As featured in The Wall Street Journal, Money Magazine, and more!

February 2008

Haven’t you heard? This week is America Saves Week. From February 24 through March 2, a coalition of non-profit, corporate, and government groups are pushing a media campaign to encourage savings in various forms, from increasing money deposited into bank accounts to finding bargains and saving money on purchases. It’s a noble goal.

Building wealth starts when you set a goal and make a plan to reach that goal. Whatever goal you choose — whether it’s buying a car, buying a house, or getting out from under your debts — learn about proven savings strategies and get simple tips on the best ways to save.

The organization is targeting certain minorities or special interest groups with special sub-campaigns, too, such as Black America Saves, Hispanic America Saves, Military Saves, and Youth Saves.

For the rest of us, the main America Saves website offers suggestions for increasing savings and decreasing expenses.

Get Out of Debt

The first step in getting out of debt is to stop borrowing. To do that, you have to stop spending more than you earn. So, make a budget and cut out any expenses you can. It may help to cut up your credit cards or lock them away in a safe place… If your debts are too large, you may want to consider bankruptcy. Bankruptcy can give you a fresh start, but it is a serious step that can make it harder to get credit for years after you declare bankruptcy.

Savings and Investments

* Cut spending painlessly by finding small savings that add up to big savings over time, like The ECRD Factor.
* Comparison shop for necessary purchases.
* Restrain spending for birthdays and holidays.
* Automate your savings.
* Put your loose change into a high-yield savings account.
* Take advantage of employer-matching retirement plans if available.
* Build an emergency fund.

My bonus was deposited into my bank account this morning. I plan on celebrating America Saves Week by putting a large portion of the newly-found cash towards paying down my student loan.


The most effective emergency fund, for use in the event of a job loss or unexpected major expense, is actually a combination of several types of investments. You should be prepared with a small amount of physical cash to hold you over until you can get money from a bank, highly liquid investments like a high-yield savings account, a Roth IRA (if you qualify) in which your contributions can be withdrawn penalty-free and tax-free, and possibly credit access.

NZbird wrote to suggest an interesting addition to an emergency food: a stocked pantry. By stocking up on non-perishable food items, you will leave more of your money available for use in the event of an emergency.

Keep your food pantry WELL STOCKED. I mean food is an essential right. And if you have kids you don’t want them stressing out because the basics like food aren’t there. So stock up your pantry real good with all the ingredients for meals. I try to keep around 6 months supply on hand. My husband use to laugh at me when I started doing it, but you know it introduced a discipline into our grocery shopping that wasn’t there before… The kids always knew the ingredients were in the cupboard for lunches, breakfast, and any snacks they wanted to make. I believe it’s that feeling of security and hope for the future that must be maintained for the sake of the children in times of job loss.

At first, the thought of stocking up on food seemed more like preparation for a pandemic, but the main point is that if your income is suddenly grounded, you won’t have to worry about spending your emergency fund for food and will have more available for rent or mortgage payments and electricity bills.

Thanks for the suggestion, NZbird!


Are you concerned about your ability to maintain your current financial position? I am. Sure, I have an emergency fund, a significant cash cushion beyond the emergency fund, and steady income.

But I have taken on risk. My long term investments are invested in the stock market which has proven to be more than a little volatile lately. If I needed to access those funds, a market downturn and early withdrawal fees would be damaging.

My income is constantly at risk; at the office, my employer might decide our entire department can be outsourced. My side business income is almost entirely dependent (directly and indirectly) upon the good graces of a certain search engine to provide income-producing visitors.

Thus, I’m not surprised that 78% of working-class millionaires, individuals with steady jobs to earn a living and a net worth between $1 million and $10 million, are also nervous about maintaining their wealth. The main differences between myself and the “working rich” besides my significantly lower net worth are purchasing habits. Though followers of The Millionaire Next Door might disagree, multi-millionaires are consumers of luxury products. I am not. I’m prone to a few luxury items once in a while, but even when doing so, I look for reasonable deals and I’m not swayed by luxury brands.

21% of working-class millionaires have started to cut back their luxury spending, although they will continue to give to charity and provide the best education for their children.

But few are trading down to Target. They’re just buying fewer expensive items than they used to. Middle-class millionaires won’t stop shopping anytime soon. They’ll still be grabbing the tech gadgets they love so much, like BlackBerrys, iPhones, GPS systems, computer accessories and software. Why? Those products, in addition to exuding status, also serve practical needs. They will also go ahead and get nice things for the home, like that big-screen television set or top-grade appliance. And they won’t pinch pennies on education and health care, things they consider to be of prime importance.

Are you concerned that you won’t be able to retain the level of wealth to which you’ve become accustomed?

The Working Rich Are Nervous [Yahoo Finance/Forbes]


Recently, I wrote about Jung Typology and Finance, looking at the first of four dimensions used by psychologists and career coaches for categorizing personality preferences. Introverts and Extraverts draw their energy from individual or group activity, and that difference can have an interesting effect on opinions and behavior with regard to money.

The second dimension in the Myers-Briggs version of this personality typology pertains to information gathering. People who take the test are categorized along a dimension whose extremes are “Sensing” (S) or “Intuition” (N). Wikipedia provides a good layman’s definition of this aspect:

Individuals with a preference for sensing prefer to trust information that is in the present, tangible and concrete: that is, information that can be understood by the five senses. They tend to distrust hunches that seem to come out of nowhere. They prefer to look for detail and facts. For them, the meaning is in the data. On the other hand, those with a preference for intuition tend to trust information that is more abstract or theoretical, that can be associated with other information (either remembered or discovered by seeking a wider context or pattern). They may be more interested in future possibilities. They tend to trust those flashes of insight that seem to bubble up from the unconscious mind. The meaning is in how the data relates to the pattern or theory.

The first thing that pops into my mind is stock analysis. While everyone who analyzes stocks looks for facts, I think those on opposite sides of this spectrum will have a different approach. The Sensing individuals might look at a company’s underlying strengths and weaknesses, identifiable in annual reports, for example. On the other hand, those who gather information via Intuition might be more prone to looking for patterns inherent in performance. Both approaches are highly technical.

Perhaps you’ve heard of the Elliott wave principle. This is a method of predicting market trends based on patterns on historical up-and-down movement. The tricks with this principle is that it’s hard to know where you are in any particular “wave.” Someone with an Intuitive personality might be drawn to this type of analysis.

If you’ve read personal finance books, you’ve probably noticed how authors try to reach both types of personality. Often, a particular lesson begins with a story, illustrating a positive or negative approach. The story is usually light on details, but Intuitive people might be able to relate to the story and understand the point the author is attempting to make. If the author is smart, he or she will continue by supporting the story with details and facts that support the conclusion.

When either approach is missing, either half the audience will be bored or the other half will be mistrusting. It’s possible that Robert Kiyosaki’s “Rich Dad” series falls into this category. The books are strong on story and emotion, perhaps drawing in the Intuitive audience. Yet, the books are short on actionable details, frustrating those, perhaps Sensing individuals, who look for facts and hard data.

Who would be better at managing their own finances, the Sensing or Intuitive individual? I think the Sensing individual should be trusted with managing the family’s finances above the Intuitive individual. The type of analysis required, including net worth, expense reports, and budgets, involve the hard data favorable to Sensing individuals.


How I Evaluated and Declined a Recent Rental Property Investment

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As my partner and I are active landlords and property investors, it’s no surprise that people approach us with real estate offers. Sometimes they’re great deals, too – people occasionally inherit properties they want to get rid of quickly and therefore cheaply, or learn of a house at a great price that just isn’t selling. […]

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Big Mistakes That Cost, Part 2

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Focusing on small spending habit changes is a good way to save significant money over the long term. No matter how many daily lattes you forgo, if you make poor spending decisions on major expenditures, all your ECRD savings could be negated in one moment. Consumer Reports has identified some of these major mistakes that, […]

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