

Whatever you do as a soloprenuer, always value those closest to you. Vince would be nothing without his friends and family. Literally.

Look around you. Who in your life gives you the most value. Stick by them and they’ll stick by you.

Check out more awesome marketing lessons on shoemoney.com.

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How to write a personal mission statement ~ Get Rich Slowly

What do you want out of life?

Maybe that seems like a strange question. What do goals have to do with getting rich slowly? Everything! Having a personal mission is key to running your life like a business. Your goals help you decide how to spend your time and money.

When I think about the difference between people with purpose and people without, I always think of my friend Paul.

Paul in the Snow

Twenty years ago, as I was swimming in self-induced debt, Paul was living a bare-bones lifestyle that seemed ridiculous to me. He didn’t own a television. He had few books and little furniture. His only indulgence seemed to be a collection of bootleg U2 albums.

“How can you live like this?” I asked him during one visit. “Where’s all of your Stuff?”

He shrugged. “I don’t need a lot of Stuff, J.D. Stuff isn’t important. It gets in the way of the things I really want.”

I didn’t know what he meant. To me, life was all about the Stuff. I had hundreds of CDs and thousands of books. I had a TV, a stereo, a house, and a car. I wanted more.

Paul didn’t have any of these, but he had things I didn’t have. He had happiness. He had freedom. He had money. He had goals.

A Man with a Plan

At the time, I earned at least twice Paul’s income, but he had money in the bank while I had none. I couldn’t see the connection between Paul’s choices and his financial success, and I couldn’t see the connection between my spending and my mounting debt. I was blind.

One day, Paul and I went for a hike. As we walked, he told me what he’d been up to. He was living in a small town in northern Washington, working two full-time jobs and a part-time job. He got free rent in exchange for housesitting with an elderly homeowner. “I’ve only had five or six days off in the past eight months,” Paul told me.

“That’s insane!” I said. “Why would you do that to yourself?”

Paul smiled. “I have a plan,” he said. “I want see the world. I’m going to buy a one-way ticket to Thailand. I’m just going to go. I’ll travel for as long as my money holds out. The more I work, the longer I’ll be able to stay on the road.”

I heard what he was saying, but I didn’t really understand.

“Do you want to come with me?” Paul asked. Of course I did, but I couldn’t. I was in debt. I had no savings. I couldn’t afford to leave work for a few days, let alone a few months. How would I pay for all of my Stuff?

Paul went on his trip. He backpacked across Europe and Asia, and he loved it. He sent me postcards from Thailand and India, from Nepal and Israel and Jordan. He was gone for five months. Then, because he’d built his life around this goal, he returned to a financial position similar to the one he’d left.

Back in Oregon, Paul settled down to a more “normal” way of life. He got a real job. He even bought a house. Still he pinched his pennies, spending only on the things that mattered most to him. In time, I began to see the connection between his lifestyle and his quiet wealth.

Here’s what Paul taught me: Have a plan so amazing, so glowing, that you’re willing to walk blurry-eyed to work every day to make the money necessary to achieve it.

Paul on the Beach

What’s Your Why?

What do you want out of life?

Too many people never take the time to answer this question. And of those who do answer it, a large number have only nebulous dreams and goals. I want you to do more. Today, I want you to create a personal mission statement.

To complete this exercise — which is based on the work of Alan Lakein — you’ll need about an hour of uninterrupted time. You’ll also need a pen, some paper, and some sort of stopwatch. When you’re ready, I want you to do the following.

Note: To make things easier, I’ve created a free PDF version of this project for you to download and print: Your Personal Mission Statement. It’s still branded for Money Boss, but we’ll change that once we have an official logo for Get Rich Slowly.

  1. At the top of a blank page, write this question: What are my lifetime goals? For five minutes, list whatever comes to mind. Imagine you don’t have to worry about money, now or in the future. What would you do with the rest of your life? Don’t filter yourself. Fill the entire page, if you can. When you’re finished, spend an additional five minutes reviewing these goals. Make any changes or additions you see fit. Before moving on, note the three goals that seem most important to you.
  2. On a new piece of paper, write: How would I like to spend the next five years? Spend five minutes answering this question. Be honest. Don’t list what you will do or should do, but what you’d like to do. Suspend judgment. When your time is up, again spend five minutes reviewing and editing your answers. As before, highlight the three goals that most appeal to you.
  3. Start a page with the question: How would I live if I knew I’d be dead in six months? Imagine that your doctor says you’ve contracted a new disease that won’t compromise your health now, but which will suddenly strike you dead in exactly six months. There is no cure. How would you spend the time you have left? What would you regret not having done? You know the drill: Take five minutes to brainstorm as many answers as possible, then five minutes to go back through and consider your responses. When you’re ready, indicate the three things that matter most to you.
  4. At the top of a fourth piece of paper, write: My Most Important Goals. Below that, copy over the goals you marked as most important from answering each of the three questions. (If any answers are similar, combine them into one. For instance, if “write a novel” was one of your top answers to the first question and “writing fiction” was a top answer to the second, you’d merge these into a single goal.)
  5. The final step requires a bit of creativity. Label a fifth piece of paper My Mission. Look through your list of most important goals. Does one stand out from the others? Can you see a common thread that connects some (or all) of the goals? Using your list as a starting point, draft a Mission Statement. Your Mission Statement should be short — but not too short. It might be anywhere from a few words to a few sentences. Take as much time as you need to make this the best, most compelling paragraph you can write.

When you’ve finished, I want you to set aside your Mission Statement and walk away. Go about the rest of your life for a few days. Don’t forget about your mission, but keep it in the back of your mind.

Your Personal Mission Statement

After you’ve had time to stew on things, sit down and review what you’ve written. How does your Mission Statement make you feel? Can you improve upon it? You want a vision to give you a sense of purpose that drives you day-in and day-out, through good times and bad. Ideally, your mission will do for you what my friend Paul’s did for him. It’ll be so amazing, so glowing that you’re willing to walk blurry-eyed to work each morning to make the money necessary to reach your goal.

Note: Your Mission Statement isn’t permanent. As your priorities and tastes change, and as new opportunities present themselves, your mission will adapt and grow.

What does an actual Mission Statement look like? Good question! Here are personal mission statements from five famous CEOs. And here’s mine:

I want to be the best person I can be, both mentally and physically. I want to sample all that the world has to offer by fostering new relationships, exploring new ideas, and daring to try new things. I want to use my skills and experience to improve the lives of others while also improving my own.

Sound boring? Not to me! I wrote this mission statement more than five years ago, and it still guides me today. When I set personal goals, I base them on this mission statement. When I make decisions about where to live and what to do with my life, I use this mission statement to guide me. Bottom line: This mission statement shapes the way I manage my money and my life.

After you’ve created a Mission Statement, the next step — if you’re ready to take it — is to brainstorm a list of Next Actions to support your Mission Statement. What kinds of things can you do to help you achieve this goal or pursue this mission? Write down anything that comes to mind.

When you have your list of Next Actions, pick the three you can do most quickly (these should become your short-term goals) and the three that would have the biggest impact on your life (these should become your long-term goals). Focus on these six goals!

What if you’re still having trouble coming up with a mission? Don’t give up. Try a different approach. Head to your public library and borrow one of the following books, each of which has great info about figuring out what to do with your life:

If, after all this, you still need more help creating your Mission Statement, take a few minutes to walk through the Mission Statement Builder from FranklinCovey. It’s a free online tool that translates your goals and values into a statement of purpose.

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

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

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“I’m 21 and pursuing financial independence.” ~ Get Rich Slowly

This guest post from Cody 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.

In January, I attended Camp FI in Florida. While most of the attendees were thirty- or forty-somethings pursuing early retirement, one young man stood out. We were all amazed at the presence of Cody Berman, a 21-year-old hustler who defies the Millennial stereotype. Cody works hard, saves tons, and has a vision for his future. I asked if he’d be willing to share his story with GRS readers. Here it is.

From a young age, my parents instilled the value of saving into me. Throughout my early childhood, my father would match my contributions to my savings account dollar for dollar. This made me excited to save birthday money and miscellaneous earnings because the money would double. (Thanks, Dad!)

When I turned eleven, I started my first job working in the snack shack at my uncle’s local disc golf course; I earned five bucks an hour. Throughout middle school and high school, I worked various jobs and saved nearly every penny. At age sixteen, I bought my first car with the money I had accumulated over the years. I still drive that car to this day.

During high school, I took several AP courses and received college credit for them. If I had only known then what I know now, I would have taken nearly every AP course and CLEP exam available. When it came time to select a college, I was torn between Bentley University and the University of Massachusetts Amherst. I calculated that Bentley would have put me in approximately $80,000 of debt after four years but that I could attend UMass Amherst virtually for free. My frugality won. I chose the latter.

Making the Most out of College

Upon my arrival at UMass Amherst, I joined as many clubs and organizations as possible. Simultaneously, I obtained a job as a teacher’s assistant to financially support myself. After several weeks of attending dozens of meetings for multiple groups, I decided that the Investment Club, Fixed Income Fund, and Finance Society were particularly interesting to me. [J.D.’s notes: Where were clubs like these when I was in college?]

I soon realized that in order to get a leg up on my peers, I needed an internship. I applied to nearly thirty positions and heard back from only one. That summer, I worked in a low-tier operations role at a small branch of a major bank.

I came back sophomore year with increased confidence and a motivation to achieve the best internship possible. This time, I applied to nearly 35 positions and received responses from about 20% of them. Initially, none of my top prospects were interested in me.

Then, one day in early April, I received an email from a private equity company who asked me to come in for an interview. Three interviews later and the position was mine. That summer, I commuted two hours each way to my internship and worked long days. I thought I was on my way to become a rich, successful investment banker. What could be better, right?

Finding Financial Independence

During my junior year, I networked relentlessly and received offers from various top-tier investment firms. I knew that whichever firm I chose to work for following my junior year would probably be the firm I received a full-time offer from. I aimed for high-caliber, high-paying jobs in New York City.

It was during this year that I discovered the financial independence movement and realized something important: Time is more valuable than money.

Because of this newly-acquired perspective, I declined all of my high-powered NYC offers and chose to work for a financial firm that valued hard work, respected work-life balance, and compensated for overtime (extremely rare in the finance space). My friends and mentors all thought I was crazy for turning down the ultra-high-paying, high-stress offers, but I knew that I was making the right decision.

Once I discovered the financial independence movement, I was immediately attracted to the idea of a side hustle. I wanted to unlock an alternative income stream to allow me to reach my financial freedom quicker. I took steps to start a t-shirt company and tutoring business, but both failed due to lack of interest and commitment.

Eventually, I collaborated with James, a mechanical engineer friend of mine, and we created the ultimate side hustle: Arsenal Discs. Our company manufactures premium golf discs and equipment for the disc golf sport.

My passion for disc golf, coupled with my business mindset, made me a great fit to run the finance and marketing arms of the business. My business partner James, who loves to design and create, complemented my weaknesses perfectly by taking over the technical, engineering side of the business.

Arsenal Discs

An Alternate Path

I see too many adults miserable in their jobs, complaining about money, and never having the time to do things. I’ve decided that this was not the life I wanted. I want freedom.

This yearning for freedom initially stemmed from my resentment of authority and being forced to perform tasks that I found neither useful or beneficial. Financial freedom grants you autonomy to work on projects that you’re truly passionate about. Once the need for a financial reward is eliminated, then altruism, passion, and authenticity foster motivation, not money.

My goal is to have a deep impact on society and, ultimately, the world. Whether this be through financial consulting, global volunteerism, or content creation, I strive to change others’ lives for the better. I feel that the typical nine-to-five job won’t grant me this satisfaction, and even if it could, I’d like to discover that career from a position of financial independence, not financial need.

I’d also like to help other young adults discover the road of financial freedom.

In my three years since discovering and advocating for the financial independence movement, I’ve had only one friend reach out to me for guidance. Most people in my peer group can’t be bothered with planning for their financial futures. They’re just finishing college. They may have just accepted their first job offer. The last thing they have on their minds is their financial situation ten years from now.

My advice to any college-aged reader out there is simple: Continue living on your college budget, even after you begin your career. As Jim Collins says, you can eventually reach financial independence by following one simple rule: “Save more than you spend and invest the rest”.

A single, twenty-something with no kids can easily live on $20,000 or less per year by making educated financial decisions. With the average graduate salary just topping $50,000 in 2017, a young adult can start with a nearly 60% saving rate! Using Mr. Money Mustache’s shockingly simply math behind early retirement, and assuming income grows at the same rate as expenses, that person could reach financial independence in eleven years. That’s incredible!

Plans for the Future

Luckily, I’m not alone in the path to financial independence.

My girlfriend Lauren, who is frugal by nature, is 100% on-board with my plans. It’s hard to argue against the idea of financial freedom in five years or less! Plus, I have my mom Ruth to thank. She’s turned me on to new blogs, podcasts, and other sources of information to add to my ever-growing repository of skills and lifehacks. She’s been extremely supportive in all of my efforts, whether it’s my studies, new ventures, or financial planning.

I’m a firm believer in creating multiple income streams to diversify risk. At this point, I have my high-paying W2 banking job, my side hustle, and miscellaneous side jobs and weekend jobs earning me income. I plan to further accelerate my wealth accumulation through real estate (e.g. house hacking, live-in flip, etc.). Developing these passive and semi-passive income streams will allow my saving rate to soar.

My hope is to work for less than three years in a traditional nine-to-five job. Instead, I’d rely on my (hopefully) successful side hustles and real estate ventures. Once I reach this point, I can put all of my time into passion projects, volunteerism, and traveling. I’m sure to make some mistakes along the way, but the goal of becoming financially independent at age 25 sounds too good to not pursue.

Nothing that I’m doing involves prodigious intelligence or tremendous abilities. I’m not a genius. I’m just a guy who wants to truly enjoy life and extract as much value out of it as possible. All it takes is a game plan, hustle, and ambition. The rest will follow. It’s never too late to take back control of your life.

Reminder: 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.

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J.D. on the Mo’ Money Podcast ~ Get Rich Slowly

Last autumn, I was intrigued by the Money 20/20 Payments Race, which pitted five folks in a race across North America. The catch? Each racer was restricted to one form of payment. One guy could use only gold, another gal use only Bitcoin. Other racers had to use only cash or only credit cards.

The surprising result? The Bitcoin racer won and the gold racer came in second. How was that even possible? (Answer: It isn’t really possible in the real world, but if a group of people are working together to solve a one-time problem, then all bets are off.)

Turn outs, I met one of the racers the following week at Fincon, the annual conference for financial media. Jessica Moorhouse finished fourth in the Money 20/20 Payments Race using a “chip and PIN” card.

Chatting with Moorhouse, I was impressed. She’s smart and witty and fun. Later, I checked out her blog and her podcast, both of which are about balancing money and life. (Because Moorhouse lives in Canada, her platforms have a Canadian twist that I find refreshing.)

Naturally, I was pleased to be a recent guest on Jessica’s “Mo’ Money Podcast”. We had an entertaining conversation about money — and lots of other stuff. You can follow that link to listen to the audio interview, or jump to the three-minute mark of the YouTube video below to watch us in action:

This is an unusual interview. Jessica and I hit it off right away. So, while we do talk about about personal finance and money management, we also get side-tracked talking by random topics such as my writing studio and her film-school experience.

Some of the questions I answer in this interview include:

  • Why did I start Get Rich Slowly? What was my financial life like? How did writing Get Rich Slowly change me?
  • What is financial independence? What is early retirement? How are they different? Is financial independence one particular thing? Or are there different kinds of financial independence?
  • Why is purpose so important? How is it important to both people who have already retired and those who are still working?
  • Why don’t I like it when people set debt reduction or financial independence as goals? Why do I see them as side effects? Why do I care about this distinction?
  • Why it’s important to be both proactive and adaptable. It’s important to be self-directed, but don’t be so locked into your plans that you’re blind to opportunity and unwilling to adapt.

I don’t always like my interview appearances, but I do like this one. I feel like it captures my personality while also allowing me to spread the message of Get Rich Slowly.

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Analyzing an average person’s budget and investments ~ Get Rich Slowly

Credit Sesame

Here’s a new thing for me: Yesterday, I met with a friend to give her financial advice. Believe it or not, in the twelve years since I started Get Rich Slowly, nobody has ever asked me to sit down with them and review their budget and investments. Pamela is the first. (And because I forgot to ask her permission to share this info, for this article I am totally changing anything that might identify Pamela.)

I’ve known Pamela for almost six years. She cuts Kim’s hair, and sometimes she cuts mine. She knows I write about money, but I don’t think she’s ever read anything I’ve written.

Pamela is 41. She’s single. She owns her own business. She loves her work and she’s happy with her life, but she’s starting to think about the future. Is she saving enough? Will she have enough for retirement? What if she wants to buy a home? Is there anything about her budget that seems out of line? When she cut my hair last month, she asked if I’d be willing to sit down with her over coffee to look at her numbers.

“Sure,” I said. Yesterday, we spent ninety minutes going through her budget and her investment accounts. Because I feel like Pamela’s situation is very typical of the GRS audience, I want to talk about

Pamela’s Budget

Pamela doesn’t keep detailed records of her earning and spending. “Once a year, I take a month to log everything. I want to make sure I’m not out of control,” she told me. “I’m tracking my money this month, for instance. The numbers I have here are rough estimates.”

Pamela earns about $3940 per month cutting hair, or about $47,280 per year. Her business expenses — including taxes — run about $1100 per month. These are fixed, and nothing about them seems out of the ordinary to me. The remaining $2840 per month represents her “take-home pay”.

Of that, $650 goes toward rent. This is a really good number for Portland, and she knows it. She’s not happy with her roommate situation right now, but she finds it tough to move because her rent is so low. Anyplace else would probably cost at least $950 per month, and $1200 per month is probably more realistic. For now, she’s willing to put up with roommate issues in order to save $300 to $500 per month.

Pamela’s second-largest expense is food, which costs her $600 per month. “I could cut that if I had to,” she told me. “I like to eat well, and I know that costs me.”

Her other expenses — clothing, utilities, therapy, and so on — total about $900 per month. (I didn’t think to take detailed notes on Pamela’s situation because I didn’t realize I’d be writing about her.) So, her monthly expenses average $2150, which means she has a surplus of roughly $690. That’s awesome!

The bottom line: Pamela earns $3940 per month, or about $47,280 per year. Her expenses (including business expenses) total $3250 per month, or about $39,000 per year. Her saving rate is roughly 17.5% if you include the business expenses in the calculation, or roughly 24.3% if you don’t.

I think Pamela’s budget is entirely reasonable, but she could always choose to cut spending a little more.

Note: I want to tie this back to my criticism of the Frugalwoods book earlier this week. In my review, I noted that the author was able to achieve financial independence quickly not because her family’s spending was $37,000 per year, but because she and her husband have high incomes. Pamela’s spending is roughly the same as that of the Frugalwoods, but because her income is in the average-normal range, her saving rate is much lower. This is an example of why income is such a vital piece of the puzzle.

Pamela’s Investments

Of the $690 that Pamela sets aside each month, she routes $200 to an Edward Jones brokerage account. This account currently has a balance of just over $42,000 spread across nine different mutual funds. (Pamela really likes her Edward Jones financial advisor.) She also has $11,000 in a credit-union checking account, and another $3000 in miscellaneous investments.

Pamela’s advisor has invested her money in the following funds. (I didn’t write down fund balances. Sorry.)

  • American Funds AMCAP Inc. (AMCPX) – 5.75% load, 0.69% expense ratio
  • American Funds High-Income Trust (AHITX) – 3.75% load, 0.69% expense ratio
  • American Funds Capital Income Builder (CAIBX) – 5.75% load, 0.59% expense ratio
  • American Funds Capital World Bond (CWBFX) – 3.75% load, 0.97% expense ratio
  • American Funds Fundamental Investors (ANCFX) – 5.75% load, 0.62% expense ratio
  • American Funds Income Fund of America (AMECX) – 5.75% load, 0.56% expense ratio
  • American Funds New Economy (ANEFX) – 5.75% load, 0.78% expense ratio
  • American Funds New World (NEWFX) – 5.75% load, 1.04% expense ratio
  • American Funds SMALLCAP World (SMCWX) – 5.75% load, 1.07% expense ratio

Pamela also owns roughly twenty shares of Square Inc. (SQ), which she purchased because she uses and loves their technology in her business. Her $200 initial investment is now worth $800. Plus, she has about $1000 in the T. Rowe Price Science and Technology Fund (PRSCX), which has no load and an expense ratio of 0.83%. (This fund is in a Roth IRA.) These are investments she’s made on her own and they have nothing to do with her Edward Jones portfolio.

My initial thoughts on seeing Pamela’s portfolio? HOLY SHIT! I’m not joking. I can’t help but curse at this asset allocation. I cannot believe that in 2018 a financial advisor would have their client invested like this. It’s baffling.

What’s the issue? On average, Pamela’s $42,000 portfolio carries a staggering 5.31% front-end load and a 0.78% expense ratio. When she sends her $200 to invest each month, roughly $10.62 of that is going to initial fees, leaving her with $189.38 invested. Then, she’s losing at least another 0.50% (or $210) per year to expense ratios (when compared to index funds).

All told, Pamela is investing $2400 per year, but paying $337.44 to expenses. That’s 13.64% of what she’s putting in — not to mention any future earnings that money could have produced. That’s great for Edward Jones, but not for her.

Here’s another way to look at it (using a new metaphor I’m inventing for this article). It’s like Pamela and I are going to race one mile around a track. We know in advance that both of us average the same speed: about 6.8 miles per hour (or about 8:49 per mile). The race should be a close one. Or it would be, except that each of us is handicapped.

  • I’m required to carry an extra nine pounds of weight (representing the the 0.09% expense ratio for my Fidelity S&P 500 index fund).
  • Pamela has to carry an extra 78 pounds (representing her average 0.78% expense ratio) and she has to start 280 feet behind me (about 5.31% of a mile).

Assuming we’re otherwise physically equal, who do you think is going to win this race? It doesn’t take a rocket surgeon to see that Pamela would have to expend Herculean effort to catch me. And the longer we run, the more the difference in the weights we’re carrying will begin to tell.

The bottom line: Pamela’s budget is great. Her investment portfolio is not. She’s losing a ton of money to “drag” each year — and each time she makes a monthly contribution to her portfolio.

My Evaluation

“I’ll be honest,” I told Pamela after reviewing her numbers. “I feel like you’re doing fine. You don’t have debt. You spend on the things that are important to you, but you’re not materialistic. You like your work. You don’t have a driving desire to retire early.”

“So, you wouldn’t change anything?” Pamela asked.

“Well, you could always spend less, right? You don’t need a smartphone. You don’t need to spend $600 on food every month. Plus, if you took on more clients, you could boost your income.”

“Right,” Pamela said.

“But again, based on what I know of you and your goals, you’re doing a great job of balancing tomorrow and today. If there were one change I’d make to how you’re handling money, it’d probably be to save more — and to change how you’re investing.”

“What do you mean?” she asked.

“You don’t want to make things too complicated,” I said, “but if I were you, I’d consider four buckets for savings. First, set aside an emergency fund. You already have $11,000 in a checking account. That’s perfect. But I’d also have a savings buckets for short-term goals like your new cell phone and for long-term goals like buying a house.”

“That makes sense,” she said. (I didn’t tell Pamela during our meeting, but if I were her, I’d use an online savings account to get better interest rates.)

“Your fourth bucket is for retirement. You’re off to a good start there, but you might consider saving even more. And really, I don’t like how your money is invested.” I spent five minutes explaining my philosophy of how to invest and describing why I prefer index funds to standard mutual funds.

It didn’t occur to me during our conversation, but in retrospect I think Pamela needs to be using tax-advantaged accounts to save for retirement, such as a Roth IRA and/or a 401(k). (The Roth IRA is probably the simplest thing to set up, so I’d recommend that.) Right now, she’s putting her money into a regular taxable account. When I next see her, I’m going to recommend that Pamela set a goal of maxing out her Roth IRA. That’d bump her retirement savings from $2400 to $5500 every year. I think that’s both smart and doable (even if it might seem like a bit of a stretch).

Overall, I think Pamela makes wise decisions, both with her business finances and with her personal finances. She’s smart and level-headed. And again, I feel like she typifies the average Get Rich Slowly reader — or at least where the average Get Rich Slowly is starting from. My hope is that with just a few tweaks, she can give her retirement savings a turbo boost!

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4 Step Process to Create Better Content than the Competition

We all want to create the best content possible, but with more than a BILLION active websites and blogs on the internet today… it’s getting kind of tough.

Consider this. With so many active websites pushing out new content daily, it’s almost a waste of time for you to not put out the best content possible. This is especially true if you are trying to rank on the first page of Google for any generic search terms or phrases.

Here’s what we know.

  • Articles of 500 to 1,000 words usually won’t outrank big sites
  • Longtail is great, but it’s still a mission to rank content
  • Mobile and tablet usage is quickly overtaking desktop
  • Social media and video are still growing markets

With all of that being said… the most important focus for your brand or business should be to ALWAYS create the best content possible. It’s no longer worth it to push out articles every other day — especially if they are under 1,000 words. Instead, put out AMAZING content every week/month, then focus the majority of your promotion efforts on those articles.

Not only will this provide your audience with better content, it will also make the marketing and monetization aspect that much easier and effective as well.

Here are some tools and solutions to help you on this journey.

Put in the Time to Research Your Keywords and Topic

Before even writing your first word of content, it’s a MUST that you know the content focus of your article. Not only does this include why you are writing, and what it’s going to be about — it should also include your target keywords and what you want to rank for.

This is where a tool like Ubersuggest really comes in handy. Unlike other keyword and SEO tools, Ubersuggest is free to use, pulls data from Google, and also has competitor intelligence where it shows not only how many times a keyword is searched, but also its monthly volume and estimates cost per click.

To get started with the process, all you need to do is plug in a keyword or phrase you might want to write about. You can also select what type of content and its language.

After clicking “Look up” you will then see a wide range of results you can weed through. The list will start off in alphabetical order, but you can sort it based on any of the columns on the right-hand side, or using the keyword suggestions and filter results fields on the left side.

After looking around for a bit, I did come across a nice grouping of keywords and phrases that would make for a good article focus. (see below). As you can see, “google keyword rank/position” related keywords are heavily sought after, yet also varied enough so there is a potential to target an audience here and rank at the same time.

Create an amazing 2-3k word post on the topic and use a few of these keywords as sub-titles for new sections, and you could soon be ranking in Google. Of course, you will also need to put in the necessary marketing and link building efforts, but again — this is focusing on how to come up with ideas for better and more in-depth content.

No matter what keywords or search phrases you are going after, make sure you have more than 2,000 words in your article, as this has continually been proven as one of the most effective ways to rank higher in Google.

Research What’s Already Ranking… Then Make it Better!

Once you have an idea of what type of keywords and search phrases you are going to try and rank for, it’s then time to start creating your content. However, before doing this, you will also need to take a peek at what’s already out there and ranking.

Just for the sake of keeping things consistent, let’s say you want to rank for something like “google keyword planner tool tutorial”. Once we search for this in Google, we will find that several of the rankings are YouTube (because we used the word “tutorial”). After those listings, we would then find numerous sites like Quicksprout, Backlinko, ShoutMeLoud, and others — each with more than 2,000+ words of content and great content/image structure.

Using this information, we can then start creating a foundation and structure for our own article. Take the time to visit each of the sites ranking on the main page of Google for the keywords you want to rank for, then see which elements each have or done (ie: text, custom images, charts, video etc).

This ultimate goal here is to then create the best resource possible — adding your own unique components for each.

Create a Visual and Video-Based Online Course

As mentioned earlier in this article, mobile devices and tablets are quickly being the go-to solution for everything these days. Even fewer people are relying on Google to find their answers, and are heading straight to video and social media. At the same time, you always want to keep leveraging your brand and figure out how to potentially make millions off your expertise and previously published content.

With all of this in mind, it’s not just about catering to your site audience with great content and video where possible — it’s also about finding a way to provide them with a premium service as well. Blog posts are great, but the majority of people coming to your site will never fully read through the content. Instead, you need to repurpose it and give it to them in a format they can easily follow, while enjoy walking through in the process.

This is something I recently did in my new “Complete Guide to Affiliate Marketing and Blogging” course on Udemy. I’ve already written thousands of articles on my own websites and blogs, but never have I dove into the world of online video like I did in this course. The end result is over 80 videos and 6+ hours of content. If you want to check it out, feel free to use this link or coupon code “SHOEMONEY” and save 90% during its beta launch.

The content and monetization play here are simple.

  1. Since I created the content myself, I know it’s of value and can refer to it within various articles, guest posts, citations, and on my own sites.
  2. Video is in demand. It’s not just about creating an online course, it’s also about giving your audience a taste, then getting to take action and get full access.

Both of these highlights go back into the goal of creating the best content possible for your audience. With thousands of users visiting my sites daily, I can also offer them a higher level of experience and learning at the same time.

Last Step… Put in the Necessary Time and Effort to Promote Your Content

Something I also touched upon at the beginning of the article is the importance of making sure your content gets backlinks, references, and social sharing in the right places. With a billion active sites always coming out with new content, even the BEST content will quickly find itself buried without the right backlinks and promotions.

Moz recently came out with their super long and detailed list of ranking factors in 2018. AndBacklinko< also came out with quite a useful resource guide as well. Unfortunately, neither of them really limit it to just a handful of “must use/follow” methods.

However, both did highlight the continued importance of CONTENT and BACKLINKS. Yes, Google is always changing the way it ranks sites, but these two components continue to play the biggest roles.

Once your content is created (and is the best possible), it’s then time to put in the manual outreach necessary to get it picked up by the masses. Such time-consuming methods usually consist of:

  • 404 broken link building
  • guest blogging
  • outreach to press/media
  • citations in reference articles
  • infographic design and promotion
  • podcasts, video and new media

Depending on your content, business model and budget… many of these methods can be outsourced, but when doing so, put in the necessary due diligence to make sure it’s done correctly.

The content you create will play a HUGE role in the overall success of your site and it’s rankings, but the actual promotion is going to determine how well it ranks and the audience it reaches over its lifetime.

Now it’s time to put these methods into motion…

We’ve covered a lot in this resource guide, but it ultimately came down to four key points:

  1. Research your topic/keyword before writing
  2. How to create the best content possible
  3. Cater to mobile/video demand
  4. Promotion is going to determine your success

You don’t need to follow this guide step by step, but no matter what type of content you are creating, these components are going to play a huge factor. Don’t waste time on just pushing content out there. Make sure it’s the best possible and serves real value, then it will be that much easier for you to promote.

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How much does the stock market return? ~ Get Rich Slowly

Credit Sesame

One of the fundamental ideas I try to promote here at Get Rich Slowly is your savings ought to be invested for long-term growth. You ought to use the magic of compounding to create a wealth snowball.

Naturally, you want put your money into an investment that offers a reasonable return and acceptable risk. But which investment is best? I believe — as do most financial experts — that you’re most likely to achieve high returns by investing in the stock market.

But why do so many people favor the stock market? How much does the stock market actually return? Is it really better than investing in real estate? Or Bitcoin? Let’s take a look.

How Much Does the Stock Market Return?

In Stocks for the Long Run, Jeremy Siegel analyzed the historical performance of several types of investments. Siegel’s research showed that for the period between 1926 and 2006 (when he wrote the book):

  • Stocks produced an average real return of 6.8%. “Real return” means return after inflation. Before factoring inflation, stocks returned about 10% annually.
  • Long-term government bonds yielded an average real return of 2.4%. Before adjusting for inflation, they had a return of about 5%.
  • Gold had a real return of 1.2%. “In the long run, gold offers investors protection against inflation,” writes Siegel, “but little else.”

My own calculations — and those of Consumer Reports magazine — show that real estate does worse than gold over the long term. (I come up with a real return of just under one percent.) Yes, you can make money with real estate investing, but it’s far more complicated than just buying a home and expecting its value to soar. (It’s important to note that returns on real estate are a contentious subject. This recent academic paper analyzing the rate of return on “almost everything” found that housing actually outperforms the stock market by a slight margin.)

Siegel found that stocks have been returning a long-term average of about seven percent for 200 years. If
you’d purchased one dollar of stocks in 1802, it would have grown to more than $750,000 in 2006. If you’d instead put a dollar into bonds, you’d have just $1,083. And if you’d put that money in gold? Well, it’d be worth almost two bucks — after inflation.

Siegel’s findings aren’t unique. In fact, every book on investing shows the same thing. Over the long term, the stock market produces an average annual return of about 10%.

Note: As much as I love Dave Ramsey’s advice on getting out of debt, he’s notorious for providing misinformation on investment returns. He argues that you can expect to earn 12% in the stock market. This makes a lot of people — including me — tense. You can’t count on earning a 12% return from stocks. You’re going to earn more like 7% after inflation, and I’d argue that in order to give yourself a margin of safety it’s better to assume 5% instead.

Average Is Not Normal

Over the past 200 years, stocks have outperformed every other kind of investment. But before you rush out and sink your savings into the stock market, you need to understand a couple of things.

First up, it’s important to grasp that average market performance is not normal.

In the short term, investment returns fluctuate. The price of a stock might be $90 per share one day and $85 per share the next. A week later, the price could vault to $120 per share. Bond prices fluctuate too, albeit more slowly. And yes, even the returns you earn on your savings account change with time.

Just a few years ago, high-interest savings accounts yielded five percent annually in the U.S.; today, the best accounts yield about one percent.

While it’s true that stocks average a 10% annual return, it’s rare that the stock market produces a return close to that average in any given year. Recent history is typical. The following table shows the annual return for the S&P 500 over the past twenty years (not including dividends):

[S&P 500 Annual Returns]

The S&P 500 earned an average annualized return of 7.19% for the twenty-year period ending in 2017. But in only one of those twenty years (2004) were stock market returns anywhere near the average for the entire time span. (Note: This twenty-year period has the lowest rate of return on record for the S&P 500.)

Short-term market movements aren’t an accurate indicator of long-term performance. (And make no mistake: One year is “short term” when it comes to investing.) What a stock or fund did last year doesn’t tell you much about what it’ll do during the next decade.

Because of their volatility, stocks outperform bonds during only 60% of one-year periods. But over ten-year periods, that number jumps to 80%. And over thirty years, stocks almost always win.

Stocks for the Long Run

The best way to build your wealth snowball is to invest in the stock market. Doing so is likely to offer you the highest rate of return on your money. And the best way to approach stock-market investing is to take the long view. Forget about what the market does today or tomorrow. Focus on the future.

In The Random Walk Guide to Investing, financial guru Burton Malkiel writes:

It turns out that the longer you hold your stocks, the more you can reduce the risk you assume from investing in common stocks. The chart below makes the point convincingly. From 1950 through 2002, common stocks provided investors with an average annual return of a bit more than 10 percent…

[Range of annual returns on common stocks]

Even during the worst 25-year period you would have earned a rate of return of almost 8 percent — a quite generous return and one that was larger than the long-run average return from relatively safe bonds.

The following chart from William Bernstein’s excellent The Four Pillars of Investing offers another way to visualize long-term returns.

[30-year annualized stock returns]

Each bar represents the 30-year annualized real return on U.S. stocks. So, the first bar shows that for the period between 1901 and 1930, the market returned an average of nearly 4% annually after inflation. For the period between 1971 and 2000, the market returned an average of over 7% per year.

The bottom line: Investing is a game of years, not months.

Don’t let wild market movements make you nervous. And don’t let them make you irrationally exuberant either. What your investments did this year is far less important than what they’ll do over the next decade (or two, or three). Don’t let one year panic you, and don’t chase after the latest hot investments. Stick to your long-term plan.

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Why you should run your life like a business ~ Get Rich Slowly

Note: During the month of March, I’m migrating old Money Boss material to Get Rich Slowly — including the articles that describe the “Money Boss method”. This is the second of those articles. Part one answered the question, “What is financial independence?”

For the past several years — since I published the Get Rich Slowly course in 2014 — I’ve been trying to teach people to think like a CFO. Here’s my fundamental premise: You should manage your personal finances the way a business owner would manage hers.

To illustrate why I think this is so important, let me introduce you to my friend Harlan…

Harlan Landes

When he was 25, Harlan’s world fell apart. In a matter of weeks, his girlfriend left, he lost his job, his car was impounded, and he was evicted from his apartment. When he moved back in with his dad, he knew he’d hit rock bottom.

While looking for work, Harlan did some soul-searching. He realized that for too long, he’d been letting life happen to him. He’d been letting other people and outside events control his destiny. He blamed his situation on the economy, on his boss, on his girlfriend – on plain old bad luck. He blamed everyone but himself.

But blaming others only left him feeling helpless.

Slowly at first, Harlan changed his mindset. He decided that failure and success were in his hands. He made it his mission to improve his life and his finances.

  • He moved to a new apartment, which he shared with three roommates. His rent was less than $350 per month and other expenses were split four ways.
  • He found a new, higher-paying job as assistant to the Chief Operating Officer in a division of a large financial firm.
  • Most importantly, Harlan began to actively manage his money. He tracked every penny he spent. He opened a savings account and began to save for retirement.

In short, Harlan took control of his life. He chose when (and why) to get out of bed in the morning. He decided how well he did the work his boss assigned him. He chose whether or not he was happy…every second of the day. He was calling the shots – all of them.

As part of his new job, Harlan got a glimpse at how big businesses operate. He saw what made them profitable, and he saw what made them fail. He decided to apply some of these business lessons to his own life.

For instance, because he’d been producing financial reports for a division of his company, he started creating financial reports for his personal accounts. At first, these reports were embarrassing. They revealed just how poorly he had managed his money. But Harlan found that running the reports kept him motivated. They were a way to “keep score” on his progress.

Harlan has made a lot of progress. After nearly fifteen years acting as the Chief Financial Officer of his own life, he’s gone from deadbeat to hustler. He’s now financially independent yet he still treats his personal budget like a business.

I like Harlan’s story because it reminds me so much of my own, I think.

Note: Harlan is one of the original money bloggers, the founder of Consumerism Commentary. He no longer owns that site, but is now co-host of the excellent Adulting podcast, which gives practical and actionable advice about being a grown-up

Becoming the Boss of Me

You see, in 2004 (when I was 35) I too was in bad shape. I had over $35,000 in consumer debt — credit cards, personal loans, a car payment — and was living paycheck to paycheck on a salary of $50,000 a year. I spent every penny I earned and had no savings. Ridiculous, right?

Then my wife and I decided to buy a new house. That was the final straw.

Rosings ParkI was flooded with financial obligations. I felt like I was drowning. All I wanted to do was bury my head in the sand, play computer games and read comic books. I wanted to give up. Fortunately, I didn’t.

At the time, I was managing two businesses – the family box company and my own computer consulting firm – with no problem. In fact, the businesses were very profitable.

“What would happen,” I wondered, “if I used my entrepreneurial skills at home? What if I managed my money like I was managing a business?” So, that’s what I did. Instead of waiting for things to magically get better, I chose to become the boss of JD, Inc.

I drafted a three-year plan to get out of debt. I cut back on spending. I boosted my income. As JD, Inc. became profitable and my cash flow improved, I paid down debt. I tracked my spending and created monthly reports to document my progress.

The results were remarkable.

In less than a year, I’d set aside a $5000 emergency fund and had increased my cash flow by $750 per month. I plowed that “profit” into debt reduction. In December 2007, after three years of hard work (and right on schedule), I became debt-free for the first time in my adult life.

Today, like Harlan, I’ve achieved financial independence. And like Harlan, I continue to manage my life as a business.

Calculating Net Worth

My goal at Get Rich Slowly is to teach you how to run your life like a business. I want you to earn enormous profits so that you can use the money to do whatever it is you dream of doing. But just as Harlan and I had to start at the very beginning, you will too.

Next week, we’ll talk about where to start. (It’s probably not where you think.)

Before we can begin, however, I have a task for you.

Exercise: Take a snapshot of your current financial position by calculating your net worth.

To measure the value of a business, companies talk about equity or “book value”. Jargon, right? In personal finance, equity is known as net worth. It’s exactly the same thing but on a personal level. Your net worth is an important number because it reveals how much the business of you is worth at the moment.

Still clear as mud? Maybe this definition of net worth from Wait But Why will make more sense:

“What would happen if you sold everything you own, liquidated any investments you have, paid off all of your debts, and withdrew whatever cash you have in bank accounts? You’d be standing on the street naked, with nowhere to go, holding a bunch of cash, and people would be looking at you. And whatever cash you were holding would be your net worth.”

Net worth tracks your financial health in the same way that weight measures your fitness. Neither number tells the whole story, but as a measure of change over time each is a handy tool.

Calculating net worth is easy. It’s what you own minus what you owe. That’s it. Simple, right? Here are more detailed instructions:

  • List your assets. Check all of your bank accounts and note their balances. If you have investment and/or retirement accounts, write down how much you have in them. If you own your home, use Zillow to determine its current value. If you own a car, use Kelley Blue Book to figure out how much it’s worth. Add all of these together to find the total value of your assets.
  • Next, list your liabilities. Write down how much you owe on your car, the current balance of your mortgage, how much you have left on your student loans. Record the balance of each credit card and personal loan. The sum of everything you owe represents your total liabilities.
  • Subtract what you owe from what you own. Your net worth is your assets minus your liabilities.?

To make things even easier for you, I’ve created this net worth spreadsheet in Google Docs for you to download or copy.

Once you’ve calculated your net worth, write this number down. Burn it onto your brain. I want you to remember how much you’re worth today so that we can see the progress you’ve made in six months. And a year. And ten years.

I calculate my net worth every month. I don’t expect you to be that obsessive, but it is important to keep tabs on this number. It measures your financial progress. As the business of you begins to make a profit, your net worth will grow. My goal here at Get Rich Slowly is to help you grow it as large as possible!

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Meet the Frugalwoods ~ Get Rich Slowly

Meet the FrugalwoodsThere are a lot of great personal-finance books out there — here are a few of my favorites — but despite the diversity of titles (and subject matter), they all share a remarkably similar format. These books are money manuals in which the author shares prescriptive advice. They tell the reader how to get from point A to point B.

From time to time, somebody will publish a book like David Chilton’s The Wealthy Barber, which provides financial advice in the guise of a story, but these attempts are very, very rare. (It’s a bit ironic that one of the oldest, most revered personal-finance books — The Richest Man in Babylon — is story based, yet few have followed in its footsteps.)

All this is to say: For years, I’ve believed there’s a hole in the market waiting to be filled, a place for a story-based book about money.

Enter Meet the Frugalwoods, the brand new book from Elizabeth Willard Thames. Liz writes the excellent Frugalwoods blog, which chronicles her young family’s experience with extreme frugality. (Her site also documents their adventures owning a 66-acre homestead in rural Vermont, a subject I love.)

Meet the Frugalwoods isn’t a money manual. It isn’t fiction. It’s memoir. The book covers ten years in the lives of Liz and her husband Nate, from their post-college job-hunting experiences in Kansas to purchasing the afore-mentioned Vermont homestead.

Through their story, Liz shows readers it’s possible to move from a life of consumerism to a life built around frugality and purpose.

In some ways, the book seems to contradict the blog. On the blog, Liz maintains that she and Nate have always been savers: “Mr. Frugalwoods and I have always been frugal — it’s just how we’re wired.” In the book, she paints a picture of a couple that succumbs to run-of-the-mill American consumerism before being liberated by a philosophy of extreme frugality.

A Regular Middle-Class Lifestyle

After graduating from the University of Kansas in 2006, Liz and Nate experienced typical young adult struggles. While he got job using the skills he’d developed, Liz struggled to find work that made use of her degrees in political science and creative writing. As a stop-gap measure, she took a position preparing files for digitization in a document scanning center. (This reminds me of the worst job I ever had, selling insurance door to door after I graduated from college. Haha.)

In a quest for more meaningful work, Liz took a position with AmeriCorps in New York City. Her job was to raise money for a small non-profit organization. The experience was formative. It taught her the essence of extreme frugality. (Her monthly food budget was her $120 food stamp allotment. She ate on four dollars per day!) Still, she managed to save $2000 of her $10,000 annual salary.

Liz lived in the Crown Heights neighborhood of Brooklyn, where people were poor and struggled to get by. During the day, however, she hobnobbed with billionaires, seeking contributions to her non-profit. It was a jarring juxtaposition.

In time, she moved to Boston to be with Nate (who had found work there as a computer programmer). She found a job doing fund-raising for WGBH, Boston’s public broadcasting station. They fell into a regular middle-class lifestyle, complete with lifestyle inflation.

I was promoted to senior development associate, accompanied by a raise, and decided to start getting my hair cut at a chic salon in Harvard Square that a woman in my office recommended. They massaged my neck, brought me herbal tea, washed my hair, cut and styled it, for just $120. The fact that I used to eat for an entire month on that same dollar amount didn’t register at the time. I worked hard, so I reasoned I deserved to treat myself. What was the point of this job otherwise?

Over the next few years, Liz and Nate moved to Washington, D.C. — and then back to Boston. Liz went back to school to get a masters in public administration. They bought a house. They got a dog. From the outside, everything seemed rosy. On the inside, however, it felt like something was missing.

“We stopped micromanaging our spending,” Liz writes. “By which I mean I had no clue what we spend in any given week, month, or year.” But the increased spending didn’t bring increased happiness.

Now that I’d experienced a life of spending $40 a week on artisanal cheeses and $120 on haircuts and $200 on dinners out, I realized it wasn’t what I wanted. What was the point of being able to buy whatever I wanted if I didn’t control my time?

Something had to give.

An Epiphany (or Two)

The FrugalwoodsLike me, Liz notes the dates of important events in her life. On 21 May 2011, on a day she was feeling particularly flustered, Nate suggested that they go for a hike. “After an hour and half on the trail, I began crying with relief,” Liz writes. “I felt an absence of pressure for perhaps the first time in my life.”

Although this small epiphany led the couple to spend more time outdoors (and to question their consumer tendencies), they still a few years to go before they’d experience their big breakthrough.

On 29 March 2014, Liz and Nate agreed to discard the life they were building and move to the woods instead. They crunched the numbers. If they embarked on a crusade of extreme frugality, they figured they could be financially independent by 2017. And when they achieved financial independence, “we’d have enough money to move to a homestead in the woods-filled countryside of Vermont.”

They dove into extreme frugality with gusto.

On their quest to squash as many expenses as possible, Liz and Nate employed a variety of methods.

  • They used barter and trade, exchanging goods and services. When Liz decided she couldn’t live without yoga, for instance, she trained to become an assistant at the studio she attended. In exchange for her time, she saved $288 in class fees every month.
  • They became masters of DIY. With the internet at their side, Liz and Nate learned to remodel their home, repair and upgrade appliances, and give each other haircuts.
  • They became Craigslist masters, patiently waiting for the things they wanted and needed to be offered for cheap. This saved them big bucks on furniture — and more.
  • They started salvaging — or “rescuing”, as Liz puts it — used items, such as lamps and dressers set out for trash pick-up.

“These types of frugal substitutions and alternatives were all around us,” Liz writes. “We marveled at everything we’d been unwittingly overpaying for. By bringing creativity and ingenuity to our consumption, we were able to drastically reduce our overall spending.”

She continues:

I don’t think the route to successful frugality entails brutally slashing everything from your budget, because you’re bound to end up in that deprived state…Rather, the key is to identify less expensive options that’ll yield the same or a similar end result. Thus, you end up not feeling deprived, you save a boatload of money, and you are then motivated to find more opportunities for dramatic changes…

And then she makes what I consider the most important point of the entire book: “Since we were working toward an ever-crystallizing goal of decamping to the woods, frugality wasn’t about what we were giving up; it was entirely about what we were going to gain.”


Finding Freedom

In Twilight of the Idols, Friedrich Nietszche wrote, “He who has a why to live for can bear almost any how.” This is why I’m so insistent that GRS readers take some time to think about what they want out of life, to craft a personal mission statement.

Their new-found frugality allowed Liz and Nate to regain control of their lives. “Frugality gave us options,” she writes. The less they spent and the more they saved, the more control they had over their destiny. She continues:

It’s a virtuous cycle of low spending and high saving that’s self-perpetuating. The less money you need to live on, the more you save, and the less you need to earn.

The next two years brought a lot of changes. Rather than resenting the process of extreme frugality, they found that they enjoyed it. (“Like, a lot.”) They began prepping their Boston home to act as a future rental property. They diligently scoured the Vermont real estate listings, hunting for suitable properties. And they welcomed the birth of their first child.

Along the way, they documented their experience at a blog they dubbed Frugalwoods.

In late 2015, after just over eighteen months of saving, Liz and Nate toured an almost-perfect property. Located on 66 acres in central Vermont, it was close enough to civilization that they’d have access to everything they needed (and wanted). It wasn’t crowded by neighbors, was wired for high-speed internet, and included lots and lots of trees. They bought the place. In January 2016, they moved in.

Liz and Nate’s story is inspiring. I like reading how people find purpose, then restructure their lives to achieve their goals. And I like reading about evolving relationships with money. “Money doesn’t make you happy,” Liz writes in Meet the Frugalwoods, “but money provides the freedom to find out what does make you happy.”

The Frugal Homestead

A Missing Piece to the Puzzle

Meet the Frugalwoods isn’t perfect. To my mind, it’s too much of a memoir and not enough of a money manual. Because it’s so much about Liz and Nate’s story, there’s very little information on how others can do what they did. In some ways, it seems like a black box: “Cut back on spending for 21 months and you can buy a farm in Vermont!” Obviously, there’s much more to the process than that.

“There are actually only three variables in the financial independence equation: income, expenses, and time,” Liz writes. Yes! She talks some about time in Meet the Frugalwoods, but the rest of the book is all about expenses. The book focuses far too much on “defense” (expenses) and not enough on “offense” (income). In fact, there’s nothing about income here. It’s like giving a recipe for baking bread but failing to mention you need yeast.

Liz doesn’t share detailed income and spending numbers after 2008 (at which time they were earning $69,730 take-home), but it’s clear that their household income grew quickly from these entry-level positions. Despite a consumer lifestyle, she and Nate were still able to save a ton.

Before they began their excursion into extreme frugality, while they were enjoying $120 haircuts and $200 restaurant meals, the couple was already saving between 40% and 50% of their after-tax income (and that doesn’t even count maxed-out 401(k) contributions and mortgage principal!). Once they kicked their frugal efforts into high gear, their saving rate peaked at 82%. (According to the blog, their saving rate was over 93% if you count 401(k) contributions.) They were able to achieve financial independence in just over eighteen months.

Liz and Nate embarked on their adventures into extreme frugality on 29 March 2014. They submitted an offer for their Vermont homestead on 23 November 2015 (and closed the deal on 15 January 2016). That’s a pretty quick turnaround.

The only real acknowledgement of the role income played in the process comes during the book’s introduction: “In order to save large amounts of money, you have to have a sufficient amount of money coming in,” Liz writes. “You can’t frugalize income you don’t earn.” That’s great, but it comes in the midst of a seven-page apology for “privilege” and not in the meat of the book. I think it’s a vitally important point, and the fact that the subject is wholly missing from Meet the Frugalwoods is a mystery to me.

Tell us more! Give us details! Show us how others can do the same thing! There’s no shame in earning a lot of money. Why hide it?

A little sleuthing turned up some numbers from which we can make some extrapolations. According to this Forbes article, during 2014 Liz and Nate spent $13,000 on non-mortgage expenses and their mortgage payments amounted to around $24,000. Because their saving rate was 71%, that means this $37,000 represents 29% of their take-home pay. Plus they maxed out their 401(k)s, which is another $35,000. More math shows that the Frugalwoods’ after-tax income was probably around $162,000 in 2014 and they were able to save in the neighborhood of $125,000. Nice!

The Bottom Line

Look, my complaint about the lack of income info isn’t meant as a knock against Liz. She’s one of my favorite people in the financial blogging universe. What it does mean, however, is that the target audience for this book is not a person struggling to get by on a low salary. (If that describes you, check out Your Playbook for Tough Times by Donna Freedman.)

If you’re in a two-income household with typical salaries, however, you can apply the book’s lessons (perhaps on a smaller scale) to pursue your goals. And if, like Liz and Nate, you’re well-educated with high incomes, you can absolutely achieve financial independence in a short time — if you’re willing to make the short-term sacrifices necessary to get there.

Meet the Frugalwoods is a welcome addition to the ever-expanding library of personal-finance literature. It covers a relatively new topic (financial independence) in a relatively new way (story). Liz and Nate’s story will be relatable for many people. It’s my hope that through her experience, she’ll help a lot of new folks discover the path to financial freedom.

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Life expectancy and retirement planning ~ Get Rich Slowly

When I write about retirement and retirement planning, I frequently mention that I aim for my savings and investments to last another thirty years. So, for instance, when I use retirement calculators to determine how long my nest egg will last, I use 78 as my projected age of death. Several readers have written to ask how I arrived at this number.

For example, Richard wrote:

I’m wondering why you’re only projecting out 30 years. You’re only 48. I’m 54 (and retired) and, in my projections and calculations, I go out 40 years. I probably don’t need to plan out that far, but you never know. My last surviving grandparent died just a couple years ago at age 99.

This is a great question. In fact, I believe life expectancy is the most critical factor in determining how much money you need to save — and how much you can spend. Unfortunately, it’s also the variable that’s most difficult to calculate with any kind of precision.

Why Is Life Expectancy So Important?

When the mainstream media publishes an article about early retirement, the comments are filled with folks who say things like, “These people are cheap. I could never live like that. Besides, what if they drop dead tomorrow? Then what good is all of that money? YOLO!”

On the other hand, early retirement forums are filled with people who go to the opposite extreme. “OMG! I can’t believe you’re only expecting to live until age 90. What about modern medicine? What about gene therapy? What if you live to 108? Boy, then you’re going to be sorry you didn’t save more!”

Both sides make valid points.

  • If your assumptions about life expectancy are too optimistic, you risk not making the most of the money you’ve saved. If you budget as though you were going to live to 95 but end up dead by 65, you’ll have a lot of money that essentially goes to waste — money you might have used to do the things you’d always dreamed of doing.
  • If your assumptions about life expectancy are too pessimistic, you risk running out of money. If you make choices based on the idea that you’ll die at age 65, for example, but live until 95, you’ll end up broke. You’ll spend decades eating beans and rice.

Here’s the bottom line: If you knew when you were going to die, you could calculate how much money you’d need to get from now to then.

Pretend that next week Elon Musk announced he’d developed the Methuselah, a machine that can tell users the precise date and time of their death. It’s 100% accurate and somehow can even account for accidental death. When the Methuselah comes on the market, you try it just for kicks. It tells you that you’ll die on 06 November 2034. You have about seventeen years left to live.

Based on that information, you’d be able to calculate with great precision how much money you’d need in order to make it to your date of death. You’d know whether you need to continue working or could call it quits right now. You’d know whether you had enough saved to travel the world in luxury or if you needed to live a more meager existence.

Unfortunately — or fortunately, depending on your point of view — there isn’t a way to tell with any precision how much longer you have to live. Elon Musk hasn’t developed the Methuselah machine. (Yet.) All you can do is make an educated guess.

How to Determine Life Expectancy

One basic way to estimate your time remaining is to consult an actuarial life table. The U.S. Social Security Administration, for instance, has a basic period life table that shows how much time the average person has left to live based on their current age. A 48-year-old man like me can expect to live another 31.32 years — until I’m 79.

Life Expectancy (Actuarial Table)

My cohorts and I each have a 0.4167% chance of dying this year. Of 100,000 of us born in 1969, 93,759 are still alive.

But actuarial tables apply to entire populations. They don’t take into account our individual habits and genetic predispositions. For a more customized guess at your date of death, you can consult one of the many online life expectancy calculators. To one degree or another, these tools take into account variables like diet, exercise, and family history.

Here are three online life expectancy calculators that I’ve tried and liked:

  • The Abaris How Long Will I Live? calculator uses data from the AARP and the National Institute of Health. It asks some basic questions about your health habits to generate a personal profile and estimated life expectancy. According to this tool, I can expect to live until 86.
Life Expectancy (Input Data)   Life Expectancy (Results)
  • I’m a long-time fan of the Living to 100 life expectancy calculator. This tool is cool because it takes into account a wide range of factors, then provides specific recommendations for how you can increase your expected lifespan. The downside? To get the most from this calculator, you have to register for an account. Living to 100 says that I will probably live until age 82. (Unsurprisingly, I can add tons more time to my life expectancy by improving my diet and fitness — and reducing my alcohol intake.)
  • The John Hancock life expectancy calculator is short and to the point. Plus, it makes adjustments in real time so that you can see how different factors influence the projections. I could boost my own life expectancy by seven years if I were to drink less beer and wine. This tool shows I should live until age 81.

Based on these life expectancy calculators, I can expect to live until my early eighties. If I lost a little weight, ate more vegetables, and reduced my alcohol intake, my life expectancy would jump by almost a decade! Hmmm….

I’m sure there are other good life expectancy calculators out there. If you know of one, please share it in the comments.

My Own Life

If the life expectancy calculators show me living until 81 or 82 or 86, then why do I use 78 as my projected age of death?

The truth is I’m more pessimistic than that. The truth is that when I give presentations, I often use a date much nearer on the horizon: 04 July 2019. That’s right: There’s a part of me that thinks I’ll be dead in about a year. I’m not joking.

I don’t mean to be morbid, but I can’t help it. You see, the men in my father’s family tend to be short-lived. My dad died of cancer ten days before his fiftieth birthday. His brother died of cancer at age 52. My cousin died of cancer at age 46. My grandmother died of cancer in her early seventies. I have another cousin — one of my best friends, actually — who turns 54 today. He too is fighting cancer. (Thankfully, he seems to be winning the fight.)

With a health history like this, I get nervous. I plan for the worst.

That’s one of the reasons I’ve been so eager to travel while I’m still relatively young. I’m afraid that if I don’t visit Europe, if I don’t take an RV trip across the U.S., if I don’t spend time in South America, then I won’t ever get the chance.

Still, I recognize that my situation is different than that of my family members who fell to cancer. For one, I’m healthier. I eat better and exercise more. (That’s not to say that I couldn’t do more. I absolutely could.) Plus, I have better access to health care. Maybe most important of all, I’m aware and vigilant of potential problems. (I get a colonoscopy every five years, for example.)

I also recognize that my mother’s family has completely different longevity stats than my father’s family. People on my mother’s side live a long time.

Based on all of this, I hold two separate, contradictory ideas in my head when I make projections about my future. On the one hand, I always ask myself what my best option would be if I knew I were going to die in a couple of years. On the other hand, I also explore options based what might happen if I were to reach my projected life expectancy of 78. (I never project beyond that, though.)

What about you? When you plan for the future, how do you decide how long you’ll live? How does that affect your decisions? Are you worried about saving so much that you’re unable to enjoy today? Are you worried about spending so much that you won’t have enough set aside when you’re older? How do you account for life expectancy in retirement planning?

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