Tag: financial literacy

  • Furloughs Show Why You Need Savings and Parachute Money

    Furloughs Show Why You Need Savings and Parachute Money

    Making headlines this week, the federal government shut down, resulting in hundreds of thousands of federal employees being furloughed.

    When someone is furloughed, he doesn’t receive a paycheck. Even if that person eventually receives backpay, furloughs can be a huge problem for those individuals.

    Why?

    Because most people, even high-earners, live paycheck to paycheck.

    When you’re furloughed, money stops coming in. But, money keeps flowing out.

    The mortgage still needs to be paid.

    The kids still need to eat.

    The credit card balances are still due.

    As reported by CBS News:

    But even federal workers who eventually receive back pay can suffer during a shutdown, as many of them live paycheck to paycheck, [Dan Koh, former chief of staff of the Labor Department] added.

    “Even if you are entitled to back pay, a lot of people can’t go even a couple of days without their regularly scheduled paycheck,” he told CBS News. “If you have to pay your subway fare, for gas, if something breaks in your home, and you’re not getting paid, it places extreme stress on government employees,” he said.

    So, what can we do to help protect ourselves from furloughs or any other sudden loss of income?

    We can protect ourselves in two ways.

    First, we can protect ourselves with an emergency savings account.

    Second, we can protect ourselves with parachute money.

    For the ultimate protection, we can have a fully-funded emergency savings account and parachute money.

    Let’s take a look at exactly what that means.

    person using MacBook reflecting that the bills still need to be paid when you are furloughed, which is why emergency savings and parachute money are so important.
    Photo by Austin Distel on Unsplash

    Protect yourself from a sudden loss of income with an emergency savings account.

    The first savings account you need is commonly referred to as an emergency savings account. This is your ultimate security blanket for whatever life throws at you.

    For example, if you are furloughed and lose your source of income, your emergency savings will keep you afloat until you’re working again.

    The idea is to use your savings so you don’t have to pull from your long-term investments.

    Your emergency savings is not just for when you get furloughed or lose your job. Your emergency savings will also protect you in times of emergency (brilliant, huh?), like unexpected medical bills or expensive home repairs.

    The idea remains the same: instead of pulling from your investments, you will have cash available in your savings account to cover your needs.

    Aim for 3-6 months of Now Money saved for emergencies.

    Aim for building up 3-6 months of your Now Money saved in a dedicated emergency savings account.

    In your Budget After Thinking, Now Money represents the consistent, reoccurring expenses that you need to pay every month to take care of yourself and your family.

    Since you will only be using this money in times of emergency, you can, and should, forego some of life’s luxuries until you get back on track.

    The same is true for fueling your Later Money goals. Take a pause until you sort out whatever it was that caused you to spend your emergency savings in the first place.

    While your emergency savings account is your first line of defense when you are furloughed, I prefer having an extra layer of protection.

    I refer to this additional protection as Parachute Money.

    What is Parachute Money?

    Parachute Money is one of my favorite concepts in all of personal finance.

    The analogy goes like this:

    Pretend your life is like flying on an airplane.

    For whatever reason, you decide you need to get off this airplane. Maybe conditions outside of your control have forced you to jump. Or, maybe you’ve decided that it’s time to take control and make a change.

    Either way, you’re ready to jump. 

    All you need is a parachute.

    You have a choice between the only two parachutes on the plane.

    The first parachute has only one string (or line) connecting the canopy to the harness . You think to yourself, “This doesn’t seem very safe. What if that one string breaks? That would end very badly for me.”

    Then, you look at the second parachute. 

    The second parachute has 10 strings. You say to yourself, “OK, this one looks much safer. If one string breaks, the parachute still has nine other strings to keep me safe. Even if something goes wrong with one or two strings, I would glide safely to the ground.”

    It’s obvious which one of these parachutes to choose, right?

    OK, cool.

    But, what does a parachute have to do with money?

    Each of your income sources is like a string on your parachute.

    The central idea of Parachute Money is to create multiple sources of income so you are not beholden to any one source. 

    Picture each source of income as a string on your parachute. The more strings on the parachute, the stronger it is.

    With Parachute Money, if one of your sources of income dries up, like when you are furloughed, you are more than covered with your other income sources.

    Of course, the more sources of income you have, the stronger your personal finances are.

    Parachute Money includes your primary job, any side hustles, any income generating assets, and your emergency savings account. It also includes the income of your significant other, if you share finances.

    The key to Parachute Money: protect yourself with as many investment and income sources as you can.

    That’s why in addition to my primary job as a mesothelioma attorney, I invest in the stock market, own rental properties and am an adjunct law school professor.

    It is not easy to maintain an emergency savings account of 3-6 months.

    Having 3-6 months of emergency savings is a wonderful achievement. It takes time and discipline to build up that level of savings.

    Personally, I’ve struggled to accumulate a sufficient emergency savings account.

    It’s not that I have a low saving rate.

    It’s that I’ve chosen to prioritize investing in real estate for the past seven years. Whenever I had enough money saved up for a down payment, I bought another property.

    Admittedly, this was a risky strategy.

    That’s why I do not recommend this approach for most people.

    Instead, for just about everyone reading this, I would recommend you build up your emergency savings account before moving to other financial goals.

    a close up of person playing a board gam ereflecting that the bills still need to be paid when you are furloughed, which is why emergency savings and parachute money are so important.
    Photo by Yuri Krupenin on Unsplash

    Did you notice that I said “just about everyone reading this”?

    That’s because I think people who are protected by parachute money have earned the right to take more risks at the expense of their emergency savings.

    Let me explain.

    If you have parachute money, you can get away with a smaller emergency savings balance in the short run.

    I was comfortable underfunding my emergency savings account in the short run because I had a strong parachute with multiple income streams.

    As I mentioned, my wife and I were both working as attorneys and had various income streams. If one of our income streams dried up, such as during a furlough, we would have been protected by our other income streams.

    Because of these multiple income streams, we were comfortable taking on the risk of having a low emergency savings balance.

    If you are in a similar position and have multiple streams of income, you may also feel comfortable with a smaller emergency savings balance.

    From where I sit, you’ve earned the right to invest your money rather than letting it sit in a savings account. If that’s your choice, I wouldn’t blame you. I made the same choice.

    That said, I would not recommend you shortchange your emergency savings in the long run. While it’s OK to temporarily prioritize other investments, I still believe that an adequate emergency savings account is essential to a healthy financial life.

    That’s why I am now focused on building up my emergency savings instead of acquiring more real estate. I’ve reached a good place with my investments. Now it’s time to focus on protecting my family.

    I think of it like this: my parachute is otherwise very strong between my primary job, my adjunct teaching job, my rental properties, and my other investments.

    The one string that I need to add is a sufficient emergency savings balance. That’s why building up my emergency savings will be my top money goal for 2026.

    When you combine emergency savings and parachute money, you are as protected as possible.

    The ultimate level of financial protection comes from having an emergency savings account and parachute money.

    You are protected in a variety of ways if one of your income streams dries up.

    If you haven’t prioritized an emergency savings account or developing parachute money, let the recent government shutdown serve as a reminder of how important these concepts are.

    Whether you are in the tech industry or an attorney or a consultant, there’s no guarantee that your job will last forever.

    The overall economic outlook is hazy at best right now. Ask five “experts” what the economy will look like in two years and you’re likely to get five different answers.

    It’s up to each of us to build in multiple layers of protection in our financial lives to avoid disaster if our primary source of income dries up.

    Do you have an emergency savings account?

    How strong is your parachute?

    Let us know in the comments below.

  • Financial Independence is Not About a Life of Deprivation

    Financial Independence is Not About a Life of Deprivation

    Stop me if you’ve heard this advice before:

    “Cancel all your subscriptions and save $1,000 a year!”

    “Cut out your morning coffee if you really want to be wealthy!”

    “Buy your Christmas presents in January when the sales start!”

    Because of advice like this, there’s a common misconception that people who want financial independence have to lead a life of deprivation.

    Nope.

    I refuse to believe that.

    Financial independence about so much more than that.

    Financial independence is not reserved for people willing to cut their spending to the bone.

    It’s for anyone willing to make intentional money decisions, including the decision to earn more money and not cut spending.

    How did financial independence become synonymous with deprivation?

    As my three-year-old asks during story time, “And, then there’s a problem?”

    Yes, son, there’s a problem.

    Too many people believe that financial independence is only about cutting spending.

    That’s a big problem that is holding people back.

    See, most of us lawyers and professionals work a ton of hours. We are already making major sacrifices.

    To throw in major reductions in spending on our way to financial independence is not a worthwhile tradeoff.

    Life is too short. None of us are guaranteed tomorrow.

    I learned this lesson a long time ago by representing clients with mesothelioma, a sudden and fatal cancer.

    That’s why I never encourage anyone to cut out spending on things and experiences that make them happy today.

    Does this mean we should all go out and spend every dollar we make?

    Of course not.

    No matter what, you’ll always need to live within your means.

    If you are spending more than you’re earning, you’ll never be financially independent.

    However, if you earn decent money and invest it the right way, you will reach financial independence.

    And, you don’t need to stop spending money on the way.

    FIRE has taken on an unintended meaning.

    One of the problems in the personal finance space is that many people first learn about financial independence in the context of FIRE (Financial Independence, Retire Early).

    Unfortunately, there’s a stereotype that FIRE is only for people willing to aggressively lower their expenses.

    In other words, the mistaken belief is that people who practice FIRE can only survive if they cut out most of life’s luxuries.

    Even though this misconception fails to capture the true spirt of FIRE, the damage has already been done.

    Too many people who I speak with get so discouraged by hearing “cut, cut, cut!” that they lose all interest in pursuing financial independence.

    It’s not that these people are financially irresponsible. They mostly live within their means and save for important goals.

    At the same time, they want to enjoy everything that life has to offer. And as mentioned above, I don’t mean enjoy life “years down the road.” They work hard and want to spend money to enjoy life today.

    For people like this, FIRE’s perceived focus on deprivation is unappealing.

    This is one of the reasons I don’t like to use the word FIRE around here. I prefer FIPE: Financial Independence, Pivot Early.

    Standing on a sheer ledge illustrating that financial independence is about having more, not spending less.
    Photo by Jason Hogan on Unsplash

    Have you noticed in the blog that we talk more about investing than cutting expenses?

    If you’ve been a consistent reader of the blog, you likely noticed that we haven’t talked much about cutting back on spending lately.

    We’ve been focused on creating wealth through investing, whether your preference is to invest in stocks or real estate.

    I certainly encourage people to generate as much fuel as possible for their investments, especially early in their careers.

    That way, you can benefit from long-term wealth generators like compound interest and appreciation.

    Generating more money to invest, of course, involves making spending choices. These types of choices are the essence of the budgeting process.

    However, instead of focusing on cutting your expenses to the bone, I recommend you create a reasonable Budget After Thinking that you can actually stick to.

    If you eliminate all the fun stuff, no budget will last very long.

    In a lot of ways, this advice is like dieting. Sure, you can lose 10 pounds in a few weeks if you eliminate every indulgence. But, how long is that diet going to work?

    I recommend that you have a budget that you can stick to long term. Then, commit yourself to fighting lifestyle creep as you start making more money.

    If you can do those two things, you don’t have to dramatically cut your expenses.

    Yes, you have to keep your spending within reason.

    No, you don’t have to cancel all your subscriptions.

    Focus on earning more, not just spending less.

    A good friend of ours just made $750 by doing one property showing. In total, she probably worked an hour to earn that money.

    Compare that to the advice of cutting out your daily coffee ritual. If you consciously deprive yourself of coffee every day for an entire year, you could save about $1,000.

    What would you rather do?

    Work just a little bit more with a side hustle of your choosing, or cut out something that you enjoy each morning?

    Do you really have to think that long about it?

    Of course, you already know which option I’m pursuing.

    woman sitting by water Bodega Bay ocean with woman standing by water illustrating that financial independence is about having more, not spending less.
    Photo by Becca Tapert on Unsplash

    I am a big fan of side hustle.

    I’ve had side hustles for just about my entire career as a lawyer.

    My first side hustle was as an adjunct professor at a local law school, teaching just one class. I eventually turned that into teaching four classes.

    In the meantime, I also launched a rental property business with my wife, now managing 11 units in Chicago and Colorado.

    We’re doing this with three young kids at home. I’m not bragging. My point is that I roll my eyes whenever anyone tells me he is too busy to make extra money.

    By the way, earning more money does not only apply to side hustles.

    There are always ways to make more money within your primary job.

    For example, can you earn a larger bonus by performing better?

    Can you ask your employer for more responsibilities and a corresponding raise?

    Or, can you earn additional money by generating business for your company?

    Lawyers, like most professionals, have the ability to earn more money if they generate business. That means bringing in clients.

    How can you find these clients?

    You can make it a priority to go to more events where you might meet potential clients.

    You could launch a blog or create other content to help people find you and know what you do.

    Either one of these pursuits could be your side hustle.

    There are endless opportunities for anyone that is motivated and is looking to earn more money.

    And when you earn that additional money, you’re on your way to financial independence without having to sacrifice the things that make your daily life enjoyable.

    OK, but I don’t even like coffee.

    I know, I’m picking on coffee. Coffee is an easy target, but it’s just one example.

    Maybe coffee is not your problem. Let’s say that you’ve cut out family vacations.

    Family vacations can be expensive. There’s no doubt about it.

    But instead of eliminating vacations, what if you could find a way to earn an extra $5,000? That could turn into a really nice family vacation.

    For some people, this is a no-brainer. They find a way to earn more money.

    Other people will simply skip the family vacation because it’s too expensive.

    At this stage in my life, I’m not willing to do that. I have three young kids. I already feel like they’re growing up too fast.

    A year ago, my daughter wouldn’t let go of my hand when I walked her to school. Now, she’s “too cool” to waive goodbye to Daddy.

    The idea of skipping out on family vacations does not appeal to me at all. I know that there will come a day when I would really regret that choice.

    Instead of eliminating family vacations, I would rather find a way to make more money.

    You can have anything you want; you just can’t have everything.

    Warren Buffett famously told his kids that they could have anything they wanted. They just couldn’t have everything.

    That sums up my approaching to spending. If there’s something I truly want that doesn’t currently fit in my budget, I would prefer to earn more instead of giving up on having that thing or experience.

    I might get there through a side hustle. I might get there through investing. If it’s something I value enough, I will get there one way or the other.

    If you focus on your income, not just cutting expenses, you can continue your journey to financial independence without giving up these things that make life special.

    Or, you can cut out the coffee and vacations, if that’s your preference.

    I’d rather challenge myself to make more money so I don’t have to make those sacrifices.

    Do you think financial independence is only for people willing to aggressively cut their spending?

    Or, do you agree that financial independence is for anybody willing to work for it?

  • Capital One Settlement: A Reminder to Evaluate Your Bank

    Capital One Settlement: A Reminder to Evaluate Your Bank

    How long have you been with your current bank?

    Do you even remember why you opened an account with that bank in the first place?

    For many of us, we opened our first “adult” bank accounts in our 20s. We probably just picked the closest bank to our apartment. I doubt many of us (myself included) put much thought into who we banked with.

    Because it’s human nature to resist change, I’m guessing many of us have never thought about whether that bank is still a good fit at the current stage of our lives.

    In light of Capital One’s massive class action settlement based on allegations that it deceived its customers, now seems like as good a time as ever to revaluate who we bank with.

    More on the settlement below.

    First, a little personal context about why I’m thrilled that Capital One is not getting away with its deceptive scheme.

    I banked with Capital One for many years.

    For a long time, I used Capital One for all my savings accounts. When I started law school in 2006, there was a Capital One cafe right next to my school.

    You could get a cup of coffee for $.75 and talk to a banker at the same time. It was a cool concept and convinced me to bank with Capital One.

    I told everyone about how great Capital One was. I had Capital One savings accounts and a Capital One credit card. You could say I was a huge Capital One fan.

    Key word: was.

    In November 2023, I had been a loyal Capital one customer for 17 years. This was during the time period when interest rates on savings accounts were rising dramatically. 

    Many banks were advertising rates as high as 4% or 5%, which were higher than most of us had ever seen.

    One day that November, for whatever reason, I logged into my Capital One account to see what rate I was earning.

    I was sure it would be in the 4% range, and probably closer to 5%, since Capital One was a leader in online banking.

    When my statement loaded, I was shocked.

    0.30%!

    Shocked probably isn’t the right word. I was disgusted. 

    0.30% in 2023 might as well have been 0.0%.

    I refused to believe that a bank that I had banked with for 17 years could do this to a loyal customer.

    What the heck happened?

    Well, Capital One, unbeknownst to me, switched my savings from its high interest platform into an account with the much lower interest rate.

    At the same time, Capital One was still advertising and offering top rates to new customers.

    When I discovered the sneaky switch, I immediately closed all of my accounts and transferred my money to a new bank. I no longer have a Capital One credit card, either.

    It wasn’t the amount of interest I lost out on that bothered me. 

    This all happened during that time when my wife and I were aggressively acquiring properties, so we never had a lot of money sitting in savings for an extended period.

    So, my anger wasn’t just about the interest.

    For me, it was about the principle. I don’t want to have any relationship with a bank that would do that to its customers, especially long-term customers like me.

    I did a quick search in my inbox and found a Capital One statement from December 2022 showing a 0.30% interest rate. That means Capital One had deceived me for at least a year before I caught on. 

    I have to admit that writing this post is reopening old wounds. Although, learning about the settlement definitely helps.

    a bank sign lit up in the dark as a reminder to always evaluate your banking relationships.
    Photo by POURIA 🦋 on Unsplash

    I am happy to report that Capital One did not get away with it.

    It wasn’t just me who was getting ripped off by Capital One.

    I am one of the many people that Capital One switched out of high interest rate savings accounts into inferior products.

    These deceptive practices were subject of a federal lawsuit brought by the Consumer Federal Protection Bureau.

    Additionally, disgruntled customers filed a class action lawsuit to recoup the interest that people like me missed out on.

    All is well that ends well, right?

    I am pleased to share that Capital One agreed to a $425 million class action settlement for its deceptive practices.

    A court hearing for final approval of the settlement has been scheduled for November 6, 2025.

    If you are, or were, a Capital One 360 Savings account holder at any time from September 18, 2019, through June 16, 2025, you are automatically eligible for benefits. You do not need to fill out a claim form.

    Note: if you’d like to update your mailing address or receive an electronic payment, you can do so here.

    What are the terms of the settlement?

    According to the Notice of Settlement:

    Capital One shall pay $300 million, to be used to make pro rata payments to settlement class members relative to the approximate amount of interest each settlement class member would have earned if their 360 Savings account(s) had paid the interest rate then applicable to the 360 Performance Savings account.

    Translation: if you had a Capital One 360 account, you are going to be paid “some” of the interest you were owed.

    The reason I say “some” is because of the word “relative” in the above paragraph from the notice.

    Capital One allegedly cheated customers out of $2 billion in interest. The settlement is for $425 million. Based on that discrepancy, it does not appear we will get all of the interest we are owed.

    Hopefully, I’m wrong about that and we all receive the full interest we are owed.

    Disclaimer: I am not involved in the settlement negotiations and this is not legal advice.

    If you remained a customer, you will receive an additional settlement amount:

    The second component consists of $125 million, which will be paid by Capital One as additional interest payments to settlement class members who continue to maintain 360 Savings accounts (presently approximately 3/4 of the settlement class). In order to accomplish such additional interest payments, Capital One shall maintain an interest rate on the 360 Savings account of at least two times the national average rate for savings deposit accounts as calculated by the FDIC.

    Translation: If you continue to bank with Capital One, you will receive some additional money. How much you’ll get is complicated.

    By the way, I am happy to learn that customers who stayed with Capital One despite its deceptive practices will earn some additional money.

    In the end, regardless of how much we receive, this news makes me very happy.

    I don’t really care about the payment at this point. I’m happy that Capital One isn’t getting away with its deceptive practices.

    And, I’m happy that news of the settlement serves as a good reminder for all of us to evaluate our current banking arrangements.

    Even with the settlement, I still won’t bank with Capital One again. I cancelled my accounts as soon as I learned that the bank was ripping me off.

    Maybe I’m being childish, but I still refuse to give my business to a company that blatantly deceives its long-time customers.

    ATM showing the importance of always evaluating your banking relationship.
    Photo by Johnyvino on Unsplash

    Why do stories like Capital One’s deceptive practices matter?

    The lesson here is that we all need to regularly evaluate our banking relationships. There is no such thing as “set it and forget it” when it comes to our money.

    You could say stories like this are good reminders to regularly think and talk about money.

    The last thing any of us needs is to be tricked by our own banks. The more we talk about what’s going on, the better chance we will catch these schemes before it’s too late.

    The point is: no matter how much you trust your bank, keep an eye on your accounts.

    No, I am not so cynical that I think all banks are out there intentionally ripping us off.

    However, massive scandals like this are not the only red flags to look out for. Banks notoriously have hidden fees and confusing rules.

    If you are not paying attention to your money, you may be unknowingly paying fees or missing out on better opportunities. It’s up to each of us to regularly evaluate whether our bank is continually providing us with the services we need.

    Are you a current or former Capital One customer?

    If this is the first you’re hearing about Capital One’s deceptive practices, will you continue to bank with them?

    Let us know in the comments below.

  • Being Good with Money is About Consistent Choices

    Being Good with Money is About Consistent Choices

    Having taught personal finance to law students and young lawyers since 2021, I’ve picked up on a common theme.

    At the conclusion of class, my students tend to be motivated and excited to get good with money.

    This makes sense because we spend a lot of time thinking and talking about what our ideal lives look like. Then, we learn how to use money as a tool to build those lives.

    In the weeks following class, I usually hear from several students who want to follow-up about topics we cover in class, like side hustles or investing in real estate.

    I’ll meet each student for coffee downtown and give them some feedback on their ideas. I love these money talks over coffee.

    My students’ excitement to take control of their money and their lives is contagious.

    Their excitement rubs off on me. I leave these conversations motivated to check in on my own money strategies and goals.

    When our chat is wrapping up, I always encourage my students to keep me posted on their journeys. I invite them to check-in every few months so I can help keep them accountable and to adjust any plans we’ve put in place.

    Unfortunately, less than 10% of my students ever follow-up after these initial meetings.

    After a while, I figured out what was going on.

    See, every now and then, I’ll run into one of these former students at a lawyer event or hanging around the courthouse. I’ll ask them about work and life and eventually about the money plan we talked about.

    That’s when I usually hear something like, “I’m still thinking about that side hustle. I just put it on the back burner for now. I’m going to do it someday.”

    Do you see the problem?

    As a wise man once taught me, “someday” means “no day.”

    a sign that says today is a goo day meaning that someday is no day.
    Photo by Yuliia Martsynkevych on Unsplash

    Financial freedom is about consistent, intentional choices.

    Ask anyone who has reached true financial freedom how they did it, and you’ll pick up on something right away.

    You’ll quickly realize that people who reach financial freedom got there by making consistent, intentional choices with their money.

    They came up with a plan and they stuck with it.

    They didn’t say “some day.”

    Achieving financial freedom is not about being the highest earner or the best investor.

    It’s about consistency.

    There are endless ways to make money. The same goes for investing that money.

    You can reach financial freedom as a lawyer who invests in index funds.

    Just the same, you can be a consultant who owns rental properties.

    Or, an engineer who buys laundromats.

    The point is the avenue you choose to build wealth is less important than the consistency of your choices.

    For example, if you commit yourself to investing 20% of your salary in index funds, you will be well on your way to financial freedom.

    But, if you can’t follow through on your plan for more than a few months, you’re never going to get there.

    Of course, we’ve all experienced this tendency in various areas of life. The easiest examples to think of relate to fitness and healthy eating.

    How many of us have said we’re going to commit to working out five days a week or eating vegetables every meal, only to give up after a couple months?

    It’s not that we want to give up, just that the rest of life gets in the way. We tell ourselves that we’ll return to healthy living someday, which actually means no day.

    When it comes to your money choices, don’t let the rest of life get in the way. Money is such a powerful tool when wielded properly and consistently.

    Don’t waste this powerful tool.

    To help make consistent choices, think about why money matters.

    To help you make consistent money choices, the first step is to think about a simple and powerful question: why does money matter?

    For me and many others, money is about financial independence, which translates to the power to choose.

    When we have the power to choose, we have the power to live a life that conforms to our personal values. That means we can live on purpose, not on auto-pilot.

    What does it mean to live on purpose?

    It means that we can choose to spend our working hours doing what is meaningful to us. It means we can choose to spend more time with the people who are meaningful to us.

    My favorite part during my personal finance for lawyers class is when my students share their motivations with each other. We all learn so much from these honest conversations.

    It’s why I believe talking about money is so important. We all benefit from knowing that we’re not alone in our money worries. We can be inspired by hearing what our friends want from their money and their lives.

    The more you think and talk about why you want to be good with money, the clearer your motivations will become.

    To help you get started, here are three powerful reasons why I want to be good with money:

    1. Money can give you choices.

    This may seem obvious, but when you have money, you have choices.

    You can choose where to live. You can choose who you work for or can work for yourself. On a daily level, you can choose how you eat, exercise, relax, and travel.

    This holds true whether you make $50,000 or $250,000. Of course, your options may be different. The point is that when you’ve made good money choices, you’ll at least have options.

    2. Money can give you personal power.

    This is another way to say that money gives you control of your life situation.

    If you are in a bad relationship, a bad job, or just need a change, money gives you the personal power to do something about it. When you don’t have money, you may be stuck.

    3. Money can give you time.

    When you have enough money to be truly financially independent, you have earned the freedom to do whatever you want with your time.

    As I mentioned earlier, you can spend your working hours at a job that is meaningful to you. And, you can spend more time with people who are meaningful to you.

    It’s been said many times, “time is our most precious resource.”

    When you have money, you can buy your time back.

    woman in white long sleeve shirt reading book on beach during daytime because she is financially free and bought her time back.
    Photo by Constantin Panagopoulos on Unsplash

    What would you do with financial freedom?

    Years ago, I asked myself this important question. I wrote down my answer and called it my Tiara Goals.

    If you haven’t ever actively thought about what you would do with financial freedom, now’s the time to do so. It is extremely motivating.

    Even when you feel like financial freedom is only a distant dream for you, it’s important to actively think about what you want out of life.

    I’d even suggest that the further away you feel from financial freedom, the more important it is to think about what it would mean for you.

    When you’re at your lowest point, visualizing what you would do with financial freedom is a helpful escape.

    Don’t forget to write down whatever you come up with.

    Here are my 7 Tiara Goals for Financial Freedom:

    1. Be with my wife and kids as much as I want. Dad never missed a game. Mom never missed a game. Nana never missed a game.
    2. Not be forced to commute to work on Friday or Tuesday or whatever day, if I need that day for myself.
    3. Choose how to spend my working hours (representing clients, teaching, volunteering, building a business, etc.).
    4. Continue to study and learn constantly.
    5. Take at least one big trip every year.
    6. Never turn down an exciting or smart opportunity because I can’t afford it.
    7. Work alongside people that value my contributions. 

    Keep in mind that I wrote these goals before I had kids and before I was even married. This was also years before the pandemic when working from home was a foreign concept to most of us. 

    I think it says a lot that I was thinking about these things way back then.

    Being consistent means thinking just a little bit about money every week.

    My goal is to help you think even a little bit about your money choices every week. That way, your money life remains in balance with the rest of your life, and you can continually evolve and adapt your choices as your life changes.

    I want to encourage you to think, and to talk, and to choose. If all I do is help you and your loved ones think more purposefully about your money, Think and Talk Money will be a success. 

    Maybe your goal is also financial independence, or the power to choose and to live on purpose.

    Maybe it’s something else entirely. Whatever it is, discovering your motivation is the crucial first step. 

    It’s so important that I’ll encourage you to think about that motivation every week.

    I’ve learned that money is something that we all need to think about as a regular part of our lives. Not that we should only think about money. Or that we need to obsess over money. Simply that we can’t ignore money. 

    How sad is it when we realize our hard earned money has just vanished? That at the end of each month, we have less money?

    If this sounds familiar, you’re not alone. There are a lot of smart people who need somewhere to turn learn about money. Or, maybe just a reminder to actively think about their money. 

    You don’t have to struggle with making continuous money choices alone.

    Most of us could use someone to talk to or something to read to help us learn about personal finance.

    I hope Think and Talk Money can be that place for you.

    I can’t, and won’t, tell you what to do with your money. It’s your life, after all. But, I will strive to help you think and talk with purpose about your money.

    The basic money concepts are easy enough to understand. Consistently making good choices is hard. 

    Most of us could ace a quiz that asked, “Is it a good idea to spend more money than you earn every month and plummet deeper and deeper into debt?”

    Knowing what to do is not the same as actually doing it. Remember, someday is no day.

    That’s why it helps to not be afraid to talk about money. For some reason, most of us choose to deal with money on our own. I’d like to change that.

    There’s a stigma that we shouldn’t talk about money. I’d like to change that, too.

    That way, we all have a better chance of making intentional, consistent choices with our money.

    Have you been excited about money in the past only to lose that excitement not long after?

    Have you tried talking about money with your friends and family to help you stay motivated? If not, what is holding you back?

    Let us know in the comments below.

  • Fix Your Personal Finances Before Investing in Real Estate

    Fix Your Personal Finances Before Investing in Real Estate

    When my students ask me a question about how to start investing in real estate, I tend to respond with a question of my own:

    “How much savings does your personal budget generate each month?”

    Yes, I know. It’s so annoying to answer a question with a question.

    This particular question usually leads to a double dose of annoyance from my students.

    My students are first annoyed that I ignored their question about real estate. They didn’t come to me to talk about something boring, like budgeting. They want to know about the exciting stuff, like becoming a real estate investor.

    What I’ve noticed is that after this initial annoyance fades away, another form of annoyance sets in. My students get annoyed because they can’t actually answer the question.

    They realize they have no idea how much money they’re saving each month because they don’t have a personal budget.

    That’s a problem.

    Not having a personal budget is a problem for anyone who wants to be a successful real estate investor.

    Investing in real estate means running a business. Money comes in and money goes out. To be successful, you have to make sure that more money comes in than goes out.

    This is obvious stuff, right?

    The same logic applies to your personal budget: if you want to get ahead in life, more money needs to come in than goes out.

    The problem is most people have a hard enough time managing their personal finances. How are they going to handle managing business finances?

    That’s why I ask my students, “If you haven’t mastered this idea with your personal budget, are you sure you want to take on the stress and risk of an investment property?”

    It would be much easier to simply invest in an index fund, like VTSAX. At least in that case, you don’t have to manage a business budget. You just have to do your best to constantly add money to your investment account.

    It’s usually around this point when my students start nodding in understanding.

    Before investing in real estate, make sure your personal finances are in order.

    My goal here is not to dissuade you from investing in real estate. I am a big proponent of rental property investing.

    I’ve said it before: I think every professional or lawyer can benefit from owning rental properties.

    My only goal is to help you avoid the mistakes that crush so many beginner real estate investors. One of the biggest mistakes I see is people taking on a major financial commitment (and time commitment) without starting from a strong foundation.

    If you’ve been following along on the blog, you likely noticed the progression in topics we’ve covered.

    You’ll see links to each one of these topics featured on the top of the Think and Talk Money homepage:

    We initially covered each of those topics in order from top to bottom. First, we talked extensively about the mental side of money. Without having your money mindset in the right place, nothing else matters.

    We then spent a lot of time talking about personal finance fundamentals, like budgeting, saving, and handling credit and debt responsibly.

    Only after having our personal finance foundation in place did we talk about more fun concepts like investing and real estate.

    There’s a reason we’ve covered these topics in this order.

    If your money mindset is not in the right place, you won’t be able to stay on budget.

    If you can’t stay on budget, you’ll likely fall into debt.

    When you’re falling deeper and deeper into debt, it doesn’t make a lot of sense to prioritize investing.

    A woman holding a jar with savings written on it suggesting you need to get your personal finances in order before investing in real estate.
    Photo by Towfiqu barbhuiya on Unsplash

    Why bother with real estate if any profits are just going to disappear?

    Let’s focus on that last point for a minute.

    What sense does it make to invest if you’ve never proven to yourself that you can use those investment gains responsibly?

    I never want to see people take on the challenge of investing in real estate just to have any profits disappear because they don’t have a strong personal finance foundation in place.

    Imagine someone does the work to find and sustain a good rental property that generates $1,000 per month in cash flow.

    It’s not easy to earn that much. It takes time and effort, not to mention the risk involved.

    If that same person blows the $1,000 he earned on things he doesn’t care about, what was the point?

    Why take on the risk and do the work if the money will all be gone by the end of the month?

    Unfortunately, this is how many people go through life. They work hard, make good money, and then have nothing to show for it.

    I don’t want that to be your fate. I want you to have a plan for your money before you earn it.

    That means sticking to a budget that consistently moves you closer to living freely on your terms.

    Most of us don’t know where our next dollar is going.

    The reason most people never get ahead with their finances is because they don’t have a plan for where their next dollar is going.

    Their income hits their checking account, they spend it on this or that, and pretty soon that money has disappeared. They haven’t used the money to advance any of their priorities. It’s just gone.

    To me, this is one of the most important money mistakes that we need to fix right away. We definitely need to fix it before we take a chance on investing in real estate.

    If not, you’ll just be making the same mistakes, just with more money to lose.

    Having a plan for our money, before we earn it, is essential if we want to reach our goals. With a plan, we can eliminate the disappearing dollars with confidence that our money is being used to serve our purposes.

    How do you create a plan for your money before you earn it?

    You need to have a budget.

    If you don’t currently have a budget that results in excess money at the end of each month, I encourage you to start there before thinking bout real estate.

    How to create a Budget After Thinking.

    The key to budgeting is to eliminate disappearing dollars by creating a plan for Now Money, Life Money, and Later Money.

    Your Later Money is what you’ll eventually use to accelerate your journey to financial freedom by investing in stocks or buying real estate.

    1. Now Money

    Now Money is what you need to pay for basic life expenses.

    These expenses include housing, transportation, groceries, utilities (like internet and electricity), household goods (like toilet paper), and insurance.

    These are expenses that you can’t avoid and should be relatively fixed each month.

    2. Life Money

    Life Money is what you are going to spend every month on things and experiences in life that you love.

    This bucket includes dining out, concerts, vacations, subscriptions, gifts, and anything else that brings you joy. 

    We can’t be afraid to spend this money. This bucket is usually what makes life fun and exciting. The key is to think and talk so you are spending this money consistently on things that matter to you.

    3. Later Money

    Later Money is what you are saving, investing, or using to pay off debt.

    This bucket includes long term goals, such as retirement plan contributions (like a 401k or Roth IRA), college savings for your kids (like a 529 plan), emergency savings and paying off student loan or credit card debt.

    This bucket also includes any shorter term goals, like saving for a wedding or a downpayment for a house. 

    Most fun of all, this bucket includes any investments you make to more quickly grow your wealth, like investing in real estate or the stock market.

    Later Money is the key category that fuels your ultimate life goals, like financial independence. The more you fuel this category, the faster you can reach your goals.

    black smartphone calculator showing the number 0 indicating how to budget with two simples numbers before investing in real estate.
    Photo by Kelly Sikkema on Unsplash

    When you have strong fundamentals in place, money becomes fun.

    Being good with money doesn’t have to be stressful. Once you have the fundamentals in place, you’ll start to see how each dollar you earn gets you one step closer to financial freedom.

    Before you think about investing in real estate, make sure that your personal finances are in order.

    Owning rental properties means running a business. When the money comes in, you want to make sure it doesn’t go right out.

    Otherwise, the effort, stress, and risk of owning real estate is not worth it. Any dollar you earn is likely to disappear as quickly as it comes in.

    To prevent that from happening, establish good money habits before you buy real estate.

    In the end, you’ll be so happy that you did.

    For any real estate investors out there, did you jump in before establishing strong personal money habits first?

    What advice would you have for beginners thinking about investing in real estate?

    Let us know in the comments below.

  • Is There Value in Keeping Both of Our Sapphire Reserves?

    Is There Value in Keeping Both of Our Sapphire Reserves?

    I recently posted about the major overhaul to Chase’s popular luxury credit card, the Sapphire Reserve. The change catching most people’s attention is the higher annual fee.

    I wrote that even with the increased annual fee, I am keeping the Sapphire Reserve in my wallet.

    I heard from a number of readers who also decided to keep the card despite the increased annual fee.

    Just as good, I heard from some readers who applied for the Sapphire Reserve for the first time after reading my post.

    I love hearing these types of comments from readers. Keep ’em coming!

    Today, I want to share my thoughts on another question that came from multiple readers. The question goes something like this:

    My spouse and I both have our own, separate Sapphire Reserve accounts from before we were married. With the higher annual fee, we are wondering if it makes sense to keep both accounts open.

    If we closed one account, we could then add that person as an authorized user on the other account.

    What do you think?

    This is a great question because there’s lots to think and talk about.

    Besides maximizing credit card value and minimizing fees, this question also touches on how couples manage their finances together.

    While that is an incredibly important conversation, we’ll have to leave it for another day. Today, I’ll simply highlight some of the relevant considerations.

    Finally, I love this question because it’s a good reminder that talking about money is not taboo. We all benefit when we discuss how to use money as a tool that works for us, not the other way around.

    Let’s get to it.

    What changed with the Sapphire Reserve?

    The Sapphire Reserve now comes with an annual fee of $795 (up from $550). That is the highest annual fee in the luxury credit card market.

    On top of that, the fee for authorized users increased from $75 to $195.

    In its press release announcing the revamped card, Chase advertised $2,700 in annual value for cardmembers. 

    Compared to an annual fee of $795, that sounds like a whole lot of value.

    The problem is it takes effort to receive all that value. More than effort, it takes spending. This can get complicated, even with only one card. With two cards, it can be even more challenging.

    For a complete description of all of the potential benefits, you can visit the Sapphire Reserve website.

    Remember that with all credit cards, the more you spend, the more you earn. That’s true whether you are accumulating points or utilizing shopping or travel credits and other discounts.

    This is a good place to emphasize the first rule of responsible credit card usage: 

    Don’t spend money just to earn rewards. That’s a recipe for financial disaster.

    The Sapphire Reserve is no exception to this rule, regardless of whether you have one or two cards in your household.

    Before we go further, it’s important to understand what it means to be an authorized user.

    What is an authorized user on a credit card?

    An authorized user is someone added to the primary account holder’s credit card account. Authorized users typically include spouses, partners or children of the primary cardholder.

    The authorized user gets his own physical card, but all spending is tracked on the primary account holder’s account.

    Importantly, that means that the primary account holder remains responsible for all payments.

    That also means the primary account holder receives all the points earned when the authorized user makes a purchase.

    Break time with aerial view of two people hugging and talking about whether to keep two Chase Sapphire Reserve credit cards.
    Photo by Guilherme Stecanella on Unsplash

    With cards like the Sapphire Reserve, the authorized user gets most of the same perks and benefits as the primary cardholder. Most notably, that includes lounge access and other travel perks.

    Not all credit cards offer the same perks for authorized users. Be sure to understand the rules about authorized users for any card you are considering.

    Before you add an authorized user to your account, make sure you understand that you are 100% responsible for that person’s spending.

    On the flip side, before you become an authorized user, understand that all of your points earned will go the primary account holder.

    If either of these restrictions are enough to give you pause about adding or becoming an authorized user, there’s no need read any further.

    You should continue to have separate credit card accounts.

    And, you should review my post to help you decide whether the Sapphire Reserve is right for each of you on an individual basis.

    If you have no problems with adding somebody as an authorized user, read on to find out whether it makes sense in your situation.

    What is the actual cost difference for adding an authorized user instead of keeping our accounts separate?

    Assuming you are OK with adding or becoming an authorized user, let’s look at what the actual cost is compared to keeping your accounts separate.

    Here are the options for couples that currently have two Sapphire Reserve accounts:

    • Option 1: Keep both accounts open and pay $1,590 in annual fees.
    • Option 2: Close one account, add an authorized user to the open account, and pay $990 in annual fees.

    Note: while you don’t have to add an authorized user to your account, I’m assuming you’re reading this post because you are considering it.

    If you stopped your analysis here, you’d see that there is a $600 difference if the couple keeps both Sapphire Reserve accounts open.

    That’s a lot of money and may lead you to think cancelling one of the cards is the easy decision.

    However, just like we explored in my post on why I’m keeping the Sapphire Reserve, there are ways to offset and reduce the annual fee.

    You can check out my post if you’re curious how I evaluate and use credit cards.

    For today’s purposes, remember that the Sapphire Reserve offers a $300 annual travel credit. The credit gets automatically applied whenever you make a qualifying travel purchase.

    It’s safe to assume that anyone willing to pay $795 for a luxury travel card is going to spend at least $300 per year on travel.

    The same assumption goes for couples thinking about keeping two Sapphire Reserve cards: they are going to spend at least $600 on travel between the two of them each year.

    Applying the $300 travel credit, the total cost for each scenario drops as follows:

    • Option 1: Keep both accounts open and pay $990 in total fees. (Each account holder receives a $300 travel credit, reducing the total cost by $600.)
    • Option 2: Close one account, add an authorized user, and pay $690 in annual fees.

    So, the real question becomes: is it worth an extra $300 annually to keep both Sapphire Reserve accounts open?

    When the extra cost of keeping both cards drops from $600 to $300, the decision gets a bit tougher.

    You may still be thinking that $300 is too much money to spend each year to have two of the same cards in your household.

    Personally, I agree with you.

    Below, I’ll show you what my wife and I do instead of having two Sapphire Reserve cards.

    However, there are some reasons why it may be beneficial for couples to keep both cards. Let’s look at those reasons now.

    Why it might make sense for couples to have two Sapphire Reserve credit cards.

    Here are some of the main reasons why it would make sense for a couple to keep two Sapphire Reserve cards.

    Trust issues. The bottom line is some couples just don’t trust each other when it comes to spending and paying bills. There’s no shame in that. It’s just a reality.

    Like we discussed above, if you find yourself in this situation, it doesn’t make sense to add or become an authorized user. The potential downsides, resentment, and arguments outweigh the $300 in annual savings.

    Accounting challenges. When you add an authorized user, all purchases get tracked together on the primary cardholder’s account. If it’s important for you to know who is making each purchase, this can be an accounting nightmare.

    Plus, some couples maintain separate bank accounts and pay bills separately. Having all credit card purchases appear on only one person’s account makes it more difficult to figure out who should pay for what.

    This shot was taken during a roadtrip with a couple of friends in the Dolomites. This pretty much sums up the lovely adventures we had over there – just us (and some beers) in the mountains for one week. Although it is just a snapshot, it captures a true, precious moment of togetherness and friendship, made possible by using Chase Sapphire Reserve.
    Photo by Felix Rostig on Unsplash

    Business expenses. It’s also not uncommon for lawyers and professionals to use their Sapphire Reserve cards for business purposes and then get reimbursed by their employers.

    If that’s the case, it may not make sense for you to blend personal and business expenses on one card. You could use one Sapphire Reserve strictly for business purposes and the other for personal expenses.

    Impact on your Credit History. You may not want to close your account because of the potential impact it will have on your credit history. This is particularly important if your Sapphire Reserve is the card you’ve had for the longest time.

    While this is a valid concern, there are ways to close your account without having any impact on your credit history whatsoever.

    The best thing to do before you close your account is to transfer your available credit line to one of Chase’s other credit cards, like the Freedom Unlimited.

    The Freedom Unlimited is the only other credit card I keep in my wallet.

    There is no annual fee with the Freedom Unlimited, and it’s the perfect compliment to the Sapphire Reserve.

    If you need help with this part, reach out to me on Instagram or LinkedIn, and I’ll walk you through the exact steps.

    Sign-up Bonuses and Credits. If you are thinking about getting a Sapphire Reserve, now is the time to do it. Chase is offering its biggest sign-up bonus ever: 125,000 points for new applicants.

    Using The Points Guy’s valuation, 125,000 points are currently worth $2,562.50.

    Combined with some of these other reasons, these bonus points might make this decision a no-brainer.

    Besides the sign-up bonus, the Sapphire Reserve comes with a number of other credits and benefits valued at $2,700 annually.

    For a complete description of all of the potential benefits, you can visit the Sapphire Reserve website.

    If you and your spouse or partner will independently take advantage of all these perks, then it could be worth it to keep both cards.

    In the end, if any one of the above applies to your situation, it may make sense to keep two Sapphire Reserve cards despite the extra $300 annual cost.

    My wife and I used to have two Sapphire Reserve cards.

    There was a time in my life when I had 10 different credit cards because I wanted to maximize the points I earned on every purchase.

    My wife and I each had Sapphire Reserve cards, too.

    We did earn a lot of points. But, it was so stressful.

    Keeping track of what card to use for every single purchase was complicated. Making sure we paid off each card every month was even harder. In the end, it wasn’t worth it.

    We now keep things simple, and I recommend most people do the same.

    Today, I only have two credit cards in my wallet: the Sapphire Reserve and the Freedom Unlimited.

    I use the Sapphire Reserve for travel (4 points per dollar spent on airlines and hotels) and dining (3 points per dollar).

    I use the Freedom Unlimited for everything else. The Freedom Unlimited earns 1.5 points across the board for every purchase. In contrast, the Sapphire Reserve only earns 1 point per dollar spent in non-bonus categories.

    Same as me, my wife only carries the Sapphire Reserve and Freedom Unlimited. This way, we can combine points to maximize our rewards. 

    Together, we still earn plenty of points and our finances are much simpler.

    I prefer to have two different cards that offer distinct but complimentary benefits.

    If your household is going to keep multiple cards, I suggest having different cards instead of doubling up on the same one. That’s true whether you combine accounts or keep them separate.

    That way, you can reap a more diverse set of benefits for a comparable cost.

    If you go this route, it’s helpful to keep your credit cards within the same bank (i.e. stick with Chase or stick with American Express) so you can combine points and accumulate rewards faster.

    Even if the Freedom Unlimited doesn’t appeal to you, I’d suggest looking at other credit cards within the Chase portfolio that earn Ultimate Rewards points.

    For example, my wife and I have the Chase Ink Business Unlimited and the Chase Ink Business Cash for our various rental property businesses.

    Each card earns Ultimate Rewards points that we can combine with our Sapphire Reserve.

    Let us know in the comments below how you view having two of the same cards in your household.

    As always, reach out if I can be of any assistance.

  • How to Prioritize Investment Account Types While in Debt

    How to Prioritize Investment Account Types While in Debt

    Recently, we’ve been talking about some tricky money questions related to investing.

    We first looked at whether it makes sense to invest while you’re in debt.

    We then looked at whether to prioritize investing for retirement or for your kid’s college.

    These are questions that commonly come up when I’m teaching law students and young lawyers. Of course, these questions are best answered when we consider both the emotions and the math of money.

    Today, we’ll look at a third question that comes up regularly:

    How should you prioritize certain investment account types, especially if you’re still paying off debt?

    This is another great question.

    If you’re wondering what I mean by different investment account types, you can read about my four favorite account types here.

    Below are my thoughts on how I would choose between different investment account types while paying off debt.

    Let me know if you agree or would prioritize a different order in the comments below.

    1. Invest just enough to qualify for your employer match.

    Your first goal should be to invest enough in your 401(k) plan to qualify for the employer match.

    Many employers today offer a match to incentive employees to contribute to their 401(k) plans. To qualify for the match, you must be participating in your company’s plan and make contributions yourself.

    The match is usually a percentage of your overall salary, usually between 3% and 6%. 

    For example, let’s say your salary is $100,000 and your employer offers to match your contributions up to 5% of your salary.

    That means if you contribute $5,000 (5% of your salary), your employer will contribute an additional $5,000 (5% match) to your account.

    In other words, your $5,000 automatically turns into $10,000.

    Think about that for a moment.

    That’s a guaranteed 100% return on your contribution. You put in $5,000 and you automatically get another $5,000. You won’t find a guaranteed return like that anywhere else.

    That’s why if your company offers a match, it’s a no-brainer to take advantage of that match.

    For this reason, an employer match is often described as “free money.”

    I don’t like the term “free money” because it implies that you have not earned that money as an employee for your company. I prefer to refer to the company match as a bonus you’ve rightfully earned. 

    The key is to accept that earned bonus by ensuring you are meeting the minimum requirements to qualify.

    Whether you think of it as free money or as a bonus you’ve earned, make sure you contribute enough to your 401(k) plan to qualify for the employer match.

    2. Pay off all credit card debt.

    After you hit the employer match, and before you think about further investments, you should pay off all credit card debt.

    Note that credit card debt is in a category of its own because of the extremely high interest rates that accompany credit cards.

    Currently, the average credit card interest rate is 20.12%.

    The S&P 500 has historically averaged a 10% annual return.

    That gap is so large that it’s a good idea to pay off your credit card debt before turning to further investments.

    Think about it like this: with credit card debt, you are guaranteed to pay a penalty of around 20% until you pay off that debt. When investing, you can reasonably hope to earn around 10% interest.

    Because the penalty you’re paying is twice the rate you’re hoping to earn, the smart move is to eliminate that penalty.

    For help on paying off your credit card debt, check out my top 10 tips here.

    Why not pay off your credit card debt entirely before investing in your 401(k)?

    You may be wondering why I recommend qualifying for your employer match before paying off credit card.

    Even with such high credit card interest rates, there’s a good reason to prioritize qualifying for your employer match. We touched on that reason above.

    Let’s revisit our example. With an employer match, if you contribute $5,000, your employer will also contribute $5,000.

    As we said, that’s like earning a 100% guaranteed return on your money. A 100% guaranteed return is too good to pass up.

    No other reasonable investment option offers a 100% guaranteed rate of return. You can’t even reasonably hope to match the 20% penalty that credit card companies charge.

    That’s why eliminating your credit card debt should be your next priority after receiving your employer match.

    3. Allocate 75% of available funds to other loans and 25% to investments.

    Once you have paid off your credit card debt, I recommend putting 75% of your available funds to loans and 25% to other investments.

    When I say loans, I am referring to student loans, personal loans, lines of credit, and HELOCs. Note, I am not referring to primary mortgage debt.

    It’s not uncommon for law students to have hundreds of thousands of dollars in debt. The same is true for students in medical school and business school.

    It’s not just people with student loan debt who face this question. As one example, perhaps you’ve used a HELOC to buy investment property, like I have.

    There’s a reason credit card debt is in a separate category from other loans, like student loans and HELOCs.

    Unlike credit card debt, student loan debt and HELOC debt typically come with lower interest rates.

    The current lowest federal student loan interest rate is 6.53%.

    The current average HELOC interest rate is 8.27%.

    Your loans may have even lower interest rates. Regardless, the odds are that your interest rate is below the historical 10% average annual return of the S&P 500.

    While it’s never a bad idea to eliminate debt, there are some good reasons why you should invest even though you’re in debt.

    We explored these reasons and why I recommend a 75/25 ratio in my recent post on investing while in debt:

    A Tricky Money Question: Should You Invest While in Debt?

    If you’re on board with investing while paying off debt, the question becomes: where should you invest that money?

    That brings us to my next suggestion.

    4. Max out your 401(k) plan.

    Once you reach this step, you should have no credit card debt. You should also be applying either the 75/25 ratio to invest while you’re in debt, or have no other debt to pay off.

    At this point, I suggest maxing out your 401(k) with your remaining available funds.

    The reason I suggest maxing out your 401(k) is because these contributions are made with pre-tax dollars. In other words, you get a tax break today by investing in your 401(k).

    To put it another way, you will save money on taxes every year you contribute to your 401(k) plan.

    Don’t sleep on the impact of taxes on our money decisions. Over the long term, taxes can be hard to predict, but they should not be ignored.

    changed priorities ahead illustrating the options you have as an investor with different account types.
    Photo by Ch_pski on Unsplash

    Nobody really knows what taxes are going to be like in the future. Yes, it’s a safe assumption that taxes will keep going up.

    But, taxes have always been complicated. I’m guessing they will always be complicated. Even if taxes generally go up, there’s no telling the exact impact taxes will have on your personal situation.

    That’s why I prefer to take the guaranteed tax savings now. I’m ok with the possibility of paying more in taxes decades from now. That’s especially true because I have plenty of good uses for those tax savings right now.

    That’s why I recommend maxing out your 401(k) before moving on to my final suggestion.

    5. Max out your HSA, Roth IRA and 529 plan.

    Once you reach this step, you’re in great shape. Reaching this point means you have maxed out your 401(k) plan, which means you’re receiving an employer match.

    It means you have no credit card debt. On top of that, you are paying down your other loans with a 75/25 ratio or have eliminated those loans entirely.

    Now, you have options. You’ve earned the right to choose the best investment account type for your situation.

    Besides a 401(k), my other favorite account types are a Roth IRA, a Health Savings Account (HSA), and a 529 account.

    You can read all about my favorite investment account types in this recent post:

    My 4 Favorite Investment Accounts for Long-term Wealth

    Depending on your income, a Roth IRA may be the best account type for additional retirement savings.

    If you’re healthy and can cover certain medical expenses, maybe you would benefit from an HSA.

    Have kids and worried about paying for college? Maybe a 529 plan is right for you.

    The point is you’ve earned the right to pick the best investment accounts for your present situation.

    You really can’t go wrong with any of these choices.

    What do you think of this plan to prioritize certain investment accounts while in debt?

    What do you think about this plan to prioritize certain investment account types, especially if you’re still paying off debt?

    Let us know in the comments below.

    If you’ve already made it to step 5 and are looking for help with what to do next, the truth is that you have too many options to cover in this post.

    To help you start thinking about your choices, you could:

    • Invest in a traditional brokerage account;
    • Invest in real estate; or
    • Pay down your primary mortgage.

    If you’ve already made it to step 5, reach out and I’d be happy to help you think and talk about your options.

    The best way to reach me is to sign up for my weekly email and reply to any email.

  • Money on My Mind: Bears, Net Worth and Exercise

    Money on My Mind: Bears, Net Worth and Exercise

    On my journey to financial freedom, I’m consistently striving to learn as much as I can from others who have done it before me.

    This week, I read a few great blog posts from some of my favorite authors and bloggers.

    Let’s take a look and see what we can learn together.

    What to do in a bear market.

    JL Collins recently posted about the big mistake that people make during bear markets. A bear market is when the stock market drops by 20%.

    Collins is one of my favorite authors on investing. He just released the new edition to his best-selling book, The Simple Path to Wealth.

    I highly recommend you pick up a copy if you are interested in learning the easy way to invest and grow your net worth.

    You can read my full review of The Simple Path to Wealth in my post here.

    Back to the question at hand:

    As an investor, what should you do during a bear market?

    Nothing!

    Easier said than done, right?

    Human instinct is to act. Our natural instinct tells us to do something when confronted with danger. We’ve all heard the saying, “fight or flight.” It’s our body’s way of protecting us from potential harm.

    For example, if you encounter a bear in the woods, despite what survival experts may tell you, I’m betting you’re running for your life in the opposite direction.

    That’s exactly what my wife and I did when we saw a black bear in Colorado a couple summers ago.

    Even though we were at least 100 yards away when we saw the bear, and the bear was walking away from us, we ran in the opposite direction as fast as we could.

    Survival experts, we are not.

    Doing nothing in a bear market is easier said than done, like not running away from a black bear when you see one on the trail up ahead.

    If you zoom in (and squint), you can see the ferocious beast in this picture.

    When it comes to investing, the saying should be modified to include a third option: “fight or flight or do nothing.”

    And as JL points out, doing nothing is usually the best decision.

    When the market drops, you have the chance to buy stocks at a discount. Whenever the market bounces back, you will benefit from all those discounted stocks you purchased.

    Of course, nobody knows when the market will bounce back. For that matter, nobody knows when it’s going to drop, either. However, history has shown us that the market has always recovered.

    What if the market doesn’t recover?

    Then, we all have bigger problems to worry about than our money.

    It may take a long time for the market to recover. That’s OK. When you invest early and often, time is on your side.

    By combining time and the courage to do nothing, you will benefit immensely in the long run.

    The Rise of Middle Class Multi-Millionaires

    Another one of my favorite authors and bloggers, Financial Samurai, recently posted about the rise of middle class, multi-millionaires.

    If you haven’t picked up a copy of his new book, Millionaire Milestones, I highly recommend it. I recently ranked it as one of my favorite money mindset books.

    You can read my full review of Millionaire Milestones here.

    In his post on middle class multi-millionaires, Financial Samurai raises a great point:

    How come people are so enthralled by high incomes instead of high net worths?

    Like me, have you wondered why people tend to be more interested in someone’s salary rather than his net worth?

    I have one theory for why society continues to value income more than net worth: income can be more easily measured and more easily used for marketing purposes.

    To put it another way: income is sexier than net worth.

    One example I thought of: remember when you applied to college, grad school, law school, etc.?

    Did you notice how schools commonly advertise the average or median income of their graduates. Schools love to show off that if you go to their school, you’ll make a certain amount of money upon graduating. 

    However, you’ll never see data on the net worth of its graduates.

    Why is that?

    Because an impressive net worths can take decades of discipline to manifest. That type of slow progress doesn’t make for sexy marketing for schools.

    Plus, a top flight education may help you earn a high income but doesn’t guarantee a high net worth. Many high earners are also high spenders. You’d be surprised how many people are good at making money but not keeping it.

    It’s up to each of us to turn that income into a high net worth. Again, that’s harder for schools to market.

    If you are a personal finance enthusiast, you know to value net worth more than income. In fact, the most impressive feat of all is when you have a high net worth on just a standard income.

    For my kids, I’d be way more impressed to see what schools crank out students with high net worths 20-30 years after graduation instead of the median income upon graduation.

    To learn how and why to track your net worth, you can read my post here.

    Does early retirement negatively impact your life expectancy?

    I read a fascinating post on Early Retirement Now that looked at the potential consequences of someone’s life expectancy based on when that person retires.

    There has been a lot of academic research done on the topic. Somewhat surprisingly, there are studies that indicate retiring early may negatively impact your life expectancy.

    Check out the post on Early Retirement Now for a closer look at some of these studies.

    I’m not too worried about the conclusions about life expectancy based on when someone retires. At best, there are conflicting studies on that question.

    Rather, what I found most interesting about the post was that I’ve rarely thought about the potential health consequences about retiring early.

    I regularly think about the mental side of retiring early. Specifically, how does someone keep his mind sharp in early retirement?

    This is one of the main reasons I believe in FIPE not FIRE.

    However, I’ve never really thought about the physical effects of retiring early.

    Does retiring early negatively impact your physical health?

    I may have mistakenly assumed that someone’s physical health would automatically peak in early retirement. I’ve based that assumption on the idea that you’ll have so much time to exercise and eat right when you don’t have to worry about a job.

    In other words, if you’re not spending 50+ hours per week sitting at a desk, there would be no excuse to skip out on exercising regularly and preparing healthy meals at home.

    This post has me thinking about other factors I’ve failed to consider.

    For one, your body may trend towards lethargy if you’re not forced to wake up, get dressed and work 50+ hours per week. Plus, as much as people may not like commuting, at least it gets you out of the house and moving around.

    My takeaway is that if you’re considering retiring early, be sure to plan ahead for physical activity as much as mental activity.

    Your body may not want to exercise every day. You may need a motivational boost from group exercise classes or clubs. Maybe you’ll need a personal trainer or coach.

    If you don’t currently have any hobbies tied to physical activity, I would suggest exploring different options before you leave full-time employment. It may take some time to find your groove with an activity or two that interests you.

    Let us know what you think about these posts.

    What do you think about these posts from popular personal finance writers?

    • Are you brave enough to do nothing in the face of a bear?
    • Have you been tricked into thinking a high income is more impressive than a high net worth?
    • What are your thoughts about the physical side of retiring early?

    Let us know in the comments below.

  • How to Think About Investing While in Debt

    How to Think About Investing While in Debt

    One of the most difficult money decisions people have to make is whether to invest while in debt. That’s because it can be challenging to plan for the future while worrying about past debts.

    It’s also a tough decision because we know two things to be true at once:

    Debt can be bad.

    Investing can be good.

    So, should we focus on eliminating the bad thing or doing more of the good thing?

    You can see why it’s a tricky question.

    The way I see it?

    You don’t have to choose only one door to walk through.

    You can invest while in debt.

    I regularly get questions like this from law students who take my personal finance class. People just starting out in their careers are rightfully thinking about whether they should invest while paying off student loan debt.

    It’s not uncommon for law students to have hundreds of thousands of dollars in debt. The same is true for students in medical school and business school. The question about investing or paying off debt makes perfect sense.

    It’s not just people with student loan debt who face this question. Perhaps you’ve used a HELOC to buy investment property like I have. Maybe you have mortgage debt, medical debt, or consumer debt.

    The choice to pay down debt or invest for the future is tricky.

    Whatever the case may be, the choice to pay down debt faster or invest for the future is tricky.

    For people feeling the heavy burden of debt, the idea of investing for some future goal can seem a little bit comical. I completely understand.

    If you’re facing monthly debt payments for the next 10 years, you may not be ready to think about retirement 50 years from now.

    Trust me, I get it.

    I know firsthand how heavy debt can feel.

    In my 20s, I had both student loan debt and credit card debt. It was not fun to carry that debt burden. I’ll never forget the incredible feeling of accomplishment when I paid off those debts. I felt so much lighter. 

    I now have HELOC debt that I’m focused on paying off. That HELOC debt stems from buying five properties in seven years. My real estate portfolio is now exactly where I want it to be, so I’ve shifted from acquisition mode to debt-reduction mode.

    Just about every day, I think about how good it’s going to feel to have that HELOC debt paid off.

    The point is: you don’t have to convince me why you may want to focus on paying off debt. I understand completely.

    However, I think it’s worth considering the advantages of investing at the same time you’re paying off debt. You don’t have to go all-in on paying off debt or all-in on investing. You can strike a balance.

    In today’s post, I’ll share my perspective to help you think about the right balance between debt reduction and investing.

    Four main reasons to invest while in debt.

    There are four main reasons to consider when thinking about whether you should invest even though you’re in debt. If you’re not investing at all because you’re focused on debt, these four reasons should give you something to think about.

    Muir Woods trails illustrating the tricky choice between investing and paying off debt.
    Photo by Caleb Jones on Unsplash

    1. Invest while in debt because of the emotions of money. 

    It feels good to see your investment accounts grow. This is especially true when you are accustomed to looking at huge debt balances on your laptop or phone screen.

    Yes, it feels good to see those debt balances shrink. It also feels really good to see your investment accounts grow.

    As a professional, you work hard for your money. You spend a lot of hours away from home so you can work and make a living. You deserve to experience the fruits of your labor.

    When your career is stressing you out, it can be very uplifting to observe a growing investment account balance month-to-month.

    2. Invest while in debt to develop the habit.

    It’s important to get in the habit of investing as early as possible in your careers. Once you start investing, even if it’s only $25 per month, you are creating a habit. This is the type of habit that will pay off immensely in the long run.

    Humans have a tendency to resist change. That’s why it’s difficult to break bad habits. This tendency also works in our favor when we have established good habits, like investing. We tend to just keep doing what we’ve always done.

    When you’ve established the good habit of investing, it’s easy to increase your contributions as you earn more money. The same is true when you’ve eliminated all your debt. You can easily use the money you had been putting towards debt for your already-established investments.

    That’s because your accounts will already be set up. All you need to do is increase your monthly investment contributions.

    This makes it easier to solidify and benefit from the good habit you’ve cultivated.

    3. Invest while in debt because of compound interest.

    Compound interest is the most powerful force in all of personal finance. The earlier you start investing, the more benefit you’ll get from compound interest.

    You can check out more about the power of compound interest in my post on investing early and often.

    Even investing a small amount of money while paying off debt will lead to massive gains over the long term because of compound interest.

    4. Invest while in debt because of the math.

    Even though money decisions are closely connected to our emotions, the math of investing can be hard to ignore. If you prefer to make money decisions primarily based on the math, here’s what you can do.

    We’ve talked before about how the S&P 500 has historically earned an average annual return of 10%. Of course, there’s no guarantee that you will earn 10% if you invest. You may earn less or you may earn more. Still, based on the historical data, it’s a reasonable estimate.

    You can then compare that 10% return to the amount you’re paying in debt interest.

    Close up of man hand using calculator to figure out whether to invest while in debt.
    Photo by Towfiqu barbhuiya on Unsplash

    For example, let’s say you have student loan debt. In this example, let’s also assume you’ve created an extra $200 in your monthly budget to allocate towards either debt or retirement.

    You’ll next want to look up your current student loan interest rates. For illustration purposes, the current interest rate for undergraduate federal loans is 6.53%. The current interest rate for graduate and professional students is 8.08%.

    Then, you can use an online calculator to help make your decision about whether to invest the $200 or put that money to debt.

    If you put the money to debt, you’ll obviously pay off that debt faster. You can read more about how to easily do these calculations in my post on Debt Snowball vs. Avalanche.

    Likewise, you can use an investment calculator to see how much that $200 will grow in an investment account over the long run. You can see how to do these calculations in my post on risk as the cost to invest.

    Armed with the math, you can then make a decision that makes the most sense to you.

    You may value getting out of debt faster. Or, you may be motivated by the larger balance in your retirement account.

    It may come down to how high the interest rate is on your student loans. The higher your interest rate is, the more sense it makes to prioritize paying off that loan.

    The point is that there are mathematical reasons to start investing even while paying off debt.

    One final note about the math: your student loan interest rate is effectively locked in (unless you have a variable rate). On the other hand, your investment return rate is only a projection. That makes a difference.

    It means that when you are in debt, you are guaranteed to be charged interest every month. In contrast, there are no guarantees you will make money when you invest. As you make your decisions, don’t ignore this key difference.

    I prefer to allocate 75% to debt and 25% to investments.

    When you consider these four main reasons, you may be convinced that it makes sense to invest even while paying off debt. 

    So, the obvious next question becomes: how much money should you put towards debt and how much should you invest?

    The ratio that works for me is 75% towards debt and 25% towards investment goals. In other words, if I had $1,000 to allocate in my budget for debt and investments, I would use $750 for debt and $250 for investments.

    I used this ratio when I had student loan debt and continue to use it to eliminate my HELOC debt.

    You can read more about my primary goal of paying off HELOC debt in 2025 in my post on money and cheeseburgers:

    Great Talk: Money and Cheeseburgers

    This 75-25 ratio gives me the dual benefit of paying off my debt faster while also seeing my investment accounts grow over time. Once my debts are paid off, I will have already established the good habit of investing. In the meantime, I’m currently benefitting from compound interest and the math of investment returns.

    The reason I lean more towards debt is because I don’t like the feeling of being weighed down by debt. It’s hard to feel completely free when you are carrying the burden of debt. That’s why I am currently prioritizing paying off HELOC debt.

    That said, I’m not willing to entirely delay investing for the future. The 75-25 ratio is a good balance for me and helps me accomplish multiple goals.

    75-25 has worked well for me. Having reached my 40s, I’m very happy that I did not neglect my investments entirely while dealing with debt.

    Don’t agonize about finding the perfect ratio between debt and investments.

    Whatever balance works for you, keep one important tip in mind:

    Don’t agonize about finding the perfect balance between debt reduction and investing for the future.

    Take a step back and think about it for a moment:

    Paying off debt is great.

    Investing for the future is also great.

    If you’re doing both of these things in some fashion, you’re already making great money choices!

    If you’re able to pay off debt and invest at the same time, you most likely have already created a successful Budget After Thinking. You have proven that you can stay disciplined enough to allocate funds to your Later Money goals each month.

    You have already done the hardest part.

    I consider this whole conversation of putting money towards debt or investments a win-win decision. There’s no reason to stress yourself out in search of the perfect balance. You’re already winning.

    Find a balance between debt and investments that works for you and stick to it. You really can’t go wrong. Either way, you are making progress on your money goals.  

    Some day in the future your debt will be paid off. 

    The bottom line is, one way or the other, you are going to pay off your debt. That’s assuming you are a reasonably responsible person on a typical career trajectory.

    If you have student loans, it might feel like you will never get out of debt. I assure you that you will.

    To put it in perspective, if you are on a standard repayment plan, you’ll be debt-free in 10 years. For most students, that equates to being debt-free sometime in your 30s.

    My guess is that by the time you retire, you won’t even remember how much debt you had or exactly when you paid it off. The only reason I remember when I paid off my debt is because I’ve been keeping a money journal since 2011.

    On the other hand, towards the end of your career, you will very much be aware of how much money you have saved for retirement. You will be counting on that money to allow you to step away from full-time employment.

    If you’ve figured out your magic retirement number, you’ll know how long you can sustain yourself on your retirement savings. 

    As hard as it is to do when you’re in debt, try and picture that older version of yourself who is nearing retirement. That older version of yourself will be very grateful that you had the discipline to start investing even while paying off debt.

    That’s why I allocate 75% of my available funds to debt and 25% to investments. When my debt is gone, I’ll put the full 100% to investments.

    • So, what do you think?
    • Are you currently investing while paying off debt?
    • What other factors went into your decision besides the four main reasons discussed above?

    Let us know in the comments below.

  • Best Money Mindset Book? My 9 Favorite Picks

    Best Money Mindset Book? My 9 Favorite Picks

    On my journey to financial independence, I’ve read close to 100 personal finance books. My favorite books motivate me to think about the relationship between life and money. I think of this type of book as a “money mindset book.”

    In today’s post, I’ll show you my nine favorite money mindset books. These books share a common theme: they will inspire you to use money to build a life that you’re proud of.

    One of the ways these books do that is by exploring the emotional side of money. In other words, they don’t just talk about the numbers and math of personal finance.

    That not only makes the books more interesting to read, it also makes them so much more practical in the real world.

    See, I am striving to build the best life possible for my family. To do that, I need to learn more than just the numbers.

    That means I need to be good at not only making money, but also using that money to build a life on my terms. That requires finding a balance, which can be tricky.

    To help strike that balance, I’ve studied how others have done it. Then, I can take what I learn and implement those lessons into my own life.

    As a personal finance teacher, I can also share these lessons with my students.

    And, that brings us to my favorite money mindset books.

    Each one of these books has helped me develop my core life philosophies. Importantly, these books have helped me acquire and use money in alignment with those core beliefs.

    Of course, when I review my Tiara Goals for Financial Freedom, I can feel the influence of each of these books on my most important values.

    I recommend that you check out each of these money mindset books. You will learn not just how to acquire money, but also how to use that money to live your best life.

    Let’s take a look at my favorites, in no particular order.

    1. Rich Dad Poor Dad by Robert Kiyosaki

    There’s a reason Rich Dad Poor Dad is the best selling personal finance book of all time. Its message is so powerful and simple that I’ve been recommending this money mindset book for years.

    If you read Rich Dad Poor Dad, your entire money mindset will be changed. Kiyosaki brilliantly shares the stories he learned about money while growing up in Hawaii.

    His Rich Dad was really his best friend’s dad, who was a very successful real estate investor and business owner. His Poor Dad was his actual dad, a highly educated and hardworking man who followed a traditional career path.

    Using these two role models in his life, he makes a very compelling case that most of us go about life and money all wrong.

    This is the money mindset book you want to start with.

    Read Rich Dad Poor Dad. It’s the money mindset book that will light a fire under you like no other book I’ve read.

    2. The Psychology of Money by Morgan Housel

    In The Psychology of Money, Housel writes about how people make decisions with their money in the real world. Housel agrees with one of our main themes at Think and Talk Money:

    Money is emotional.

    We can all be shown data and spreadsheets and understand what we should do. But, that’s usually not enough to change our behavior.

    Housel is here to help with that. In The Psychology of Money, he takes core personal finance lessons and translates those lessons into regular life concepts.

    Additionally, Housel teaches us the different ways people think about money. Then, he offers his perspective on how we can make better sense of money through our own life experiences.

    Read The Psychology of Money. This money mindset book will help you understand the relationship between money and happiness.

    3. Think and Grow Rich by Napoleon Hill

    Think and Grow Rich is another classic money mindset book that will shift your entire viewpoint on earning a living.

    I first read this money mindset book in college when I learned my friend’s dad offered him $50 if he read this book.

    $50 to read a book?

    I needed to see what this book was all about.

    At the time, I didn’t appreciate how much this money mindset book would change my life.

    Originally published in 1937 and later updated, Think and Grow Rich, will convince you that you can be successful.

    Initially, Hill studied innovators like Henry Ford and Thomas Edison. In the updated version, you’ll learn about modern figures like Bill Gates and Mary Kay Ash.

    Books on a brown wooden shelf, which includes a money mindset book to help learn about the balance between life and money.
    Photo by Susan Q Yin on Unsplash

    Hill’s book is so good because of what he reveals about these legendary figures.

    The secret?

    There was nothing mystical about any of them. Before they became legends, they were just like you and me.

    You can be successful in any walk of life if you just stop sleepwalking through life like everyone else and do something.

    Read Think and Grow Rich. This money mindset book will motivate you to do that thing you’ve been saying you would do, but haven’t yet.

    4. The Richest Man in Babylon by George S. Clason

    The Richest Man in Babylon is a third classic money mindset book originally published nearly 100 years ago.

    This book is a quick read. It’s ideal for anyone still not convinced that they have to pay attention to their personal finances.

    Clason wrote a simple collection of fables set in the ancient city of Babylon. Each fable illustrates the importance of a key money habit, like saving and investing.

    Through his stories, you’ll see how you can get ahead in life by practicing strong financial habits.

    It’s not enough to just be good at making money. You need to be good at keeping that money, too.

    Read The Richest Man in Babylon. This money mindset book will introduce you to the building blocks of a healthy financial life.

    5. Your Money or Your Life by Vicki Robin and Joe Dominguez

    Your Money or Your Life is the complete package when it comes to money mindset books.

    Vicki Robin and Joe Dominguez are often credited for laying the groundwork for the Financial Independence Retire Early (FIRE) movement.

    While I prefer the term Financial Independence Pivot Early (FIPE), I share their viewpoints on the relationship between money, work, and time.

    Spoiler alert: when it comes to life and money, most of us are doing it all wrong. We chase money at the cost of our precious time.

    First, you’ll learn to think of money as nothing more than a tool to build your ideal life. Next, you’ll learn how to specifically use that tool to achieve financial independence.

    Read Your Money or Your Life. This money mindset book will motivate you to start valuing your time for what it’s really worth.

    6. The Millionaire Next Door by Thomas Stanley and William Danko

    It can be difficult to ignore the temptation to keep up with our neighbors. Whether we like it or not, we are concerned with our social status. Part of our self-worth gets tied to comparing ourselves to others.

    One of my favorite money mindset books, The Millionaire Next Door, discusses this concept in detail.

    To start, you need to adjust your perception of how real life millionaires behave.

    You may be surprised to learn how most millionaires have made their fortunes. Also, you may be surprised to learn about their modest lifestyles.

    Read The Millionaire Next Door. This money mindset book will help you if you’re struggling with comparing yourself to others.

    7. Die with Zero by Bill Perkins

    No money mindset book has led to more passionate conversations with my friends and family members than Die with Zero.

    First, Perkins encourages us to think about whether we are working too many hours. In Perkins’ view, the problem is that we are sacrificing the best years of our lives. Instead, we could be creating lifelong memories.

    In that same vein, Perkins makes a strong case that many of us are saving too much for retirement.

    Also, Perkins questions the conventional wisdom of waiting until we die to pass money onto our kids. Instead, he suggests helping our kids earlier in life when the money will be more meaningful.

    Read Die With Zero. This money mindset book will motivate you to book that vacation you’ve been putting off.

    8. Millionaire Milestones by Sam Dogen

    In Millionaire Milestones, Dogen covers his journey from finance bro in New York in his 20s to present day life as a writer, investor, and husband and father.

    What separates Millionaire Milestones from other personal finance books is that Dogen’s still on his journey.

    Girl reading a money mindset book to learn about the balance between life and money.
    Photo by Joel Muniz on Unsplash

    He’s not a newbie, and he’s not preaching from the rocking chair on his patio.

    Dogen’s presently raising kids. He’s focused on his website and his investments. Like you and me, he can relate to the present day challenges of personal finance because he’s still on his journey.

    You can read my full review of Millionaire Milestones in my separate post here.

    Read Millionaire Milestones. This money mindset book is the Goldilocks of personal finance books.

    9. The Simple Path to Wealth by JL Collins

    The Simple Path to Wealth by JL Collins is the best money mindset book on investing I’ve ever read.

    It is a must-read for anyone trying to figure out why and how to invest in the stock market.

    If you’re a new investor and don’t understand how to invest in the stock market, Collins will set you on your way.

    If you’re a seasoned investor unsure what to do in times of economic uncertainty, Collins is here to help. 

    Maybe you just need a bit of motivation or a reminder of how simple it is to build long-term wealth. There’s no one better than Collins to provide that pep talk.

    Collins is sometimes described as “the Godfather of Financial Independence” in the personal finance community. He has a popular blog where you can read more about his story.

    The short version is that he wrote a series of letters to his then teenage daughter about money, investing, and life. He wanted to impart the wisdom he had accumulated during his lifetime and help her avoid the mistakes he had made.

    Those letters eventually led to his blog, which then led to his bestselling book, The Simple Path to Wealth, first released in 2015.

    Since then, Collins has been a thought-leaders in the financial independence community. He has inspired thousands, if not millions, of people around the world to accumulate massive wealth by following a few simple rules. 

    What makes Collins so transformative is his ability to make seemingly complex topics (like investing) into easily digestible and actionable information.

    If you have any intention of becoming financially independent and haven’t read The Simple Path to Wealth, now is the time to do so.

    I’ve read his book cover-to-cover twice and constantly refer back to his lessons.

    Each time I read his book, I’m reminded how simple it is to reach financial independence if I can just follow a few simple tips.

    You can read my full review of The Simple Path to Wealth in my post here.

    Read The Simple Path to Wealth. It is quite simply the best money mindset book on investing I’ve ever read.

    What is your favorite money mindset book?

    So, these are the money mindset books that I recommend most often.

    Wherever you are on your personal finance journey, there is something for everyone in one of these books.

    If you have read some of these money mindset books in the past, I suggest you read them again. As our lives and priorities change, so does our relationship with money.

    You’ll get something new and different from reading these books again. Personally, I didn’t fully appreciate these money mindset books until I was years into my career and knew what it felt like to work for money.

    • Have you read these money mindset books?
    • What money mindset books am I missing?

    Let us know in the comments below.