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J.D. Roth Interview & Your Money: The Missing Manual Review

We recently had the honor of conversing with J. D. Roth, creator of the incredibly successful personal finance blog Get Rich Slowly. In just five short years, J.D. has managed to build a following of roughly 85,000 readers! J.D.’s story is a fairly simple one, but one that rings true to us all. He found himself deep in debt, and finally, one day, decided to do something about it. He parlayed this story into a wildly popular personal finance blog, and recently authored his first book on the subject, entitled Your Money: The Missing Manual.

The work is fashioned much like his blog — there are no get rich quick schemes, just simple, relevant advice on how to get out of debt and stay there. It’s all based on the simple premise of “spend less than you earn.” We all know that this is sometimes easier said than done, but J.D.’s book provides you with a blueprint on how to get there. He provides you with the info you need to make sensible financial decisions regarding spending, saving, and investing, the three cornerstones to financial freedom. He writes about proven methods for debt reduction and also gives you a lot of simple, painless ways to control how money comes into and goes out of your life. The book also provides information on how, when, and why to set financial goals. The title of his book is key; for most of us, we truly need a “manual” for how to manage our money.

Here is an excerpt of the conversation we had, which you will almost surely find just as insightful as his daily blog postings:

Your blog has been around for going on five years, at last glance you had about 85,000 registered readers, and your articles consistently garner 100 or more comments. To what do you contribute your amazing success? After all, isn’t your story very similar to many other people? Deep in debt, woke up one day, busted tail to get out of debt. What sets you apart from all the other PF blogs out there?

JD: When people ask what has made Get Rich Slowly successful, I tell them it’s a combination of hard work and luck. There’s no question that keeping a blog for five years requires a ton of commitment. This is a full-time job for me, and I’m constantly striving to improve my writing. Plus, I do my best to respond to my readers. But despite the effort I put into it, I’ve been fortunate to make some key connections, and to get noticed by some bigger financial writers.

I do think my story is remarkably average. But I think one thing I do differently is go out there everyday and talk about my experience, for good or ill. Money is still a taboo topic in the U.S., but for nearly five years, I’ve been writing every day about the things I do right and wrong with money. I don’t pretend to be an expert, but I don’t hide what I’m learning either.

What role do parents play in the personal financial habits of their children? How early should they start teaching them about personal finance?

JD: Parents play a key role in imparting financial habits to their children. Whether they know it or not, kids inherit financial values from their family. I like to call these “financial blueprints,” the unspoken guidelines that guide how we deal with issues like debt and wealth.

I don’t have kids, so I can’t say at what age parents should start giving an allowance or start teaching about debt. I do know, however, that kids model the behaviors they see in the home. So, it’s not so much about what you overtly teach them as it is about what you and your partner do in day-to-day life. You can say all you want about avoiding debt, but if you’re racking up credit-card bills or fighting about money, that’s what your children will see.

So, yes, I do think parents ought to teach kids the basics — the importance of saving, the dangers of debt — but I think it’s even more important to model good financial behavior.

A few weeks back one of your writers did a piece on charity (“Using Consumerism for Social Good”). What are your thoughts on charity and the role it should play in personal finance? Should a person in debt still donate some, or any, of his money? And, what charities are on your short list?

JD: This is a great question. I was raised in a family that didn’t give to charity. We were poor, so we were always worried about how to care for ourselves, let alone care about others. As a result, it’s been a struggle for me to make charity a priority as an adult, even now that I’m out of debt. I take a lot of (deserved) flak for my lack of charitable giving, but what can I say? It’s an issue I’m wrestling with. I’m not perfect!

Having said that, I do believe charitable giving is important. How important? Well, I think that’s up to each person to decide. There are some folks who feel strongly that you should always donate 10% of your income, even when you’re deep in debt. Others argue that “charity begins at home,” that you can’t effectively give to others until you’ve taken care of your own financial needs.

As for myself, I’ve found that I’m much more inclined to give to real people rather than faceless entities. I’ll give a homeless man on the street $20, even though he might use the money for booze. Last year, I anonymously donated $1000 to various friends who I saw were in need. If they needed it, I’d buy school books or sports equipment for my young nieces and nephews. That personal connection is important for me, and I’m much more inclined to give to a real human being than to a charitable organization (especially a big charitable organization).

In short: I’m just starting my journey toward charitable giving. I tend not to give to large groups, but instead to individuals.

You bring up the point early on in your book that “We’re all seeking happiness, not riches.” Do you think the average American Joe realizes that he or she can achieve a great degree of happiness without being overly “rich”?

JD: I don’t think Americans — or anyone else, for that matter — have given much thought to what makes them happy. It’s a question for philosophers. All the same, there are things that do and don’t make people happy.

I think that the mass media has an enormous influence on our culture, mostly for the negative. It’s not just the mind-numbing bread and circus effects of the media, but the subtle peer pressure. We see something on TV, and we believe it’s normal. (Especially if we’re exposed to it repeatedly.) And no matter how much anyone protests that advertising doesn’t affect them, they’re wrong. Advertising does affect people, even you. And studies show that those who think they’re least influenced are actually most influenced. That’s why advertisers are willing to poor billions of dollars into marketing every year: because it works!

The net effect of all this marketing and advertising is that we come to believe we “need” things in order to be happy. And in order to get these things, we need money.

The main problem is that to some degree, it’s true that having more money makes us happier. Rich people are happier than poor people, and rich nations are happier than poor nations. But over a certain amount, additional wealth has only a marginal impact.

What’s the solution? I don’t know. In my own life, I’ve tried to reduce my exposure to advertising (I think I’ve watched three hours of television this year, for example), and I make a conscious effort to remember that it’s very possible to live a happy, fulfilled life even without a lot of money. But I’m not sure that’s a message that will ever reach the American masses. There’s no money in it!

It is a very impatient society we live in. Everything is based on “faster, faster, faster.” However, for those deep in debt, it’s almost as if patience needs to be “learned” in order to overcome debt. Can one “train” oneself to be patient?

JD: Absolutely! This is a great question because it gets at the heart of what it means to be successful, not just with money, but with many other aspects of life. I’m in the middle of a mass weight loss program, for example. I’ve lost 40 pounds since January. But especially now that I’m nearing my goal, the weight loss has slowed. The progress comes in fits and starts. I have to keep reminding myself to be patient, that success doesn’t come overnight.

Two years ago, I read a book called “Mastery” by George Leonard. Although it has nothing to do about money, it’s the best personal-finance book I’ve ever read. Leonard argues that mastering any ability is not about the quantum leaps to great improvements, but about learning to live with the plateaus — those long stretches of time where nothing seems to happen. You spend two years paying off a single credit card. You spend six months losing your last five pounds. You spend five years editing your novel. These plateaus require mental toughness. They make most people quit. Yet, these plateaus are where success is actually achieved.

So, yes, patience can be learned. But learning it is very different for each of us. And it’s something that has to be worked at all the time. While we’re biding our time on a plateau, we’ll occasionally fall off. We’ll backslide. It’s very important to learn how to cope with these mistakes without derailing all of the previous progress.

You seem to be a big fan of the “debt snowball.” However, from a strictly financial standpoint, following the “debt snowball” ideals will cost you more money to get out of debt rather than eliminating your debt from a “highest interest rates first” type of mindset. Shouldn’t the goal be to get out of debt by spending the least amount of money as possible?

JD: Not necessarily. The goal of getting out of debt is getting out of debt. I argue that if people made mathematically optimal choices, they wouldn’t be in debt in the first place. So why insist that they start making them now? Instead, I think it’s important to focus on the debt snowball — or any other method that actually works to let you get out of debt.

Besides, the “high interest rates first” method only saves method if it works. That is, if the person following it is able to do so without failure. In my case, I couldn’t do it. I’d try the high interest rates first method, but give up because it took so long. (See? Lack of patience!) It ended up costing me more in the long run because I’d backslide.

But once I gave my permission to follow the debt snowball — to pay off debts from small balance to high balance, ignoring interest rates — the successes came quickly. I didn’t derail once. Yes, I paid a little more in interest than I would have if I’d followed the mathematically optimal method, but that’s a small price to pay for having actually been able to pay off the debt, you know?

The key thing to remember is that personal finance isn’t about knowing the math. I know the math. I kicked ass on the math portion of the SAT, placed well at the National Math Exam, and even was one of the top kids in the nation at Business Math when I was in high school. You don’t need to explain the math to me! But money management isn’t about math — it’s about emotional maturity. The debt snowball method helps build that maturity.

If you could improve one facet of your personal financial life, what would it be?

JD: I still spend too much to indulge myself. If I see something I want and I can afford it, I buy it. I think a little deferred gratification would stand me in good stead.

If you could sit down with the newly elected Republican-led government and give them one piece of financial advice for getting this country out of its economic woes, what would it be?

JD: Ha! Economics are like a black box to me. Besides, I’m apolitical. (I’m a small-i independent.)

Still, it seems pretty clear to me that whatever the Bush administration did screwed things up in a big way. A lot of people blame President Obama for the present economic crisis, but he didn’t create it. His administration has done a piss-poor job at dealing with it — no question — but his policies didn’t get us into this mess. The blame for that rests with the previous administration. I’m not sure why so many people ignore this.

I think the real solution isn’t palatable to either political party. From a personal finance perspective, you’ve got to retain positive cash flow: you have to raise your income and decrease your spending to stay out of (or get out of) debt. Why can’t the government do this? That means cutting government spending and increasing taxes. But you know what? That angers folks on both the left and the right, so it’s never going to happen. (The Obama administration did things exactly backwards, in fact: they cut taxes and increased spending. How does that make sense?)

Anyhow — that’s more political opinion than I’ve provided in almost five years of writing at Get Rich Slowly. I try to stay away from politics because it’s not really relevant to personal finance.

You devote a chapter of your book to the topic of goals. Do you see a downside associated with goal-setting that’s too aggressive? If someone is $20k in credit card debt, and they set their goal to cut that in half in the first six months, if they fall short, couldn’t you see this discouraging them and causing them to give up?

JD: Yes, aggressive goals can lead to problems. That’s why I advocate setting realistic goals. Look at what other people have achieved, and use these successes as a basis for your own goals. And run the numbers. Figure out what’s realistic and possible, not just what you hope you can do.

Most importantly, learn to make course corrections. I think too many people think of goals as immutable — once they’re set, they’re set. This is dumb. If, after three months, you see that your “get out of debt in six months” goal is never going to happen, then shift the target. Don’t let it discourage you; just use it to improve your aim next time.

Let me return to my diet for a further example. I set a goal to lose 50 pounds in 2010. That’s not going to happen. To date, I’ve lost 38 pounds — and I may lose 3-4 more by the end of the year. But you know what? I’m not going to let that get me down.

For one thing, I will have lost more than 40 pounds, damn it! That’s a success! Even though I missed my goal, I accomplished something remarkable. For another, I will lose that 50 pounds…it just may take me a few more months. But I’m willing to be patient. I know I’ll get there.

In 20 words or less, what is your #1 best piece of advice for maintaining financial health?

JD: “Spend less than you earn; invest the rest.” It’s basic advice — so basic that many people just dismiss it as trivial — but it’s also the fundamental law of wealth. In fact, in Andrew Tobias’ excellent “The Only Investment Guide You’ll Ever Need,” Tobias writes that the following budget is all you need to know about building wealth: [this list is a quote from the book]

1. Destroy all your credit cards.
2. Invest 20% of all that you earn. And never touch it.
3. Live on the remaining 80%, no matter what.

All financial advice comes down to “spend less than you earn; invest the rest.” All of the millions and millions of words written on the subject are in support of this fundamental principle.

As a writer of a personal finance blog, you have to come up with good short articles just about every single day. It seems that “writer’s block” would be an even bigger obstacle for you than even for most book authors (one book, one topic, every year or so). How often do you experience writer’s block and how to do you overcome it?

JD: Oh, good grief. I experience writer’s block nearly every day. How do I overcome it? Well, I have several methods:

1. I have a staff of writers. I recognized years ago that I wasn’t going to be able to continue writing Get Rich Slowly full time by myself. I could see that the well would run dry. So, I starting bringing on guest authors. And from there, I moved to actual staff writers. This lets me share a variety of voices at Get Rich Slowly, and it gives me time off.

2. Any time I have an idea, I jot it down. When I get writer’s block, if I really need to break the block, I can dig through my stacks of paper to find one of hundreds of ideas just sitting here.

3. But the real secret? Exercise. No joke. When I get stumped, I have to fight the urge to sit at my computer, staring at the screen. I make myself go outside and go for a walk. Or mow the lawn. Or go to the gym. When I do this, I invariably come up with a story, and often a great one. Some of my best pieces at Get Rich Slowly are a result of me moving away from the computer and doing something else.

Writer’s block is a very real thing. The key is developing coping mechanisms to minimize its effect.

Note: A special thanks goes out to J.D. for taking the time out of his busy schedule to speak with us, and, the next time you find a particularly creative post on his blog, just remember that it was probably inspired by a spirited workout at the gym! Thanks again, J.D.!

And don’t forget, three copies of J.D.’s book, Your Money: The Missing Manual, will be given away to three lucky commenters on this post!

Update: The 3 winners of J.D.’s book, Your Money: The Missing Manual, are Jeremy, kscritch, and Mary G with their comments below. Congrats!

David Bakke
David started his own personal finance blog, YourFinances101, in June of 2009 and published his first book on ways to save more and spend less called "Don't Be A Mule..." Since then he has been a regular contributor for Money Crashers. He lives just outside Atlanta, GA and most all of his free time is taken up by his amazing three year old son, Nicholas.

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