Of all the personal finance blogs out there, J.D. Roth’s Get Rich Slowly is my favorite. Roth is a former cardboard box salesman who found himself going deep into debt and, five years ago, began sharing his spending and saving activities on his Web site. As a self-taught personal finance expert, Roth’s advice is realistic, useful and very entertaining. No wonder Money magazine called Get Rich Slowly “the most inspiring” money blog of 2008.
Roth’s first book, Your Money: The Missing Manual, was just published by O’Reilly Media. It lays out a plan for getting out of debt, making and keeping a budget, and investing for the future. Really, the book is about how your financial decisions play a role in the larger goal of establishing a way of life that’s personally rewarding and meaningful.
I interviewed Roth about the ideas in his book. Over the next couple of weeks I’ll be running the interview as a series of posts. In this first post, I asked J.D. to talk about what led to his decision to learn about personal finance, and about the importance of setting realistic and measurable financial goals.
Mark: Who is Your Money, The Missing Manual for and how can it help them?
J.D. Roth: I wrote it for people who have struggled with their personal finances and are now looking to turn things around. I’m 41, and many of my friends, like me, struggled with money when they were younger and now they’re ready to get serious about it. It’s not really meant for people who are just starting out in life, like recent college grads. There are a couple other books that are better for them, such as Ramit Sethi’s I Will Teach You to Be Rich and Beth Kobliner’s Get a Financial Life. And it’s not really for people who are millionaires already, because they already know this stuff. It’s more for people who have struggled with money and are now looking to get back on track.
Mark: How did you become interested enough in personal finance that you ended up starting the “Get Rich Slowly” blog, and writing a book out it?
J.D. Roth: I struggled with money for many, many years. I’m one of those proverbial college students who picked up a credit card at the university center at one of those tables. This was back in 1988 or 1989. I was young and foolish and I thought, “Wow! This is a license to go out and spend.” I thought, “Once I graduate I’ll be able to afford all this, no problem.” By the middle of the 1990s I had over $20,000 in credit card debt and it was mostly from foolish stuff. Sometimes I used the credit card as an emergency fund because there were periods when I didn’t have a job … but mostly I bought a lot of computers and comic books and other things I didn’t really need. In 1998, I cut up my credit cards. But I found other ways to accumulate debt — I would borrow from family and friends and take out consumer loans to buy my computers.
By 2004 I had over $35,000 in consumer debt…. The thing that finally turned me around, was we bought a 100-year-old house…. Now, on paper I could afford the house, but when it actually came down to it — having that $35,000 in debt and making the payments on that, making the payments on the house, and then also trying to remodel the place — I just felt overwhelmed. So I started reading personal finance books. As I read them, I detected certain themes. One of the themes was the notion that you can’t get rich quickly but you can get rich slowly — or, in my case, get out of debt slowly — if you’re willing to be patient and apply certain principles. So I wrote about that on my personal blog in 2005 and that article got picked up in a lot of blogs. I didn’t really expect it to get as big as it did.
WHY GOALS MATTER
Mark: One of the things that’s core to your book and your blog is the importance of setting financial goals. How can people set goals that they can actually achieve, whether it’s getting out of debt, or saving for retirement, or whatever.
J.D. Roth: I absolutely believe that goals are key to achieving financial success. One of the reasons I struggled with money for so long is that I didn’t have financial goals. During my 20s I didn’t have any sort of direction. People told me I should be saving for retirement, but when you’re young it seems so far off, and what do I need to save for retirement for? I could buy another computer or drive to Seattle with my wife to watch the Seattle Mariners, instead of saving for retirement. But only after I made the overarching goal to get out of debt was I able to ignore all of these other distractions.
Once I got out of debt I kind of floundered for a while because my goals were gone. I didn’t have that goal any more and then I realized “Aha, it’s the goal that’s the thing that’s keeping me moving forward,” and so I set a goal to save for a car. I got one, and now my goal is to travel around the world. I’m very excited about world travel and so that helps keep me focused and helps me ignore distractions. It’s not enough to say, “Oh, my mom says I should be saving for a down payment on a house. I’m gonna save for a down payment on a house.” If it’s not something that you’re personally invested in, it’s very difficult to be successful with a goal.
And another important thing is breaking the goals down into small chunks. I used to be very frustrated by the fact that I had to pay off $35,000 in debt. I set a timeline for myself. I said “Okay, I’m gonna do it in five years,” but instead of focusing on that big five years and $35,000 I, I tried to break it down to $7,000.00 a year. And even that seemed big and so I tried to break it down into chunks. I would focus: “Okay, I’m gonna pay off my car loan. Then I’m gonna pay off the computer loan. Then I’m gonna pay off this credit card.” By breaking it down into steps I was able to work towards my goal without feeling oppressed.
In part 2 of this interview, J.D. Roth will share his tips for curbing compulsive spending and how to set up a budget that won’t drive you nuts.
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