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Accumulating money is not a real goal for anyone’s life. Growing wealth is not the point. People don’t work hard because they want to see their bank balance grow; those of us who track our finances and chart our net worth over time aren’t trying to compete in some financial competition.

I imagine there are individuals who do have an approach to money wherein the increase of the bank balance is the ultimate goal. But this approach misses the point. Perhaps these savers and earners haven’t given enough thought to why they want to grow their wealth, other than believing that society dictates that they do so — or they idolize people in the media who flaunt their wealth.

Money exists to be used in some kind of transaction — that’s all. So there’s no point in accumulating money just for money’s sake.

This is a concept I’ve covered on Consumerism Commentary in the past, but I bring it up again because it’s always relevant, and maybe it’s good to have reminders once in a while.

I don’t write about my own business much on this website. My business is based in the act and process of blogging. Consumerism Commentary has been my business. And while I think it would be fun to write about it more, as any business owner would like to write about his own business, I wanted to avoid that. If my business was a store I had planned with a friend, I would write about that here.

Writing about blogging as a business just didn’t seem right for this website, because I’d be “blogging about blogging.” The only people who may be interested in that are other bloggers, and Consumerism Commentary reaches a much wider audience than “other bloggers.”

Therefore I’ve stayed away from writing about how I earned money from my business, how I built that business, and how I eventually sold that business for an amount of money that would be potentially life-changing. And it’s a shame I’ve avoided the topic, because it’s really interesting, and I think other people, both those who consider themselves bloggers and those who don’t, would like to hear more about it.

I took the opportunity to write about my experiences and what I’ve learned from turning a hobby into a business for the new Plutus Awards website.

(For those of you who don’t know, The Plutus Awards is an award ceremony I founded. The awards highlight the best in financial media and products. It was born from my own enjoyment of running awards ceremonies, something that started in college with my creation of awards with superlative and funny awards for members of my university’s marching band, with the ceremony at an annual banquet.)

This epic article was influenced by questions I get all the time from other bloggers who want to find a way to earn consistent income from their websites. Of course I’m happy to answer any questions privately, but I haven’t had an outlet in which I’ve felt comfortable sharing all the details.

And the massive more-than-4,000-word article just touches the surface — I could write a book about what I experienced over the past twelve years with my unintentional business.

I expected to receive some criticism from the article. I wrote about how I focused primarily on this hobby-turned-business and didn’t seek work/life balance between my work and social life. One reader felt sorry for me, as if I had missed out on something in pursuit of the almighty dollar. I probably took more offense to the reader’s remark than I should have.

There are probably some things that I’ve missed out on in life. I guess I could have spent more time watching movies with friends. I guess I could have tried harder to start a family. But I don’t think my life is any less whole right now.

But for me in the year 2000, earning a tiny salary from a nonprofit and living in one of the most expensive areas of the country, I had to do something about my financial situation. Life wasn’t about the money, but I needed to start paying attention to my finances, and I needed to figure out how to get my life moving in the right direction.

When you have no money and you begin thinking about what the future consequences will be, money starts to plays an important role in your life. The trick is being able to prevent yourself from seeking money above all else. You can prevent that by keeping larger goals in mind, by thinking about what the point of having money is. It’s more than just “freedom.” What would you do with “freedom” if you had it?

For me, it was starting a foundation. In 2000, I knew that if I had enough money, I’d start a foundation that focused on arts education. It might have been a little naive to have that as my plan, but the idea isn’t too far-fetched.

And if you’ve read How I Built a Seven-Figure Blog, you know that I didn’t start a business to reach that goal. I didn’t start a business at all. I focused my blogging, something I had already been doing for years, on a topic I wanted to learn more about — personal finance and money management. All I wanted to do was get better at managing the money I had.

After several years as an adult ignoring my finances, I had to make my life about money, at least a little bit, in order to improve my situation. Having been born into a middle class family in the wealthiest country in the world, I had been failing at maintaining that level. My situation, goals, and needs would have been different had I been born in poverty or to a wealthy family.

Now that I’m in a different financial situation, after seeing that hobby turn into a successful business that I later sold, perhaps it’s easy to say that life isn’t about money. When you have enough in the bank to be secure — you don’t have to rely on income from an employer, for example — it’s easier to focus on the grander goal.

Speaking of which, I’m happy that I’m able to reach some of my bigger goals before the age of forty. Remember that arts foundation I’d dreamed about? Well, I’ve changed my approach, but I’m still in the general vicinity.

I’m establishing a scholarship at my undergraduate university for music interns. Did my music education degree relate to how I’ve built my “career” over the last decade? Not directly, and that’s why it might not make sense to people why I want to give back to my university. But my experiences at my college did shape me and my approach to life.

But more importantly, I was required to take an internship for my minor that got me started with the organization that allowed me to get into a financial mess in the first place. The stipend through my scholarship should help students be able to afford to take the best internship opportunities without having to worry about how they’re going to earn a living while working for little or no money.

This will help level the playing field, so the best internships can go to more than just the wealthiest students who can afford avoiding work for a semester.

In addition, I’m also starting a foundation — but this will be related to financial media, like the Plutus Awards. I’ll be announcing more information about that soon.

So I’ve written quite a bit about the work side of my life, and lest anyone thing I don’t have perfect balance between work and non-work aspects of my time on this planet, there’s been a lot going on. Last month, I mentioned my apartment received storm damage. The landlord is still trying to repair the apartment — this is over a month after the incident — and I decided to exercise a clause in my lease that allows me to leave.

There is a world of choice available to me right now. I could do virtually anything. But, I made a commitment to work with a music group based in Princeton, New Jersey throughout the rest of the summer, so I won’t be leaving. I am signing a seven month lease, moving just over the border to Yardley, Pennsylvania, to an affordable but smaller apartment.

I’m downsizing, getting rid of some furniture and other items I’ve accumulated over the years. The lease will get me through this year’s Plutus Awards, and once that is over, I’ll be ready to think about leaving the area, spending the winter on the west coast with my girlfriend and family, and giving myself the opportunity to travel more.

Of course, I’ll need to “balance” these changes with working on my new projects.

Unless I decide to stop and live off my investments for the rest of my life. I’m just not ready to retire, though.

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Over the last year, a friend of mine has been trying to convince me to move my financial assets.

I currently have a taxable investment account at Vanguard, and my portfolio consists of a mix that includes a domestic stock index fund, an international stock index fund, and tax-advantaged municipal bond funds. This friend believes that I should be approaching my investments somewhat differently.

He is a real estate broker, so he likes to think in terms of leverage. My asset level qualifies me for so-called “private banking” at most retail banks, and one of the things banks like to do for wealthier clients is hold onto their assets while offering special terms like reduced banking fees and great interest rates on a substantial line of credit.

I’ve had no need for such things thus far, but there may come a time where I want to use leverage to invest in a business, so I’ve been exploring the idea.

So far, I’ve talked to two firms. The first was the one recommended by my friend, as he manages the assets of his wife, who is a member of a prominent family that has seen success through generations in New Jersey. That’s Merrill Lynch. The other is a branch of my local retail bank, Wells Fargo Advisors.

I spoke to both separately, and they both put together proposals. Wells Fargo presented me with a team of people ready to take over my banking, while the Merrill Lynch adviser initially thought my plan was solid. Both parties drew up a proposal for me, and the two were very different. I had a much longer initial discussion with Wells Fargo, so their proposal took into account my preference for low-cost index funds, at least partly.

Neither of these teams of advisers are financial planners. They are salespeople, or stockbrokers, or financial advisers, or investment advisers, and they have products to offer. People in these roles can go by any variety of names and can be misleading to customers.

The price I pay for these products, in addition to the fees baked into investments that eat into net investment results, is generally a 1% fee for assets they manage. There are certain times when paying 1% of a portfolio’s balance every year — whether the portfolio gains or loses money — could be like paying someone’s salary. It’s far higher than the expense ratios embedded into my mutual funds.

In theory, even salespeople, whether they earn money from commissions, from kickbacks from fund managers, or from a combination of the two, should want to offer what’s in the best interest of the client. If they don’t, the client would leave, theoretically, and find a better salesperson. But I’m not so sure this theory works out in practice. Given two roughly similar investments, wouldn’t a salesperson want to offer the one that provides him with a little more income?

Legally, advisers must only sell investments that are appropriate for the investor based on the customer’s time horizon and risk tolerance. A financial planner, particularly one who is certified, is held to a different standard. A financial planner must give advice always with the customer’s interest in mind. That’s the fiduciary standard, and it would be the difference between a planner recommending a low-cost portfolio of index funds and an adviser or salesperson making decisions based on what’s more lucrative for the firm.

President Obama wants to change the regulations so all financial advisers, everyone who works for a bank and offers advice on investment decisions, are held to this fiduciary standard. This probably has more of an effect on what happens when you call up your employer’s 401(k) plan sponsor to ask for investment advice.

It’s clear why banks have no interest in adhering to a fiduciary standard. If stockbrokers were unable to sell all but the lowest-cost investments, it would change the entire nature of Wall Street. In order to stay in business, managers of active mutual funds would need to find a new way to sell their products. Banks would have to make up the income previously generated through incentives or kickbacks in other ways.

This is why the industry has reacted to the fiduciary standard proposal by claiming that the requested regulation would make it more difficult for the middle class to get financial advice. I don’t necessarily think that’s true. It might make investment sales at a bank less accessible to those without sufficient assets for the 1% fee to generate worthwhile revenue.

But that’s not the financial advice most people should be seeking — and I found that out when I attempted it myself. The middle class, whoever that may be — the not wealthy, who may be dealing with a growing retirement investment account, a house, and maybe some additional taxable investments — needs little in the way of investment sales and more in the way of basic financial planning advice. Maybe financial coaching.

Maybe there’s a different solution. More retail banks could offer financial planning or coaching, where the employees abide by the fiduciary standard, much like independent Certified Financial Planners. The model must work because Vanguard offers this service to its customers; there’s no reason why retail banks can’t figure out how to make sure the same type of service would be profitable.

If customers really believe the best place to go for financial advice is their local retail banks, those institutions can do a better job of meeting those needs rather than just putting them in front of salespeople. If financial planners can stay in business independently, banks should be able to find a way to incorporate that type of service into their offerings.

Employers may want to follow this example, as well. When I worked for a financial company, a company whose own subsidiary managed employee’s 401(k) accounts, employees were encouraged to talk to a company-provided financial expert. It was never clear — especially to me, thirteen years ago, before I knew about fiduciary standards and financial planners — who I was talking to or how they determined their recommendations and advice.

When you walk into a car dealership, you know you’re talking to a salesperson, and you know the goal of the salesperson is to sell you something. You also know that the salesperson has incentives to sell you cars, related products, and services that generate the most profit for the dealership.

For most customers, this isn’t as clear when you enter a retail bank. For some reason, customers believe that bank employees want to help and are financial experts who offer advice. The proposal of new fiduciary standard regulations could make sure that customers can walk into a bank and get the real advice they’re seeking.

The fiduciary standard isn’t a guarantee. As Walter Updegrave pointed out in a recent article for Money, an adviser and a client can never have completely aligned motivations. A financial planner would need to give advice that is in the best interest of his or her client, but must also be concerned about earning future business from each client, winning new clients, and staying in business.

No one, not even a fiduciary, can look out for yourself better than you.

And I understand that the general reaction to that fact is that we need to educate everyone more about managing their own finances, so they know to avoid brokers who try to sell customers what’s in the company’s best interest instead of what’s best for the clients. But this is a message that doesn’t get through completely, and especially not to the people who need to message the most.

Financial planners and coaches can keep trying to make it clear that they’re better resources for most people and we can continue pushing useless and harmful money management and financial literacy classes in high school, or we can make some industry changes to ensure that the professionals people are most likely to encounter when they need help are the right type of financial planners.

I’m going to go back to the bank. I may eventually move my assets to the bank to take advantage of access to credit, but only if I can do so on my own terms, investing how I want to invest, with no additional fees.

Do you think all brokers and financial advisers should be held to a fiduciary standard?

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A week ago today I was in Phoenix. I had been there for a few days, and I had been planning to spend a month with my girlfriend away from the cold New Jersey weather. It wasn’t a vacation. We each needed to continue working, but figured we might as well do so where the weather was nice.

Early in the morning, I got a frantic call from my apartment complex’s superintendent. “Where are you?”

Groggily, I stated I was out of town and asked what was going on. “We have a major problem.” The sprinkler line in my apartment building froze and burst, dumping cold water, ceiling debris, and insulation into my kitchen. The unit below me was in worse condition, and their basement’s ceiling collapsed.

I ensured the super was aware that I recognized the seriousness, and with some trouble (a different story), I got on a flight back to New Jersey that got me to the apartment later that night. After hanging up with the super, I did two things.

First, I called my insurance company to let them know about the situation. Second, because I knew I probably wouldn’t be able to see the apartment myself until late in the evening, I asked a friend to stop by and assess the damage, taking some photographs. Thankfully, he was available and able to help out.

The insurance company requested that the apartment maintenance staff not remove anything, and I relayed that message to the super, but I didn’t expect them to comply as safety was their primary concern.

By the time I landed and a car dropped me off at my apartment, it was twelve hours after the initial call. The damage in the kitchen was very bad. The carpets throughout my unit were soaked. All in all, however, much of my personal property was fine. The neighbors downstairs were not as lucky.

The landlord determined the best way to deal with the mess would be for me to move all of my belongings out of my apartment so they could begin the repairs immediately. I asked for and received recommendations for moving companies and by the end of the week had a storage facility located, a moving company booked, and the insurance company agreeing to pick up the bills.

The pack-out and move-out lasted several hours yesterday as the temperature plummeted from thirty degrees to zero. But now I’m still waiting for communication with the landlord to determine when the work will start, how long it will take, and how they intend on discounting my rent for the period of time during which my apartment building is uninhabitable.

The damage to my items is generally isolated in the kitchen and the dining room, and my dining room is relatively empty because I converted it to a photography studio.

Liberty Mutual, the insurance company that covers my automobile insurance, renter’s insurance, and umbrella insurance, offered me two options. I could receive a check to cover the depreciated value of my damaged items, with a later reimbursement once I replace those items, or I could use Liberty Mutual’s service for replacing those items, where a company that partners with the insurer seeks out replacements for each of the items and sends it directly to any location I want, thereby avoiding issuing a check to me.

I chose option number one, as my current living situation might not require immediate replacement of everything and I plan spending time away from my apartment.

The insurance company also offered to pay for a hotel, but one of my friends offered up some space in his home. Liberty Mutual will also pay for living expenses, like food, that are above and beyond what I would be spending normally, while I’m out of my apartment.

Communication with Liberty Mutual has been a little difficult, but part of the problem is that the similar problems have occurred in homes across the Northeast region of the United States, and insurance companies are busy dealing with a large number of claims. In my apartment complex alone, a day or two after my incident, there was another burst pipe that flooded a different building. There is obviously insufficient protection during cold weather.

My landlord also hasn’t been very communicative. The super has been nice, but all I know about the repairs is that they expect it to take a week. I think the repairs, including fixing any water damage, replacing the carpets and wood floors, ceilings, walls, and kitchen appliances might need more like a month.

Renter’s insurance is inexpensive, but I’m thankful to have it. I would really love for this incident to be over so I can get back to Phoenix — and get back to life, to work, and to warm weather. After last year’s winter in New Jersey, my plan was to avoid as much of it as possible. And on one of the coldest days, I was brought back, and I’ve been too busy taking care of the emergency to be able to write some articles for Consumerism Commentary.

I can’t complain too much. As I’ve mentioned, with friends, insurance, money available for emergencies, and perhaps some luck, this incident hasn’t been nearly as bad as it could have been. I do feel bad for my neighbors who experienced much more damage and disruption in their lives.

One observation this event has allowed me to make pertains to my accumulation of stuff. Over the past decade, I’ve lived in just two apartments. Prior to that, in the six years after graduating college with a bachelor’s degree, I lived in at least seven different places. While moving around, there was never a big opportunity to settle in and accumulate stuff. That has changed over the past decade.

There’s a lot of items I could get rid of, things I don’t necessarily need in order to live a happy life. But I don’t subscribe completely to the idea of minimalism. Just because all I need to live are a few items, that doesn’t mean that I should limit my life to the bare necessities.

Keep in mind that my living needs are different than many readers. I am an unmarried individual without children. I have no family to support. Thankfully, no one is affected by the flooding in my apartment other than me (and my neighbor downstairs). If my family were displaced by an event like this, the situation would be very different.

With good insurance coverage and a landlord that doesn’t try to weasel out of responsibilities (at least so far), I can be confident that I can return to a great place to live.

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Any self-help guru would agree that how you think about money shapes your behavior with money. If you want to improve your financial situation, whether to get out of debt or to reach financial independence, your relationship with money is the first thing that must change.

If you believe you will never be able to climb out of poverty, it’s going to be much more difficult to achieve that goal. Of course, there is much more than goes into reaching your financial goals than just thinking about money differently. One can’t wish oneself out of debt, even by wishing intensely. The proper mindset is just the first step, but offers no guarantee of success.

Additionally, changing a mindset that’s been around for decades — or generations, even — doesn’t just change overnight. It’s a lot simpler to consider a changed mindset the key to achieving financial goals than it is to actually believe that everything you’ve been taught about money is wrong.

My current financial situation bears little resemblance to my life ten, fifteen, and twenty years ago. I’ve progressed through five different phases of my life — so far — as delineated by my approach to money. Each time I changed my mindset, my life improved and my financial situation became more stable, but it’s unclear which came first.

As I look back, I can identify these five phases.

Money mindset phase one: ignorance. As a kid and young adult, money played almost no role in my life decisions. I decided to study music education because I was passionate about teaching music, and I decided to go into nonprofit because I wanted to help even more young people in the arts. I never met any resistance from my parents, but I also didn’t think about whether a career in nonprofit was something I could handle without making incredible sacrifices.

Before long, living on my own after college, my finances were in shambles. But I ignored all my problems, including speeding tickets I couldn’t afford to pay. My life snowballed out of control, and even though I had started to realize I was in serious financial trouble with an increasing load of debt, my life culminated in losing my apartment, my job, my car, and my girlfriend all within the span of about a month.

Money mindset phase two: saving money and getting out of debt are worthy goals. This rock bottom led to my first major mindset change. Moving back in with my dad for a few months, I needed to get myself going in the right direction.

  • I left the world of education and nonprofit and found myself a temp job at a financial firm, accessible by public transportation, and began earning more money than in the nonprofit.
  • I began reading more about living below your means on the Motley Fool discussion boards.
  • I created a basic outline for a budget and started tracking my finances every day.
  • I started Consumerism Commentary to anonymous publish my financial progress and to keep myself accountable for my financial decisions.

I was finally saving for my future, investing for retirement, and focusing on better goals for myself. The mindset during this period was about making smart financial decisions and figuring out how to slowly build wealth over the long-term.

During this time, I also started focusing more on finding other ways to earn money. With a long history on the internet and having learned how to design and publish websites in 1994, I found ways to supplement my day-job income.

This would have been fine. Had I stayed in this position and mindset, I probably would be able to live comfortably, even if I would never have a sizable nest-egg, and even if I would never be able to live off my investments alone.

Money mindset phase three: I can build something of value. When I started Consumerism Commentary, I had all ready been blogging and operating websites for years. I had never considered the idea that websites could make money or be viable businesses on their own. The thought of being a “full-time blogger” would have seemed ridiculous at the time.

Before long, it became clear that there was a possibility of building a business out of all the time I was spending writing. Advertisers were interested in reaching the audience I had built, and these companies willing to pay for the privilege. Slowly, I started dabbling with advertising, while always maintaining some kind of ethical guidelines, so I wouldn’t feel too dirty at a time when very few people were earning money.

As the business progressed, I could see that there was a possibility that I wouldn’t have to rely on working forever in order to afford my living expenses. The business kept growing, and not only did I have cash flow, almost all of which was saved in bank and investing accounts, but I was building an asset that might have value to someone else, as well.

At no time throughout my life has money actually been a driving force behind how I live my life. I didn’t start writing online because I wanted to get rich. I didn’t want to sell my business (which I did in 2011) because I had dollar signs in my eyes. Being wealthy has never been a goal for me — but I’ve always liked the idea of never having to worry about whether I can afford something that I’d like to do.

Money mindset phase four: hold onto your assets. I’ve had a few bad experiences as a result of success. And part of this fourth phase still sticks with me today. During this period, as my cash flow from business revenue grew and I sold the business, I was concerned my assets could either disappear suddenly or they could dry up over time.

I did very little to change my lifestyle, and I was during this phase still trying to save as much as possible for the future. While I could have afforded it, I had no interest in buying fancy things or traveling the world. This is a scarcity mindset, but at this point in my life, I should have been past this.

I’m still not fully beyond money mindset phase four.

Money mindset phase five: abundancy. Through a combination of luck and hard work for over a decade, I’m currently in a financial situation that I never thought would apply to me. Until this year, I’ve been reluctant to touch my investments, and at times I still think I’d rather work for a paycheck than dip into my nest egg to pay for my living expenses.

At some point, I just have to start enjoying my success rather than worrying about whether I’ve written enough articles for Consumerism Commentary each month. But this is hard for me. There is more I want to do, both here and with new projects. I want to keep working. I want to build another company. I’m not ready to retire, so I need to keep going in some form.

A friend of mine who married an heir of at least part of a significant family fortune in New Jersey, someone I’d known since starting at that temp job after I lost my nonprofit job, has been trying to get me to live fully in this fifth phase, but I’m just not there yet.

And perhaps one of the reasons I can’t do this is that I am still concerned about cash flow. Invested mostly in stock market index funds and bond index funds, my cash flow is much less significant than it was while I was building my business, even if it is much less risky.

I need to think about how I can set something up to create a stronger cash flow from my investments — and that’s the type of thinking that often leads people to real estate investments. I doubt I could ever create another website that generated as much revenue as this one did.

So real estate is something I’ll be keeping in mind, but I don’t know if I have the right mindset for it.

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Robert Kiyosaki Gives Readers a Second Chance

by Luke Landes
Robert Kiyosaki [via YouTube]

Over the years, I haven’t been too kind to the best-selling author, Robert Kiyosaki. He’s certainly built a successful empire, and a large community people respect him for his business acumen, his willingness to try or to appear to try to help others, and his advice. However, I’ve always found his advice thin at best ... Continue reading this article…

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New 529A Plans Help Disabled People Save Tax-Free

by Luke Landes
Wheelchair

Now that the government backed down on its proposed changes to 529 plans for future education expenses, we can expect the same tax benefits present for education to be applied to families and individuals who face expenses caring for disabled people. Families will be able to deposit funds into special savings accounts, called 529As, and ... Continue reading this article…

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5 Questions Before Applying for a New Credit Card

by Luke Landes

Since the credit crunch in the midst of the latest recession, credit card solicitations have seen a significant increase. Unless you’ve opted out, and good luck with that, you’re probably getting junk mail from credit card issuers with invitations to apply for the latest credit card offers. Don’t get too excited, especially if you have ... Continue reading this article…

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Raise Money-Smart Kids: The Opposite of Spoiled, by Ron Lieber

by Luke Landes
ron-lieber1[1]

In Ron Lieber’s The Opposite of Spoiled, the author offers suggestions for raising money-smart kids based on the stories of hundreds of parents.

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