Your Money: The Missing Manual

Introduction

"What we get from this adventure is just sheer joy. And joy is, after all, the end of life. We do not live to eat and make money. We eat and make money to be able to live. That is what life means and what life is for.”

—George Mallory

For years, I lived paycheck to paycheck on an average American salary. Every month I struggled to pay my bills and make ends meet. I spent everything I had, and sometimes more. In the decade after I graduated from college, I racked up over $35,000 in debt. I knew how to spend money, but I didn’t know how to save it.

2004 was a turning point for me. My wife and I bought a 100-year-old farmhouse that needed a lot of work. My budget was already stretched to the limit, and I didn’t see how I’d be able to afford the plumber, electrician, and carpenter we needed. I felt like I was drowning.

With the help of some friends, I was able to keep my head above water: They loaned me some books about money. I read them, and then went to the public library and borrowed more books on the topic. I started picking up personal-finance magazines and browsing financial websites. All of the advice made sense, but there were so many numbers and terms involved that I couldn’t keep them straight.

To make sense of it all for myself—and maybe to help some others along the way—I started writing about the things I learned and posting them at GetRichSlowly.org. I reviewed the books I read, shared the websites I found, and wrote down my thoughts about my relationship with money. I never expected anyone other than my family and friends to read the site, but to my surprise, others wanted to learn about this stuff, too.

Get Rich Slowly has grown into an amazing community of everyday folks who help each other tackle financial problems. (The site gets half a million visitors every month!) Want to learn how to cut your cable bill by 33%, where to find the best online savings account, or find out what a bond is? Get Rich Slowly readers have the answers.

Over the years, I’ve continued to use the site to share what I learn about managing money. I also share my own story, both the successes and the failures. I know a lot more about money than I did 5 years ago, but I still do dumb things from time to time. (We all make mistakes, right?) The key is to learn from them and move on.

This book is the culmination of everything I’ve learned while turning my financial life around. I’ve included the most important things I’ve discovered during 5 years of reading and writing about money every day. I’ve done my best to pack Your Money: The Missing Manual with tons of useful info while keeping it easy to understand and (I hope) fun to read. Above all, this book aims to give you the information you need to change your financial situation for the better.

About This Book

Based on my research—and my experiences with what does and doesn’t work—I’ve developed a list of 14 guidelines that form the basis of my financial philosophy. These ideas lurk behind every page of this book:

1. Financial success is more about mastering the mental game of money than about understanding the numbers. The math is simple; it’s controlling your habits and emotions that’s hard.

2. The road to wealth is paved with goals. Without financial goals, you have no direction, so it’s easy to spend money on things you’ll regret later. But if you’re saving for a house, your daughter’s college education, or a new car, your goal will keep you focused.

3. To build wealth, you’ve got to spend less than you earn. Successful personal finance is all about building positive cash flow (which you’ll learn about in Chapter 4). That’s easy to say, but not always easy to do.

4. Saving must be a priority. Before you pay your bills, buy groceries, or do anything else, you should set aside some part of your income. Start small if you have to (even $25 a month is good), and then increase your saving rate with time.

5. Small amounts matter. Your everyday habits have a huge impact on your financial success, so don’t be frustrated if you can only save $25 a month for now; I started small, too. Small changes help build good habits, and they can make a real difference over time.

6. Large amounts matter, too. It’s good to clip coupons and to save money on groceries, but it’s even better to save money on the big stuff like buying a car or house. By making smart choices on big-ticket items, you can save thousands of dollars in one blow.

7. Financial balance lets you enjoy tomorrow and today. Being smart with money isn’t about giving up your plasma TV or your daily latte. It’s about setting priorities and managing expectations: choosing to spend only on the things that matter to you, while cutting costs on the things that don’t.

8. Slow and steady wins the race. The most successful folks are those who work longest and hardest at things they love to do. So try to find ways to make frugality fun, and recognize you’re in this for the long haul. Remember that you’re making a lifestyle change, not looking for a quick fix.

9. The perfect is the enemy of the good. Too many people are afraid to start getting their finances in order because they don’t know what the “best” first step is. Don’t worry about getting things exactly right—just choose a good option and do something to get started.

10. Failure is okay. Even billionaires like Warren Buffett make mistakes, so don’t let one slip-up drag you down. Use failures to learn how to do better next time.

11. Nobody cares more about your money than you do. The advice that others give you is almost always in their best interest—which may or may not be the same as your best interest. Don’t do what others tell you just because they’re compelling. Get advice from various folks (and books like this one), but in the end, make your own decisions.

12. Each person is different. There’s no one right way to save, invest, pay off debt, or buy a house, so don’t believe anyone who says there is. Experiment until you find methods that work for you.

13. Action beats inaction. It’s easy to put things off, but the sooner you start moving toward your goals, the easier they’ll be to reach.

14. It’s more important to be happy than to be rich. Don’t be obsessed with money—it won’t buy you happiness. It’ll give you more options, sure, but happiness is what makes life worth living. If you can stay happy and in control of your life, money will be easier to manage.

Your Money: The Missing Manual will show you how to kick debt to the curb, save for the future, and pursue your financial dreams. I’ve done my best to write the book that I wish I’d read 20 years ago—before I got deep in debt. My hope is that I can help you avoid the same fate and build a brighter financial future.

About the Outline

This book is divided into three parts, each containing several chapters:

• In Part One: Blueprint for Financial Prosperity, you’ll learn how to lay the groundwork for success; a little advance planning will pay off big in the long run. Chapter 1 explores the relationship between money and happiness, and suggests some ways of finding balance. Chapter 2 helps you set financial goals. In Chapter 3, you’ll learn that budgeting isn’t necessarily evil; in fact, it can be a great way to help you defeat debt, which is the subject of Chapter 4.

• Part Two: Laying the Foundation teaches you the importance of cash flow—the difference between what you earn and what you spend. In Chapter 5, you’ll learn frugal tactics to help you save money on everyday spending. Chapter 6 looks at the other side of the equation: How to boost your income.

  Chapter 7 helps you find the best bank accounts for storing your money, and Chapter 8 will help you get your credit cards under control. Chapter 9 discusses how to be smart when buying big items, and Chapter 10 covers the biggest expense of all: housing. Finally, Chapter 11 provides the basic info you need to deal with taxes and insurance effectively.

• Part Three: Building a Rich Life shows you how to use your financial foundation to build a rich life—both today and in the future. Chapter 12 gives you a brief intro to investing, and Chapter 13 explains how and why to save for retirement. Chapter 14 wraps things up with a look at the relationship between love and money.

There’s no way for one book to cover everything there is to know about personal finance. I’ve covered the essentials and included pointers to where you can learn more about any given topic by doing further reading in other books, on various websites, and in magazines. Along the way, I also share real-life stories from people like you.

Frequently Asked Question: What Are Tiny URLs?

This book mentions lots of great websites where you can learn more ways to be smart with your money. But sometimes that info is on a very specific part of a site, and the Web address that takes you to that spot can be awfully long. That’s where Tiny URLs come in.

URL (short for Uniform Resource Locator) is the geeky name for a Web address. For example, http://www.google.com is the URL that tells your Web browser how to get to the Google home page. But not all URLs are that short. To read a great Get Rich Slowly article about bonds, for instance, you have to go to http://www.getrichslowly.org/blog/2009/04/21/investing-101-how-bonds-work/. That’s a lot of gobbledygook to type in, and you have better things to do with your time.

In 2002, a guy named Kevin Gilbertson started the website TinyURL.com. The site’s mission is simple: to shorten ungainly Web addresses. All you do is copy the address you want to shrink, head over to http://tinyurl.com, and then paste the address in the box. Click the Make TinyURL button and voilà—the site gives you a much shorter address (which starts with http://tinyurl.com) that takes you to the same exact spot as the long one.

Throughout this book, you’ll see TinyURLs used in place of giant, clunky ones. To get to the GRS page mentioned above, for example, you can use http://tinyurl.com/GRS-bonds instead. Just type that address into your browser and your computer will get you to the right place. Better yet, head to this book’s Missing CD page at www.missingmanuals.com, where you’ll find clickable links to all the sites referenced in this book.

About MissingManuals.com

At www.missingmanuals.com, you’ll find articles, tips, and updates to Your Money: The Missing Manual. In fact, we invite and encourage you to submit such corrections and updates yourself. In an effort to keep this book as up-to-date and accurate as possible, each time we print more copies of it, we’ll make any confirmed corrections you’ve suggested. We’ll also note such changes on the website, so that you can mark important corrections into your own copy of the book, if you like. (Go to www.missingmanuals.com/feedback, choose the book’s name from the pop-up menu, and then click Go to see the changes.)

Also, on our Feedback page, you can get expert answers to questions that come to you while reading this book, write a book review, and find groups for folks who share your interest in smart money management.

We’d love to hear your suggestions for new books in the Missing Manual line. There’s a place for that on missingmanuals.com, too. And while you’re online, you can also register this book at www.oreilly.com (you can jump directly to the registration page by going here: http://tinyurl.com/yo82k3). Registering means we can send you updates about this book, and you’ll be eligible for special offers like discounts on future editions of Your Money: The Missing Manual.

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