Resources for a personal finance reboot

I want to talk a bit about challenging financial situations today and some resources I have found most helpful. First, some context. The parameters of our move to Boston included the following: (a) a moderate level of student loan debt, (b) expenses incurred in support of a cross-country move and settling into a new place, (c) a 3-4 month waiting period before finding a suitable renter for my home in Atlanta, and (d) high housing costs in Boston (I pay 2x for 0.5x space relative to Atlanta).

I won’t discuss specific numbers, but suffice it to say the bottom line after the dust settled from all this was overwhelming. I have known people who were facing many times the debt I faced. It’s difficult to even know where to start. Dealing with that level of challenge required a complete reboot in my thinking and approach to money.

(By the way, this is an especially important topic for people coming out of grad school with a PhD. You may have an idea that you are now a very big deal and carry an unrealistic perspective on your earning potential (there is probably a reality check waiting for you, even in STEM fields). And you are also entering the financial game years behind your friends who only did an MS or MBA, which means you are already five years behind in terms of both lost income and compounding interest.)

My wife and I paid it all off in about a year.1 We found that once you become willing to make very difficult changes, you make progress faster than you think you will.

So, if you are in a similar boat and in the mood to get trounced, here are some resources that helped me take responsibility and make difficult and necessary changes:

The Total Money Makeover (Ramsey)

The Dave Ramsey debt snowball concept from this book is the number one tool that kept me motivated as I paid down credit cards and student loans. Reading this book initiated the process toward a whatever-it-takes mindset. I sold things I thought I’d never be able to let go of: my road bike, my iPad, a nice watch, and countless other things my generation feels entitled to. Does your family actually need two cars? I came to view those things as items I simply could not afford, no matter what justification I previously came up with. I don’t normally prefer a writing style like Ramsey’s, but frankly I thought it worked in this context. Cannot recommend highly enough.

Boundaries: When To Say Yes, How to Say No (Cloud and Townsend)

Here is a book that is ostensibly about maintaining a healthy relationship to all the various parameters in your life: people, work, health, yourself, etc. What am I personally responsible for in my key relationships? What am I not responsible for in my key relationships? This book touches every major area of life. But I found this book had a remarkable impact on my view of money and the personal responsibility I must take on with it. If I am in debt, it is a result of my decisions and actions. No one is going to bail me out, and the outlook will not improve until I own the situation, devise a plan, and walk it out daily over a long period of time. Ignoring a problem is unacceptable.

If You Can: How Millennials Can Get Rich Slowly (William Bernstein)

This is an outstanding short (30 min) read that markets itself as an investment primer for millennials. Here is a book that will show you why you have to eradicate your debt ASAP – you must start investing ASAP. If you cannot find the discipline to save, it does not matter how much money you make. It is full of practical advice and is a springboard to other, more in-depth, resources on personal finance and investing.

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy (Stanley and Danko)

I read this book because I have heard time and time again that if The Millionaire Next Door will not win you to frugality, then nothing will. What is the message? Many people who appear to be wealthy aren’t. Many people who are wealthy appear not to be. People who have truly taken responsibility for their financial future have no need for (and definitely do not feel entitled to have) “status artifacts.” Instead, and among a great many other activities, they live simply and spend significant time and resources planning for the future.

Seth Godin has written a handful of no-nonsense posts on personal finance. Seth rightly treats consumer debt as the emergency it is and offers practical suggestions to change. I also love some of his generally mentality which leaks through in these posts.

A few comments on personal finance blogs:

My advice is to mostly stay away from them unless they really tow the frugality line like the highly reputable Get Rich Slowly. I have found much financial writing which purports to help, instead subtly reinforces the mentalities that breed an indebted lifestyle. Instead of teaching you to take responsibility for your actions and make sacrificial changes, they distract you with “hacks” that never address the core problem or still tempt you to spend money. For example, you should be more concerned about becoming expert in your current field than getting your passive income gig off the ground. But that message probably doesn’t drive page views.

A few comments on tools:

You don’t have to spend a dime to make massive changes for the better. It’s tempting to rationalize further purchases off the bat that will help you meet your goals. This software or those fancy envelopes for your cash-only system. Don’t fall for it. You have to stop rationalizing spending. Every book listed above is available at your local library. All the tools you need are basically free: Mint.com, Excel, a Google spreadsheet, envelopes for cash (okay, $1).

Now that the fundamental building blocks are in order, I have undertaken a self-education in investing. I have a huge stack of books from the library and hope that I can report back at a later time about what I found most helpful.

(Disclaimer: Amazon affiliate links throughout, although you should probably just get these books from your local library.)

  1. I apologize if that sounds a bit too self-congratulatory, but I’m trying to convey real hope that it’s possible to overcome this sort of thing and make systematic progress toward your financial goals.