My financial crisis, recovery, and 14 rules for money

On Friday, I did a lengthy interview with Dean Voelker on his Improving Your Financial Health radio show. Dean’s very much into preparation, so I actually wound up doing a substantial amount of prep work for the interview.

Since I had accumulated such a pile of notes for the interview in advance and Dean asked so many worthwhile questions, I made something of a transcript of the interview and am sharing it with you.

Tell us about your background.
I grew up in rural Illinois. My parents didn’t have much money and, sometimes, they struggled to make ends meet. I learned a lot about frugality from them, but I didn’t learn as much about pure money management skills. I attended Iowa State University and graduated with a degree in the hard sciences, after which I spent about six years working in various jobs in research fields. Recently, I’ve been a full time writer.

How long have you been writing The Simple Dollar?
I started writing the blog that would become The Simple Dollar in October 2006. I launched The Simple Dollar publicly in November 2006.

How did you decide to do that?
In April 2006, I experienced a personal and professional meltdown of sorts. I had always dreamed of being a writer, but it felt as if my dreams for doing that were slipping away in the flow of my professional life. I was unhappy with some aspects of my current job. To make things worse, we were in dire financial straits, with a large pile of consumer debt over our heads.

I decided that things had to change. After a while, I began to see that a lot of people my age were going through similar crises – a “quarter life crisis,” if you will. They were finding themselves in serious financial problems and sometimes were deeply questioning the path they had chosen in life. However, most people my age were very reluctant to actually talk about these problems with anyone outside of their immediate family and maybe a very, very close friend or two.

I started The Simple Dollar because I felt that this was a conversation that people needed to have. I felt that by sharing my story and my experiences, both in the positive sense and in terms of my own failings, I would open people up to think about their finances and career more and talk about it, whether by sending me emails or comments or by talking to people in their own lives.

Where did the name ‘Simple Dollar” come from?
One night shortly before the launch of the site, I just brainstormed a long list of names. I crossed some of them off that I didn’t like and my wife took a turn at the list, too. Eventually, The Simple Dollar is the name that stuck out.

Looking back, I’m glad I didn’t choose a name like “Trent’s Financial Failings.”

About how much time do you spend on this per week?
On The Simple Dollar alone, I probably spend fifteen hours purely writing and composing posts. I spend another five to ten researching posts and doing reading related to it. I probably spend another ten hours on site management, approving comments, and answering emails – but, frankly, I have more emails and comments and other things like that than I can cover in ten hours, so I sometimes have to pick and choose.

I spend additional time on other writing projects, such as my upcoming book.

Where do you get most of your information?
Books. I’m a voracious reader. I read, on average, three books a week, of which one is usually something geared towards personal finance or careers.

What are your “14 Money Rules”?
My 14 Money Rules is simply a list of what I think are the true core values and ideas of what I talk about on The Simple Dollar. I keep these rules posted on every page on the site, in the right hand bar. The 14 Money Rules are:
1. Spend Less Than You Earn.
2. Don’t Over-Think Your Investments.
3. Stop Wasting Time.
4. Eliminate (and Avoid) High-Interest Debt.
5. Talk About Money (And Be Honest).
6. Stop Trying to Impress Other People.
7. Watch Your Progress (But Make It Fun).
8. Take Care of Your Things.
9. Do It Yourself.
10. Plan Ahead Every Time You Spend.
11. Find and Work Toward Your True Passions.
12. Build Real Friendships and Relationships.
13. Improve Yourself Every Chance You Get.
14. Give Without Strings or Regrets.

Which ‘Rules’ generate the most discussion?
Doing it yourself tends to generate the most discussion. Many people argue that it’s better to pay someone else to do something for you if you’re earning more than that person’s hourly wage. My argument against that is twofold: first, you only earn more than that person’s wage if you’re earning more post-tax and you actually spend the time you’ve hired someone in gainful employment. Two, and perhaps more importantly, doing things yourself teaches you things and makes you more resourceful. Almost every skill you have in life has value – if nothing else, it can help you build relationships with others. If you know how to fix a toilet, for instance, you can share that skill with a new friend or acquaintance in an effort to forge a stronger bond.

Tell us about your free E-Book “Everything You Ever Wanted To Know About Personal Finance On Just One Page.”
A long time ago, I wrote a very popular post entitled “Everything You Ever Really Needed to Know About Personal Finance on the Back of Five Business Cards“. After posting it, several people contacted me and suggested that I try to turn it into a book of some sort.

Over the next several months, I tossed the idea around and eventually developed it into a fifty page short book, intending to use it to shop around to various book publishers. I incorporated a lot of original writing, pieces of various Simple Dollar posts, and lots of other interesting elements.

At some point, I just decided that it would be a very worthwhile move – in terms of helping people with their finances and encouraging people to think about it and talk about it – to simply give the short book away, which is exactly what I did.

What are your thoughts on the new credit card regulations which just went into effect this week?
I think, on the surface, they protect consumers. However, the credit card companies are businesses that are out there with the purpose of making money. If you close one door on them, they’ll open another.

I think we’re in a period where they’re going to try different methods of earning money, since some of their previous methods have now had the door shut on them (such as young card holders). What form will that take? Whatever it is, the end consumers will be the ones paying for it. It might be the return of annual fees. It might be higher interest rates. It might be something entirely new, like a minimun number of uses required per month. Only time will tell.

You also have some downloadable books. What can you tell us about that?
The “downloadable books” on The Simple Dollar are simply collections of older posts on a common theme. I’d write a series of posts on a certain topic – say, building a blogging business – and then I collected all of the posts together, edited them a bit so that they made sense as one long document, and turned them into a downloadable PDF. Since the posts are available for free anyway, I have a minimal charge on these donwloadabe books – they cost two dollars a piece. Some people buy them because it’s convenient for the purpose of printing them out for a trip or something like that; others buy them simply as a way to support the site.

The Simple Dollar has some great open discussions which readers participate in. How were you able to come up with 25 Gadgets That Save Money?
One big thing I like to do when writing an article is look for things that have something interesting in common, sometimes in an unusual or unexpected way. In that case, I simply collected a list of items that can actually save you money, including paying for themselves, over a long period of time.

The idea started from looking at programmable thermostats. If you buy one of those and set it so that your furnace doesn’t run when you’re not at home or when you’re asleep – or the same thing with the air conditioning during the summer – your energy bill savings will add up to much more than the cost of the thermostat after a few years.

A few of the items in the article were a bit extreme, such as a wind turbine, and I think most of the discussion came from those items. You can, indeed, save money with the purchase of a wind turbine, but it takes quite a while.

I loved the McDonald’s article! You compare a McDonald’s double cheesburger to making a cheesburger at home. What did you learn?
If you take all of the short term costs into account – time and money, in other words – the two roughly balance out. The homemade burger is slightly more expensive, but it’s also more tasty. Of course, I did add a lot of toppings to the homemade burger that weren’t on the double cheeseburger from McDonald’s, such as lettuce and such, but it wouldn’t be a homemade burger if I didn’t.

If you’re making just a single burger for yourself, then there’s a decent argument that McDonald’s provides a better value in the short term. If you’re making several burgers, the homemade ones are much less expensive. The real advantage of fast food is the convenience – it’s not really all that cheap, as you get lower quality food than what you can make at home for a similar price.

How long did it take to gather your research?
It took a surprising amount of time. I had to plan out what I intended to do – make a burger and compare it to the McDonald’s one. I had to shop for the ingredients for the homemade burger. I had to visit McDonald’s to get the double cheeseburger. I had to make the actual burger at home. I also spent time documenting all of this with pictures and time recordings as well. I spent on the order of six hours on the post.

Have you seen the documentary film “Super Size Me”? (2004 by Morgan Spurlock)
I think that movie touches on what would be my real concern with eating fast food – it’s unhealthy. It causes you to gain weight. The high amount of salt in the food can cause high blood pressure. It can definitely leave you feeling lethargic. It’s not exactly good for your heart.

Thus, the long term costs of that double cheeseburger is quite a bit more than the ninety nine cents you paid at the drive-thru. You’ll have health care costs and lost productivity costs as well.

I see the “Rich Dad, Poor Dad” books and seminars by Robert Kiyosaki everywhere. What should people know about him and these books?
I am not a fan of Robert Kiyosaki’s work. For starters, he severely underestimates risk in nearly everything he discusses. He paints a picture that makes it seem as easy as a run down to the courthouse steps to make thousands of dollars. It’s no different than any other “get rich quick” scheme – there are opportunities out there, but it takes a lot of hard work to find them and there’s a lot of risk for failure along the way.

The biggest problem, though, is the utter disdain he has for people who make the choice not to do things the “Rich Dad” way. He actually refers to people who work at a job and make an honest wage as “hamsters,” right in print in the book.

He’s right in that a steady job will not make many people wildly rich. A 401(k) will not make a person wildly rich. What it will do, however, is make a person secure, both in the sense of not having to worry about the future and in the sense that their future life won’t have financial need. That’s the goal that a lot of people have in their life, and achieving that goal revolves around low-risk choices. Kiyosaki ignores risk and calls such people “hamsters.” I don’t really have much respect for that attitude. Different people value different things in life, and an awful lot of people value steadiness and security – that doesn’t make them “hamsters,” it makes them the backbone of America.

Have you met anyone who said that his advice really worked for them?
I’ve never met people face to face who have said positive things about Rich Dad, Poor Dad. I’ve read many positive comments from Simple Dollar commenters about the book, but it’s often hard to tell whether the people are legitimate or whether they’re people who have paid thousands of dollars for a seminar and want to feel as though they’ve made a good decision.

You also wrote an article about buyng your car – 2009 Toyota Prius. What were some of the main reasons you bought it?
We bought the car for two reasons: fuel efficiency and reliability. My wife commutes almost forty miles one way to work about three days a week, plus all of our family lives about four hours away from where we live and we visit them regularly. Thus, we rack up a lot of miles on our cars.

We sat down and ran the numbers several times on a multitude of cars available, both new and used. We took the Consumer Reports reliability data on makes and models into it, and we also calculated fuel costs up to 200,000 miles on the car’s odometer assuming gas prices at $2 a gallon and at $3 a gallon. We simply couldn’t find a better deal than the Prius that we purchased, even after a multi-month hunt. We found ones that exceeded it on total cost of ownership questions – the cost of buying the car, getting it road-worthy, and paying for fuel up to 200,000 miles – but they all had reliability concerns.

What types of concerns have you had with recent news about Toyota?
Every large manufacturer is going to eventually have some sort of product problem that warrants a recall or a fix. You simply cannot test everything – you just have to do as much due diligence as you can and ship the product.

The current Toyota issue is a tricky one because it’s apparently very hard to replicate. I’ve read on messageboards where one person claims to have caused the problem by doing some specific thing, then another person can’t replicate it.

The real question is how Toyota deals with all of this over the next six months. They have to absolutely make it right by their customers, but we won’t know the full story for a while yet.

I know you are not an advisor, but what are your thoughts on municipal bonds?
I think they’re good choices for people in a high tax bracket who want something pretty safe that has returns that aren’t a big tax burden. Municipal bonds definitely have a place in a larger portfolio. However, I’m not sure that they’re the best choice for beginning investors who are often not in a really high tax bracket and would often be better off chasing larger returns with a bigger risk.

There is a lot of information out there. What is ONE THING someone listening today should do if they are having financial difficulty?
Talk about it. Don’t be ashamed of having financial difficulty. There are many, many people out there going through similar problems to what you’re going through. If you feel you can’t talk to your friends about it, go online and look for others sharing your problems.

Knowing that there are people out there who share your concerns and are willing to offer you helpful words and helpful advice can make an enormous difference when it looks as though the chips are down.

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