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July 2010

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I’ve had thousands of dollars in credit card debt since 1997. I remember applying for a job in March of 2001 which I calculated would help me erase my credit card debt in about twelve months. I didn’t get that job. Nobody got that job, in fact, the entire web design sector was crashing, and I had just moved to Seattle. Almost two years ago on this very website I declared that I would be free of credit card debt six months later. That didn’t happen, either. I admit that this problem is almost entirely my fault, even though circumstances beyond my control have made the problem worse, like a 10% pay cut from last Spring that still hasn’t been fully restored (even though we’ve hired two new people).

But in January of 2010, I decided (again) that enough was enough, and I started posting regular debt updates, and limited myself to spending only $100 a week. I thought it would be plenty, but on weeks that required gasoline or a haircut or car maintenance, well, it didn’t always work out as planned. On the upside, I have more than one source of income, and I’ve been able to maintain a regular schedule of paying about $1,300 a month toward that debt.

It hasn’t been a joy funneling every dollar I could toward the ghost of debt that has been haunting me for thirteen years. We missed an entire growing season in the backyard because we didn’t have the money to pay someone to fix the faucet, to say nothing of every other home improvement project that was put on hold.

Thanks to the obligation to post regular, detailed updates, I found places I could be saving more money, and on May 7th, I was able to completely pay off one of my two credit cards. Now here I am, on the cusp of paying off the second, and last, credit card that I ever hope to carry a balance on. No, I really mean it this time. I got paid today, and between that and the extra money from side jobs, I am able to bring the balance to just a couple hundred dollars.

Now, even if I double my weekly budget for myself, and ignoring side jobs and the restoration of my proper salary, I’m still going to have $1,100 a month that I don’t owe to anybody. I can’t stress this enough: this is completely new territory for me. First, of course, I’m going to throw a party. There will be good wine and delicious snacks. You can’t talk me out of that.

After the party, though, I’m conflicted about how best to deal with the extra income. We still have car loans and a mortgage, but I don’t feel a strong compulsion to pay those down faster than is scheduled. I know that most of our very smart readers will encourage me to start saving toward a three- or six-month emergency buffer. When I look at the three-month number of $12,820, I feel the same dread I used to feel when my credit card debt totaled a similar number. Suffice it to say that I’ve never saved even 10% of that amount in my life, and I’m shocked that we go through that many expenses in just three months, but we do.

At present, mostly because of my previous credit card payments, my wife and I put 10% of our leftover income into a joint savings account. If we kept it to 10%, we’d meet our three-month buffer in twenty-six months. If we bumped it up to 50%, we’d meet the same goal in five months, and we’d have about $200 each for weekly expenses. In reality, we’ll probably settle on something higher than 25% but lower than 50%. There are still all those household projects to take care of, vet bills, maybe some occasional new clothes, etc.

All of the above assumes that both of us want to stay at our current jobs, earning the same salaries, which isn’t necessarily true. We both have strong creative urges that are better fulfilled at the kind of projects you find outside of offices, and if we could still live without fear of homelessness, either one of us might be persuaded to seek a job with a lower salary and fewer hours and/or brain requirements, so that we might have more opportunities to pursue those creative projects.

If you sympathize with that, or even if you don’t, I’d love to hear your story in the comments below.


Somehow over the past several years, I’ve been increasingly finding myself in the position of an entrepreneur. Throughout my life, I have been a bit of a self-starter with the ability to inspire others to join my causes, whatever they may be. I’ve never considered myself an entrepreneur, however. I never thought I’d be using my creative tendencies to run and manage a business.

Frankly, I’m not very good at it. I’m quite disorganized, and competing priorities always seem to be problems. And if my history of dead-end projects is any indication, while I may be a self-starter, I’m not always a self-finisher. To me, “entrepreneur” was a bad word, signaling a person whose specialty was business rather than the industry in which the business falls.

Nevertheless, here I am, an accidental entrepreneur running and trying to manage a successful business. I don’t admire many entrepreneurs, but I am a fan of Aaron Patzer — at least what I know of him from his public persona and our interviews on the Consumerism Commentary Podcast. Aaron created the popular web-based personal finance management and budgeting software, which was recently purchased by software behemoth Intuit, the makers of Quicken.

This entrepreneur is a lecturer with The Founder Institute, a membership organization designed to support budding business-starters. He also recently wrote an article for CNN describing how the institute developed a test that can supposedly predict the success rate of an individual as an entrepreneur. The test is based on research that indicates that success is not correlated to traditional metrics like IQ, teamwork, and planning. Instead, the best entrepreneurs tend to be spontaneous, appreciative of aesthetics, passionate about art and literature, and older.

Read the article here or sign up to take the quiz that will predict your success as an entrepreneur.

Not everyone is destined to succeed as an entrepreneur, and that’s not a bad thing. A lot of people — and the programs they offer for sale — tend to treat entrepreneurship as the Holy Grail of personal finance or wealth-building, with complete control of your own financial destiny and the ability to create wealth rather quickly compared to buying and holding stocks for decades in order to become “rich.” But this lifestyle is not for everyone, and not everyone is interested in taking the entrepreneur’s path.

What are your thoughts on entrepreneurs?


This is a guest article by Ramit Sethi, author of the best-selling personal finance book, I Will Teach You to Be Rich. He recently launched a new program, Earn1k, to help people earn more money on the side. To get a free mini-course on earning more, sign up here. Ramit will also be our guest on the Consumerism Commentary Podcast this coming Sunday.

Last year, when I went on book tour for my book, I Will Teach You To Be Rich, I asked my readers to share the number one thing they wanted me to write more about.

I was surprised. The number one reason people wanted to earn more money wasn’t paying off debt, or investing, or money and relationships. Almost universally, people wanted to know how to earn more money.

I initially believed people wanted to earn more so they could buy a $2,000 handbag or fly to Vegas for the weekend. Again, I was way off.

Most people are simply unsatisfied with the limits of their 9-to-5 job and want the option of eventually quitting and working for themselves. In fact, some of them don’t even want to work themselves…they just want the option of doing SOMETHING else.

Have you ever met people who are a few years out of college and feel like, “Huh…is this it?” We all have dreams of living a certain lifestyle, and it can be disheartening when we realize we’re going to have to save, scrimp, and pinch for 40 years. For many of us, $1,000 to $2,000 a month would make a huge difference in our lives.

We want to earn more now more than ever, and it’s not just about the money itself. We want to be independent from our corporate jobs (even if we end up staying at them, we want the option of doing something else). We want to work from home or from the beach. Here’s a picture of my brother’s office in Mexico:

Money isn’t the end goal. But we want it to help us achieve our real goals to live a rich life. And you can’t out-frugal your way to rich.

Earning money isn’t easy

But it’s not easy. People immediately see how challenging it can be to consistently earn more money and end up fantasizing about their independent lifestyle dream without taking action — forever. They come up with delusional ideas like “passive income” or create psychological barriers like “I could never earn money… I don’t have an idea.” After all, if you’re a regular person (i.e. someone who has a busy job, and still wants to have a life), your available money-making options start looking really limited. These options usually either:

  • take a lot of time and money to start (Brick and mortar businesses),
  • are spammy and dumb (“The latest secret money-generating trick!”), or
  • have zero growth potential (Donating plasma, taking paid surveys, etc.).

There’s a better solution. It’s not sexy, but it will help you lead a rich life: Turning your skills into income using freelancing.

Freelancing, as opposed to productization, is the easiest way to earn more money. It costs virtually nothing to get started, you can start earning money right away, and you can rapidly test and refine what you offer to earn even more.

Compare this to building products, which excites people due to the kooky idea of passive income… but requires multiple skill sets that few people have.

With freelancing, you can get started immediately and be earning money within one week. Freelancing also gives you practice running your business, without all the risk typically associated with entrepreneurship. It dispels the most common myths and excuses people make about why they could never work for themselves.

Common excuses about earning more money

We hear these all the time:

“I don’t have an idea.” The mistake is believing that you need one magical idea that will rain down from the sky and give you a profitable business. Not true! Instead, the critical part is building a system to rapidly test ideas to find a profitable one. Here are some ideas that my students have turned into profitable income: Personal organizer, music instructor, tutor, freelance writer, personal chef.

“I’d rather make passive income.” For delusional people dreaming of thousands of dollars in passive income being deposited into their PayPal account all while they sip coconut juice on the beach is just that — a dream that keeps them far away from the reality of earning more. The people who are serious about earning money realize that, to earn money passively, you have to start out actively doing work actively.

“Are you crazy? I don’t want to work an extra 60 hours every week.” Nobody wants to take on a second full-time job. You can actually freelance as many or as few hours as you want — even as little as five hours per week. If the client work piles on and you start getting too busy, you can increase your rates to bring the hours back down. (I did this, raising my rates over 1,000% in a few years.) There are dozens of other strategies like this that professional freelancers use to balance a high client load, or to balance freelancing with a full-time job. My friend Ben is a senior product manager at a very well-known web company, and still manages to freelance on the side — not because he needs the money, not because he hates his day job (he actually loves it) but simply because he wants to. How does HE manage the workload? We interviewed him to get the inside scoop here.

“Wait, first I have to set up my company Facebook and Twitter accounts!” PLEASE READ THIS CAREFULLY. If your goal is to earn money, social media is a waste of time for the vast majority of people. Social media can be fun and useful, but its greatest utility comes when you’re already well-established. For those starting out, it’s a distraction and a risky pitfall. You don’t need an audience; you need customers. If you’re spending time optimizing 20 social media profiles or doing other feel-good things before you’ve gotten your first client, just kick yourself in the face. Then start talking to some prospects.

“I’m just not a big enough risk taker to just quit my job like that.” Most people aren’t, and you don’t need to be either! I want to expand on this last point, because it’s common for people to get tripped up about having a job. Actually, if you want to work for yourself one day, you should use your job to your advantage. Here’s how:

  • Develop your skill set. Learning new skills for free is great, but getting paid to do it is awesome. Make sure your job has you doing high-value work that you can potentially use elsewhere. If not, you may want to think about finding another job first.
  • Build your network. People love to hire and recommend people they know. Get to know the influential people in your industry so that when you quit (on good terms, of course), you can reach out to them for help.
  • Finance yourself. Treat your employer like your own venture capitalist — let them put food on your table while you experiment with business ideas. Be sure to build up a comfortable cash fund (at least six months worth of living expenses) before quitting.

Earning more is as much about changing our mindset as about the actual tactics of getting clients and refining a business offering. The best approach to earning more builds you a track record a client base long before you even quit your job (or make whatever next transition). When — and if — you’re ready, you can hit the ground running because you’ll already have built the foundation for the lifestyle you truly want.


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