Think and Talk Money’s motto is “Money Wellness Together.” The more we all talk, the more we all benefit. The best way to keep the conversation going? Ask questions!
I’ve learned through teaching in law schools for the past 15 years that most of us prefer seminars with questions and answers to long lectures. Thanks for all the great questions so far! I’m hoping we can do a Q&A post like this just about every week.
Please keep the questions coming in the comments on any post, by responding to our newsletter, or on Instagram.
In our first Q&A post, we’ll cover my favorite personal finance books, whether you should keep your condo as a rental unit, and the most important question of all: what is Italian beef?
1. Do you have a favorite personal finance book that you would recommend?
What a great question. I always recommend starting with books that focus on money mindset. Like we always talk about, the first step is getting our money mindset in the right place. I would start with:
1. Rich Dad Poor Dad by Robert Kiyosaki. There’s a reason this is the best selling personal finance book of all time. If you read Rich Dad Poor Dad, your entire money mindset will be changed. Kiyosaki brilliantly shares the stories he learned growing up from his Rich Dad (really his best friend’s dad, very successful real estate investor/business owner) and his Poor Dad (his actual dad, highly educated/traditional career path). Using these two role models in his life, he makes a very compelling and easy to follow case that most of us go about life and money all wrong.
Read Rich Dad Poor Dad. It will light a fire under you like no other book I’ve read.
2. Think and Grow Rich by Napoleon Hill. Another longtime classic that will shift your money mindset. I first read this book in college when I learned my friend’s dad offered him $50 if he read this book. $50 to read a book? I’m in.
Originally published in 1937 and recently updated, Think and Grow Rich, will convince you that we can all be successful. 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. To translate the title into my own words: Wake up! Use your brain! 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. You will be motivated to do that thing you’ve been saying you would do, but haven’t yet.
3. The Richest Man in Babylon by George S. Clason. A third classic originally published nearly 100 years ago. Clason wrote a simple collection of fables set in the ancient city of Babylon to illustrate the power of fundamental money habits: earn, save, invest, protect. Through his stories, you’ll see how you can get ahead in life by practicing strong financial wellness habits.
Read The Richest Man in Babylon. You’ll understand the building blocks of a healthy financial life.
4. Your Money or Your Life by Vicki Robin and Joe Dominguez. Vicki Robin and Joe Dominguez are often credited for laying the groundwork for the Financially Independent Retire Early (FIRE) movement. They have a lot to say about the relationship between money, work, and time.
Most of us are doing it all wrong. We chase money at the cost of our precious time. By making good choices about how to earn money- and as importantly what to do with that money- you can get the most out of your money and your life.
Read Your Money or Your Life. You will start to value your time for what it’s really worth.
5. Die with Zero by Bill Perkins. Perkins makes a strong case that many of us are saving too much for retirement. We work too many hours and save more money than we’ll ever need. Instead, we could be using that money during the best years of our lives to create lifelong memories.
Perkins also questions the conventional wisdom of waiting until we die to pass money onto our kids. He suggests helping our kids earlier in life when the money will be more meaningful.
Read Die With Zero. You won’t wait any longer to book that vacation you’ve been putting off for no good reason.
If you have read these books already, but it was some time ago, read them again. I didn’t fully appreciate all the lessons until I was years into my career and knew what it felt like to work for money.
2. $500 Challenge? I could never do that!
In Part 3 of our series on budgeting, I gave you 10 of my favorite tips to help stay on budget. One of the tips involved a game my wife and I play called the “$500 Challenge.”
If $500 is a nonstarter for you, increase the amount of the game. Whether you play with $750 or $1,000 or more, the point of the game remains the same. If $500 is too much for you, pick a smaller number that works. The amount doesn’t matter. The point is to set a number for yourself that will get you back on track after overspending in the previous month. January is a great time to play the game.
3. When I’m creating my budget categories, does my health club membership count as Now Money or Life Money?
When I said I‘m not a fan of a rigid budgeting framework like 50-30-20, this question illustrates exactly why. Elizabeth Warren popularized 50-30-20 in her book, All Your Worth: The Ultimate Lifetime Money Plan, first published in 2005.
In a 50-30-20 framework, you must choose what category to put your health club membership in. Same with every other borderline expenditure. What if you think working out should be Now Money, but it pushes you over 50%? OK, just move it to Life Money. Wait, now I’m over 30% in my Life Money. Why is this so hard?
Take it from me and my students who have attempted 50-30-20 budgeting, making these choices gets to be very frustrating. What is the point in agonizing over decisions like this?
So, what should you do with your health club membership?
It doesn’t matter! You saw in our really lost boy’s budget that I counted it as Now Money. Today, I’d actually probably count it as Life Money. How’s that for an answer!?
Instead of agonizing, pick a category and leave it there. The whole purpose of our budget is to generate fuel for our Later Money. Whether that fuel comes from adjustments to Now Money or Life Money is irrelevant.
In our Budget After Thinking, we’re not limiting ourselves by rigid frameworks and agonizing over spending categories. We’ve got better things to focus on, like creating more fuel for our dreams.
4. Do I need to actively budget forever?
Nope! I’m going to do a post soon on what I recommend for people that have done the budgeting thing for a while and have a pretty good idea what their spending is. If you’re at that point, and are relatively responsible, you won’t need to track your spending anymore.
Let’s look at a quick example. Say you learned that your Budget After Thinking includes $1,000 of Later Money. That means each month, your top priority is to put that $1,000 of fuel towards your financial goals.
In this plan, you’ll need a “cushion” in your checking account to make it work. In this example, let’s use $5,000 as our cushion. At the end of the month, after you’ve made your Later Money transfers out of your checking account, and you’ve paid all your bills and credit cards, you should have $5,000 left.
If you have less than $5,000 left, compensate the next month by spending less so you get back to $5,000 at the end of month 2. If you’ve way overspent, that’s an indication you are not ready to stop budgeting.
No matter what, don’t short your Later Money. Do the $500 challenge if you need to. If you have more than $5,000 left, transfer the surplus to your savings account so you can use the excess to cover budget busters or top off your checking account if you overspent a little the previous month.
This budgeting process is similar to zero-based budgeting, a concept that’s been around for a long time. I find this method takes almost all of the anxiety out of budgeting. The key is you just have to be disciplined enough that if you have less than $5,000 left at the end of month 1, you course correct in month 2 so you’re back on track.
5. I am thinking about either selling my condo or keeping it as a rental unit. What should I do?
I’m a real estate investor, so my mind always goes first to keeping the condo as a longterm rental unit. Based on the question, it seems this reader is interested in real estate investing, too. If that’s true and your financial situation permits, I would consider keeping the condo as a rental unit.
It could be a great way to see if you like being a landlord without putting time and resources into acquiring a different property. Best case scenario, you hold the condo for many years and it turns out to be a great investment. Worst case scenario, you sell it in a year or two if being a landlord isn’t your thing.
Of course, there are so many factors that go into real estate investing. You need to do your homework first on whether your condo is a plausible rental unit. Leave a comment below or reach out on Instagram if you need some help deciding if your condo might be a good rental unit.
6. What is Italian Beef?
This person, I cannot help.
Fortunately, there’s a current Emmy winning show out there about Chicago and Italian beef!
Thanks for all the questions! Please keep them coming in the comments on any post, by responding to our newsletter, or on Instagram.