Today I am excited to welcome Get Rich Slowly founder JD Roth to chat about his new Be Your Own CFO guide. It is an honor and a pleasure to have had the chance to ask JD some questions about how he got started in personal finance and how he developed his new guide.
For the uninitiated, can you share a little bit about who you are and how you got started with finance writing online?
When I introduce myself on stage, I often say, “My name is J.D. Roth, and I'm an accidental personal finance expert.” It's true. I have no formal training in this stuff. In fact, for years I struggled with money. I was deep in debt. After about fifteen years of this, I realized something. Although my personal money was a mess, I was managing two businesses just fine. They were profitable!
After reading a bunch of books about money, and after doing some soul searching, I decided to begin managing my home economy just the same as I managed my businesses. I decided to become the CFO of my own life. It worked. The changes were slow at first, but gradually I dug out of debt, built wealth, and more. Along the way, I documented my progress online at Get Rich Slowly. For whatever reason, my story resonated with readers and the site grew rapidly. I'm fortunate to have been able to help a lot of people over the past eight years.
Can you share a finance lesson you learned the hard way and try to share with each new reader?
Haha. Only one? I tend to learn lots of things the hard way. Go figure.
The thing that took me longest to learn was that I cannot pick stocks. I suck at it. But until just a few years ago, I thought that was how people made money in the stock market. As a result, I made lots of poor “investments”. (I was actually speculating, but I didn't realize it at the time.) I bought Celera Genomics at its peak. I bought Palm Pilot stock on the day of its IPO. (Ouch!) After The Sharper Image crashed, I maxed out my Roth IRA with its stock. The company went bankrupt. During the financial crisis, I bought Countrywide. After that last one, I wised up.
Now I follow the advice of Warren Buffett and dozens of other smart investors. Instead of trying to beat the market, I match it. All of my money — and I have a lot of it now — is in low-cost index funds. I ignore them. Could I get a better return elsewhere? Sure, in the short term. But I believe that over the long term, there's no way to consistently beat the market. I'm happy being an index fund investor because studies show that over longer time spans, index funds will beat managed funds 80% of the time.
For a young person with only student loans and stable income, where would you prioritize your financial focus?
I'm a recent convert to the cult of Mustachianim. At his blog, Mr. Money Mustache urges readers to cut costs and boost income so that they're saving at least 50% of their earnings. And he says 70% is even better. Most people think this is impossible, but it's not. It just means you have to leave modern culture behind. And if you do, the rewards are enormous.
If you achieve a 50% saving rate (which I call “profit margin” in my new Be Your Own CFO guide), you can retire in about fifteen years. At 70%, you can retire in about ten years. This math is powerful, and I think young people should be aware of it. In fact, I've come to believe it's the most important principle a person can know about money: The more you save, the less you have to work in the long run.
How did you get the idea to create an unconventional guide to personal finance? What makes this finance guide different from the usual finance advice we normally get from “finance experts.”
Great question. I've been friends with Chris Guillebeau — the mastermind behind the Unconventional Guides — for a long time. Last year, he approached me about writing a guide to mastering your money. We went through a lot of iterations before we arrived at the “Be Your Own CFO” concept, but once we had that, we knew we were on the right track. It took me four months to write the 120-page guide, and more time to conduct the 18 interviews and write the 52 emails that make up the “Get Rich Slowly” course. But I'm proud of the result. This is useful stuff.
There are a few things that make the “Get Rich Slowly” course different than typical financial advice. For one, this is advice that I've tested in my own life and that has been tested by the readers at the Get Rich Slowly blog. For another, I spend a lot of time talking about the psychology of money. I truly believe that smart money management is more about mindset than it is about math. We all know the math. It's controlling our emotions and desires that's tough. Lastly, I'm a firm believer that nobody cares more about your money than you do. Instead of assuming you’re a victim of circumstance, I assume that you are the master of your own fate. This course shows people how take charge of their financial future now instead of waiting for somebody else to come along to save them.
What lessons can people plan to learn over the year after they purchase your new guide? If they follow along through the entire series, how will their financial plan be different at the end?
I have tons of stuff planned for the coming year! When people purchase the course, they'll receive a new email every Monday. These emails will contain some of the best tips I've culled in the eight years I've been writing about money, not just at GetRichSlowly.org, but for Entrepreneur magazine, Time.com, and other outlets.
Topics include: how to afford anything, how to get out of debt, the secret to a rich life, the power of profit, how to choose a credit card, how to slash home energy costs, estate planning made easy, the right way to lend money to family and friends, and so on. I'll share a mix of practical tips and foundational philosophy.
What's next for JD Roth? Now that you have created this guide, what is your next big project and what new developments are getting you excited in personal finance today?
First up, a vacation. My girlfriend and I plan to spend a couple of weeks exploring California's wine country after the course is released. Plus, I'll continue to write at More Than Money, which is my personal site. I'm in the middle of a year-long exploration of fear, happiness, and freedom. It's been a lot of fun. But I don't have any big projects on the horizon. Not right now.
What new developments excite me in the world of personal finance? I'm not sure. Most personal-finance writers complain that there isn't anything new to write about money. (I've had two different big-name financial reporters say they write the same fifteen stories over and over again.) That said, it's always fun for me to find unappreciated ideas that have a big impact, such as the idea of saving half your income. Or the power of “big wins”. Or the notion of mindful spending. (I cover all of these in the “Be Your Own CFO” guide, by the way.)
I'm proud of the Get Rich Slowly course. It's packed with great stuff that can really help people get out of debt, build wealth, and pursue their goals. If your audience is interested, they can learn more here.