I liked to read books about money, especially about how to live cheaply. Possum Living by Dolly Freed is a good example of the kind of book I liked: stories of people living really frugally, often without traditional sources of income. They put it into a money market account an account that earns more interest than a savings account but is still almost guaranteed not to lose money with the understanding that it should be used toward the loans, which at that time were in deferment.
I started doing temp work to save up money to move to London. I made an appointment with a guy at the firm to see if I should do something different with it besides just keeping it in a CD. At the time, I was making minimum wage and had no other money except for the amount my family had given me. The idea that I needed to start investing as soon as possible stuck with me. In the meantime, my reading about frugality was paying off. All my furniture was found by dumpster-diving.
I lived the frugal lifestyle: I always shopped at thrift stores. I would stay in hostels when I traveled. The bus got me to work and downtown. So in late , I was still basically at zero. The second time I got a job with a b , I went to a meeting where I got an explanation of how it all worked.
When I left that job after two years, I had a few thousand dollars saved. I kept the account, and still have it today. I moved to New York briefly and then to Chicago, where I decided to stay for good. My interest rate on my loans was really low, so I had just been paying the minimum, even though I had a little cushion of money. I was looking for a new goal again. I had spent some of the gift money, either on moving or on paying off my loans, so it took me a little while to get there.
The book was partially about living cheaply, but more about changing your thinking about money. I started tracking how much I was spending, and keeping a chart the way the book recommended. In the last chapter, the book talks about financial independence: saving the amount of money you needed so you could live off of the interest. I had heard about idea before, but this was the first time it felt possible.
I became bored with every job I had, and although my current job was more stimulating, my boss was toxic, so the idea of someday not having to work was appealing. I started reading about early retirement on message boards, and in books. I got the sense that I needed millions of dollars to reach financial independence, and I felt like I was never going to get there.
Even so, I could still track my money, draw my little charts, and get closer to it inch-by-inch. It was around this time that my boyfriend sent me an interview with John C. It linked to this chart , which showed how drastically fees can affect your returns. Because expenses make such a huge difference, index funds which have very low fees can end up giving you better returns than individual stocks or managed mutual funds will.
I had read all this stuff about frugality, about creative ways to make an income, but when people started talking about bonds and stocks I tuned out. He talked about asset classes basically things like stocks, bonds, and real estate and how diversification a mix of investments can make investing a lot safer.
He laid it out logically in a step-by-step process, and he talked about a wider range of investments, international stocks and real estate and gold. Suddenly, I got excited about investing. Is your life whole? Do all the pieces — your job, your expenditures, your relationships, your values — fit together? The purpose of Your Money or Your Life is to transform your relationship with money.
That relationship encompasses more than just your earning, spending, debts and savings; it also includes the time these functions take in your life. In addition, your relationship with money is reflected in the sense of satisfaction and fulfillment that you can get from your connection to your family, your community and the planet.
Once you have changed the nature and function of your interaction with money, through following the steps, your relationship with money will be transformed — you will reach new levels of comfort, competence and consciousness around money. Many books on money are available today. What these books have in common is that they assume your financial life functions separately from the rest of your life. This book is about putting it all back together.
It will take you back to basics — the basics of making your spending and hopefully your saving of money into a clear mirror of your life values and purpose. It is about the most basic of freedoms — the freedom to think for yourself. They finally understand the basics of money.
They reconnect with old dreams and find ways to realize them. With a great sense of freedom and relief, they learn how to distinguish between the essentials and the excess in all areas of their lives and how to unburden themselves. They find their relationship with their mates and children improve. Their new financial integrity resolves many inner conflicts between their values and their lifestyles.
Money ceases to be an issue in their lives, and they finally have the intellectual and emotional space to take on issues of greater importance. At a tangible level, they retire their debts, increase their savings and are able to live happily within their means. They stop buying their way out of problems and instead use such challenges as the opportunity to learn new skills.
Overall, they heal the split between their money and their life — and life becomes one integrated whole. The old road map for money has trapped us in the very vehicle that was supposed to liberate us from toil. And it delivered — but only as long as people really needed more material possessions. When we are not taking our identity from our jobs, we are identified as consumers. We buy them the newest toys to prove our love. Our old financial map, instead of making us more independent, fulfilled individuals, has led us to a web of financial dependencies.
The material progress that as supposed to free us has left us more enslaved. At some point in the last forty years, though, conditions began to change. For many people, material possessions went from fulfilling needs to enhancing comfort to facilitating luxury — and even beyond to excess. Unlike the past, problems began to emerge that could not be solved by providing more material goods.
The planet itself began showing signs of nearing its capacity to handle the results of our economic growth and consumerism — water shortages, topsoil loss, global warming, ozone holes, species extinction, natural resource degradation and depletion, air pollution and trash buildup are all signs that our survival is in question. New tools for navigation are needed. What we need is a new financial road map that is based on current global conditions and offers us a way out.
It requires thinking in new ways. Until you can deliberately and dispassionately question your own inner road map for money, you will be stuck in classic financial dead ends, such as: Spending more than you earn. Buying high and selling low. Not liking your job, but not having a way out. Needing two paychecks to make ends meet.
Being so confused by money that you leave it to the experts, who in turn feed on your ignorance. Exploring the following concepts will transform your relationship with money and will lead you to FI — Financial Intelligence, Financial Integrity and even Financial Independence. Financial Intelligence In order to gain Financial Intelligence you first need to know how much money you already have earned, what you have to show for it, how much is coming into your life and how much is going out.
You also need to know what money really is and what you are trading for the money in your life. One tangible outcome of Financial Intelligence is getting out of debt and having at least six months of basic living expenses in the bank. If you follow the program we present, it will lead to Financial Intelligence. Financial Integrity Financial Integrity is achieved by learning the true impact of your earning and spending, both on your immediate family and on the planet.
It is knowing what is enough money and material goods to keep you at the peak of fulfillment — and what is just excess and clutter. Financial Independence Financial Independence is defined as having an income sufficient for your basic needs and comforts from a source other than paid employment. Financial independence is an experience of freedom at a psychological level.
You are free of the guilt, resentment, envy, frustration and despair you have felt about money issues. Financial Independence has nothing to do with rich. Financial Independence is the experience of having enough — and then some. The old notion of Financial Independence as being rich forever is not achievable. Enough is. Enough for you may be different from enough from you neighbor— but it will be a figure that is real for you and within your reach.
Your Money or Your Life If someone thrust a gun in your ribs and said that sentence, what would you do? Most of us would turn over our wallets. The threat works because we value our lives more than we value our money. Or do we? Eventually we may have all the comforts and even luxuries we could ever want, but inertia itself keeps us locked into the nine-to-five pattern.
If the daily grind were making us happy, the irritations and inconveniences would be a small price to pay. Our levels of debt and our lack of savings make the nine-to-five routine mandatory. In a sample of over people, from both the United States and Canada, the average happiness score was consistently between 2. If this were just a private hell it would be tragedy enough. Our affluent lifestyles are having an increasingly devastating effect on our planet.
We project onto money the capacity to fulfil our fantasies, allay our fears, soothe our pain and send us soaring to the heights. In fact, we meet most of our needs, wants and desires through money. We buy everything from hope to happiness. We no longer live life, we consume it. We have come to believe, deeply, that it is our right to consume. If we have the money, we can buy whatever we want, whether or not we need it, use it or even enjoy it.
We have taken our right to consume to heart, and perhaps placed it above other rights, privileges and duties of a free society. At the same time, between the ads, our televisions, radios and newspapers are reporting the bad news about the environment. Product packaging is clogging the landfills. Product manufacturing is polluting the groundwater, deforesting the Amazon, fouling the rivers, lowering the water table, depleting the ozone layer and changing the weather.
Transforming our relationship with money and reevaluating our spending activity could put us and the planet back on track. The beginning of a new road map for money There is a word that provides the basis for transforming your relationship with money.
10 YEARS AFTER 9 11 IS AMERICA A BETTER PLACE NEW BERN
There are no shortcuts to building wealth, but there are strategies that can help your money go further. For example, investing in mutual funds in tax-advantaged accounts through your workplace, like a k , is a great way to get started. And if you get a company match on your contributions, even better. If you have a traditional k at work with a match, invest up to the match. Then, you can open a Roth IRA. The only downside to a Roth IRA is that it has lower contribution limits than a k.
Have a Roth k with good mutual fund options? Even better! Not having to pay taxes on that money means you keep hundreds of thousands of dollars in your pocket. If you ever get confused about which account is best, just remember: Match beats Roth beats Traditional. Diversify your investment portfolio. Whenever someone talks to you about investing, the word diversification probably gets thrown around a lot.
After all, the last thing you want to do is treat your retirement portfolio like the Kentucky Derby and bet it all on one horse. Below are the four mutual fund categories we talk about and the reasons why we recommend them: Growth and income: These funds create a stable foundation for your portfolio. These can be described as large, well-known big and boring American companies that have been around for a long time and offer goods and services people use regardless of the economy.
Growth: This category features medium or large U. Unlike growth and income funds, these are more likely to ebb and flow with the economy. For instance, you might find the company that makes the latest "it" gadget or luxury item in your growth fund mix. Aggressive growth: Think of this category as the wild child of your portfolio.
You may see these referred to as foreign or overseas funds. It can be tempting to get tunnel vision and focus only on funds or sectors that brought stellar returns in recent years. Just remember, nobody can time the market or predict the future unless you happen to have a time-traveling DeLorean parked in your driveway.
Before committing to a fund, take a step back and consider the big picture. How has it performed over the past five years? What about the past 10 or 20 years? Choose mutual funds that stand the test of time and continue to deliver strong returns over the long haul. Brush up on investing lingo. But a basic understanding of some of the most common terms will help. Cost: Make sure you understand the fee structure that your financial advisor uses to get paid.
Large-, Medium- and Small-Cap: Cap stands for capitalization, which means money. To most investors though, it refers to the size and value of a company. Medium-cap companies are moderately risky, and small-cap companies are the riskiest—but have the biggest payoffs. Performance Rate of Return : Again, you want a history of strong returns for any fund you choose to invest in. Focus on long-term returns —10 years or longer if possible. Portfolio: This is simply what your investments look like when you put them all together.
Sectors: Sectors refer to the types of businesses the fund invests in, such as financial services or health care. A balanced distribution among sectors means the fund is well diversified. Turnover Ratio: Turnover refers to how often investments are bought and sold within the fund.
Actively managed funds are managed by professionals who research what's out there and buy with an eye toward beating the market. While some fund managers might achieve this in the short term, it has proved difficult to outperform the market over the long term and on a regular basis. Passive investing is a more hands-off approach and is rising in popularity, thanks in large part to the ease of the process and the results it can deliver.
Passive investing often entails fewer fees than active investing. Calculate your budget Thinking about your budget in two ways can help determine how to proceed: How much do mutual funds cost? Aside from the required initial investment, ask yourself how much money you have to comfortably invest and then choose an amount. Which mutual funds should you invest in? But what initial mix of funds is right for you? Generally speaking, the closer you are to retirement age, the more holdings in conservative investments you may want to have — younger investors typically have more time to ride out riskier assets and the inevitable downturns that happen in the market.
Decide where to buy mutual funds You need a brokerage account when investing in stocks, but you have a few options with mutual funds. You also can buy directly from the company that created the fund, such as Vanguard or BlackRock, but doing so may limit your choice of funds. You can also work with a traditional financial advisor to purchase funds, but it may incur some additional fees. Most investors opt to buy mutual funds through an online brokerage, many of which offer a broad selection of funds across a range of fund companies.
If you go with a broker, you'll want to consider: Affordability. More on these below. Fund choices. Workplace retirement plans may carry only a dozen or so mutual funds. You may want more variety than that. Some brokers offer hundreds, even thousands, of no-transaction-fee funds to choose from, as well as other types of funds like ETFs.
Research and educational tools. With more choice comes the need for more thinking and research. It's vital to pick a broker that helps you learn more about a fund before investing your money. Ease of use. A brokerage's website or app won't be helpful if you can't make heads or tails of it. You want to understand and feel comfortable with the experience.
Understand mutual fund fees Whether you choose active or passive funds, a company will charge an annual fee for fund management and other costs of running the fund, expressed as a percentage of the cash you invest and known as the expense ratio. This mutual fund calculator can help Mutual funds come in different structures that can impact costs: Open-end funds: Most mutual funds are this variety, where there is no limit to the number of investors or shares.
The NAV per share rises and falls with the value of the fund. Closed-end funds: These funds have a limited number of shares offered during an initial public offering, much as a company would. There are far fewer closed-end funds on the market compared with open-end funds. Most funds available to individual investors are currently no-load. Here's our roundup of the best brokers for mutual funds 5.
Manage your portfolio Once you determine the mutual funds you want to buy, you'll want to think about how to manage your investment. One move would be to rebalance your portfolio once a year, with the goal of keeping it in line with your diversification plan. For example, if one slice of your investments had great gains and now constitutes a bigger share of the pie, you might consider selling off some of the gains and investing in another slice to regain balance.
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