The Art of Manliness - Episode #16： Conquering Debt with J.D. Roth of Get Rich Slowly

00:00:00.000 Brett McKay here and welcome to another edition of the Art of Manliness podcast.

00:00:20.760 Now with this tough economy we're facing right now, many of us feel like we're sinking in

00:00:24.740 financial problems. Bills pile up and personal debt weighs us down and sometimes it feels like

00:00:30.500 we're never going to get ahead financially. Well our guest today has been in that situation

00:00:34.840 but he's shown that it's possible to get ahead. He's recently paid off $38,000 worth of credit card

00:00:40.420 debt and has cataloged it on his website. His name is JD Roth and he's the author of the personal

00:00:45.320 finance blog Get Rich Slowly. Money Magazine has named JD's site the most inspiring personal

00:00:50.840 finance blog on the net and one of the 25 best money website. JD also has a book coming out

00:00:57.520 later this year called Your Money, The Missing Manual and you can pre-order it on amazon.com

00:01:02.040 right now. And JD lives in Oregon with his wife. JD, welcome to the show.

00:01:07.500 Thanks, Brett. It's good to be here.

00:01:08.780 Yeah, I appreciate you taking the time to speak with us today. Now JD, a big part of the story

00:01:13.240 on your blog is how you accumulated $38,000 worth of credit card debt and then paid it off.

00:01:18.580 How did you get to that situation where you had that much debt? Did it happen really fast or did

00:01:23.280 it happen little by little? I mean what's the story behind that? Well no, it kind of happened

00:01:28.020 solely over time. And first of all, just to clarify, the total or the way I always say it is it was

00:01:33.080 over $35,000 in consumer debt is how I phrase it. And so most of that was credit card debt. Like

00:01:44.060 many people in debt, I tried to juggle things around. And so sometimes the credit card debt

00:01:47.900 took on other forms. But no, it happened slowly and it actually started when I was in college

00:01:53.940 back in 88, 1988, 1989, somewhere around there, I got my first credit card and it was actually a

00:02:01.600 store credit card. And I wanted to use it to buy a super fancy shaver and bottled cologne.

00:02:07.200 And from there, it was all downhill. I didn't have the money to pay for it. And so I took out

00:02:13.800 the charge card. I carried that debt for a while. And then I took out all sorts of other credit cards

00:02:18.440 when I was in college. And I graduated. I didn't have much of a debt problem coming out of college,

00:02:24.480 but I didn't have a job coming out of college either. And so I lived on credit cards. I used those

00:02:30.880 to survive while looking for work. And then even when I found a job, it didn't pay very well. So I was

00:02:35.620 using the credit cards to accumulate debt. Over the next few years, up until the mid-1990s,

00:02:42.720 it developed from using the credit cards as a necessity, or what I felt like was a necessity,

00:02:48.360 to using them to pay for toys and gadgets and computer games and books and all this stuff.

00:02:54.260 So by the middle of the 1990s, I had over $20,000 in credit card debt.

00:02:58.320 Wow. So your story sounds pretty common. A lot of people get credit cards when they're in college.

00:03:03.680 Those people at the tables with giving out free t-shirts and you sign up and then you get the

00:03:09.720 credit card and then you just go from there. Do you think your problem or doing that, was it a

00:03:16.320 lack of education about personal finances or just being young and... It was being young and stupid and 1.00

00:03:24.120 just kind of being overconfident, thinking that, oh, well, I'll be able to pay this off. Because 1.00

00:03:28.380 you know, I've always looked at a smart guy. I was never the athletic guy in high school. I was

00:03:32.820 one of those geeks, one of the nerds. And I took accounting classes. I was in Future Business

00:03:36.840 Leaders of America. I took these classes. I knew this stuff. And it didn't help me knowing this

00:03:43.940 stuff in theory. I just felt like I was cheating the system, I guess. I was like, oh, you know,

00:03:49.580 I can take out this debt to buy the Sega Genesis because I'll be able to make more money in the

00:03:57.220 future. And I did end up making more money in the future, but I also spent more money. So I was

00:04:03.220 never catching up. So eventually I kind of wised up that, you know, hey, I'm being stupid with the 0.99

00:04:09.560 credit cards. And I couldn't exactly figure out how to get rid of the credit card debt. I started 0.83

00:04:14.240 looking for silver bullets. I wanted to pay it off instantly. I wanted to win the lottery or something.

00:04:20.500 And the one thing I ended up doing was in 1998, I took out a home equity loan where you borrow

00:04:27.420 against the value of your house. And I used that money from the home equity loan to pay off the

00:04:32.900 credit card debt. And so even though the credit card debt kind of magically went away, it was still

00:04:38.960 there. It was just now it was in the form of I was borrowing against my house to pay it off.

00:04:44.380 Yeah. And then that didn't stop my debt. I had mentioned that I had over $35,000

00:04:49.480 worth of consumer debt. And so from 1998 until 2004, during those six years, I found a way to

00:04:56.480 come up with another $15,000 in consumer debt. And I didn't have to use credit cards to do it.

00:05:02.120 I found ways to borrow money otherwise.

00:05:03.840 And so what was the catalyst that caused you to turn it around to stop juggling debt around and

00:05:12.080 start paying it down?

00:05:12.960 Well, everything just kind of, I started to feel like I was, instead of feeling like I was

00:05:21.120 somehow cheating the system or and managing to stay afloat, I started to feel like I was

00:05:25.580 drowning. My wife and I, we bought a new house. We sold our old house and bought the house we're in

00:05:30.740 now. And it's a hundred year old farmhouse just outside Portland. And it's a beautiful house.

00:05:38.460 But when we bought it, it needed a lot of work done, just tons and tons of work. And we knew

00:05:43.680 that going into it. And I did all the math on paper and I thought, oh yeah, you don't have

00:05:48.560 to afford this. And then we actually moved in as hard as I started to have to pay for the

00:05:53.040 repairs. And I was like, oh my goodness gracious, how am I ever going to be able to make this

00:05:58.480 work and still have money to enjoy life? And so I just felt overwhelmed. I felt like I was

00:06:05.080 drowning. And so a couple of friends gave me, or recommended some personal finance books. I read

00:06:12.300 those personal finance books. And that was really the catalyst is reading those books and starting

00:06:17.700 to act on the advice they gave, I guess.

00:06:20.240 Was there a personal finance book in particular that really motivated you and got your butt in gear?

00:06:25.900 Yeah, there were two of them. And that's a great way to phrase it too. The first one,

00:06:30.180 the one that kind of laid the groundwork for everything was Your Money or Your Life by Joe

00:06:35.520 Dominguez and Vicki Robin. And it basically talked about how when you buy all these little

00:06:43.260 things, because that's how I accumulated most of my debt was just buying little things here

00:06:46.740 and there, buying magazines, spending on new video games, buying new clothes that I didn't

00:06:52.260 necessarily need, just doing these little things all the time.

00:06:56.840 You're basically trading hours of your time where the book says life, energy, which sounds

00:07:03.180 all new agey. But you're trading your time for these things. And that was kind of an eye-opening

00:07:10.620 thing, but that didn't kick my butt. What really kicked my butt then was reading Dave Ramsey's book 0.93

00:07:15.760 called The Total Money Makeover, which is all about getting out of debt. And between those two books,

00:07:23.900 yeah, it just, it spurred me to look at what I was doing. It just changed my ways.

00:07:30.340 And how long ago was this when you started really getting serious about paying off your debt?

00:07:35.140 Oh, let's see, when was it? 2004. I think it was October of 2004. I sat down and I drew up a plan.

00:07:41.620 I sat down and I said, okay, this is what I'm going to do. This is how I'm going to pay the debt off.

00:07:44.440 And I tried to work on it a little bit over the next six months. And I kept reading new personal

00:07:49.400 finance books. And then it was in the spring of 2005, April of 2005, I sat down and it was just

00:07:56.840 for my own education. I kind of wrote out all the lessons I'd learned from the various personal

00:08:02.860 finance books. And I had a personal blog. And so on this personal blog, I put up an article that I

00:08:08.700 called Get Rich Slowly, because I felt like the lessons that I was pulling from these books were

00:08:13.640 that, you know, you can't just pay off your debt all at once. You can't get rich quickly. You can't

00:08:20.060 do this stuff. But if you're patient and you follow certain principles, you can do it slowly. So I

00:08:25.640 called my article Get Rich Slowly. And it was really popular that that article is really popular. It got

00:08:31.340 picked up all over the place. And I started trying to live those principles that, you know, it's hard at

00:08:37.520 first, because you make mistakes, you read what these books say to do. And you try to implement

00:08:43.780 them. But there's so much going on. And you're in debt. And you're trying to do things right, but you

00:08:49.720 still spend too much money eating out or whatever. And you make mistakes along the way. And so it took me a

00:08:55.120 long time to get everything figured out, I guess.

00:08:58.940 Yeah. So I mean, you started off Get Rich Slowly, I guess, with this article, what inspired you to actually

00:09:03.740 start a blog dedicated to that? And really, I mean, it's pretty gutsy to open yourself up, you know,

00:09:08.900 financially and let people know your financial status. And I mean, what inspired you to do that?

00:09:15.780 I can't remember if there's any one single inspiration. Part of it was I was, I started to pay off my debt by

00:09:22.940 cutting my expenses and so on. And I decided I needed to boost my income because I decided there were two sides of the

00:09:29.280 things. By cutting your expenses, you kind of free up some money to pay off your debt. But I

00:09:34.660 thought if I could boost my income, I could have even more. And so I read about people making money

00:09:38.460 from websites. And I decided I wanted to start a comic book website, actually. I wanted to start a

00:09:43.860 comic book blog because that's one of my passions, one of my hobbies is comic books. And I started that

00:09:48.840 and I was making a couple bucks a month. It was no big deal. And then I thought, well, you know,

00:09:53.760 people really like that Get Rich Slowly article I wrote. Well, maybe I can start a website based around

00:09:58.580 personal finance. So I did that and gave that a try. And that took off a lot more than the

00:10:05.040 comic book blog did. I got many, many more readers. Whereas I had maybe 20 comic book blog readers

00:10:10.860 after a couple months. I had 2,000 at Get Rich Slowly after a couple of months.

00:10:16.160 Wow. We're going to take a quick break for your word from our sponsors. And now back to the show.

00:10:22.420 Now, so JD, your site's called Get Rich Slowly, which I think pretty much sums up your philosophy

00:10:27.380 towards personal finance. But can you go into a little more detail about how you approach personal

00:10:32.240 finance? Sure. For me, I'm all about making small manageable, taking small manageable steps,

00:10:41.740 not trying to get everything, not trying to be perfect, not trying to do everything at once.

00:10:48.260 And so that means maybe picking one or two areas in your life where you can make improvements and

00:10:54.360 focusing on those. One example might be if you're the sort of person who eats out all the time,

00:10:59.420 and maybe you don't get a lot of value out of it. Maybe you don't really enjoy eating out,

00:11:03.100 but it's just something you do out of habit. That might be one area where you can try to cut back.

00:11:07.160 And meanwhile, still indulge yourself in other areas. That's not necessarily giving yourself

00:11:13.520 permission to overspend, but it's just saying, I'm going to try to focus on one thing at a time,

00:11:17.940 try to cut back on one thing at a time. Let's see, what else do we have here? I think that it's

00:11:22.720 important to take a long-term view. I think many people, and I'm one of them,

00:11:28.340 we get wrapped up in this idea that, oh, I need to change everything this month or this year.

00:11:34.220 And that's really not how it works. You didn't get into debt overnight. I mean,

00:11:38.600 people don't get into deep debt just over the matter of one year. It usually takes several years

00:11:43.460 if you've got a credit card problem or some kind of spending problem. It's going to take three,

00:11:47.260 five, six, seven years to get really, really deep in debt. Well, it's going to take that long to get

00:11:50.780 out of debt too. And you've just got to be patient and be willing to make those choices

00:11:56.660 for a long period of time, I guess. Yeah, I guess it's kind of like personal

00:12:00.060 fitness as well. A lot of people... Oh yeah, absolutely. There's a huge parallel there.

00:12:04.720 Yeah, a lot of people take 10 years to put on 100 pounds and they want to lose it in a year,

00:12:09.940 but it never happens. So JD, you've become kind of an expert in the area of personal finance. You've

00:12:16.700 got this successful blog, you're writing a book. So I'd like to get your take on this. What are the

00:12:21.440 biggest personal finance mistakes that you've seen that are unique to men or that you see more

00:12:26.740 often in men as opposed to women? Well, I think maybe the biggest one, and this is true in a lot of 0.98

00:12:36.080 different aspects or areas of life, not just with finances, but men tend to be more overconfident

00:12:41.500 about their abilities. We want to believe we're right, that we know what we're doing. And it's

00:12:49.600 very difficult to admit mistakes sometimes. And I know when doing research for Your Money,

00:12:55.120 The Missing Manual, I came across this study. I think it was published in 2001. And a study found

00:13:00.900 that men believe they're better investors than women, but they're actually not. When you compare

00:13:10.040 men investors and women investors, men actually earn about 1.5% less per year for annual returns

00:13:19.540 than women do. And single men are even worse. It's like 2.5% less than single women. And the reason 1.00

00:13:26.340 for this is that men tend to be overconfident, that they think that they know more than other

00:13:32.560 people. And so they can make these decisions that are going to outsmart everybody else.

00:13:38.480 Sorry, propensity towards risk, I guess, bites us in the butt. Interesting. And speaking of men and 0.99

00:13:46.360 women, what are the biggest problems you've seen that couples experience with money? And what advice 1.00

00:13:52.040 would you give to avoid those type of problems? Well, I think that there's one fundamental problem

00:13:56.980 that occurs with couples, and that's a lack of communication. And it can manifest itself in all

00:14:04.200 sorts of different ways. But it all comes down to a lack of communication. And I think that, you know,

00:14:10.020 a marriage is a partnership. So I often think of it as it's actually like a partnership between three

00:14:16.540 different entities. You've got the husband, you've got the wife, and you've also got the partnership

00:14:21.460 itself. And I think it's important to keep all three of those in balance. If for some reason,

00:14:26.700 one aspect becomes too dominant, whether it's the husband dominating over the partnership and the

00:14:33.260 wife, or even if it's the partnership dominating over the husband and wife, I think that it can

00:14:37.920 create problems. And I think by having open communication, it's possible for both partners

00:14:43.400 to work together to make sure that, first of all, they're each pursuing their individual goals,

00:14:49.780 but they're also pursuing the goals for the marriage, if that makes sense.

00:14:53.180 Yeah, definitely. J.D., I want to get your take on this. You know, with this recession that we're

00:14:57.460 having right now, frugality, you know, manly thrift and manly frugality or whatever, is back in vogue.

00:15:04.220 But do you think this is just a temporary thing? Or, I mean, do you think this recession is actually

00:15:07.660 going to fundamentally change the way that Americans particularly view money? Are we just going to go

00:15:11.660 back to our spin-thrift ways as soon as things start picking up again?

00:15:15.200 You know, that's a great question, and I don't know the answer to that. I know that a lot of

00:15:20.520 my own friends seem to be much more interested in thrift over the past couple of years. It's

00:15:26.440 become much more popular. Well, just Friday night, me and a bunch of my friends, we went

00:15:30.780 out, we went from Poland and went to pizza, you know, it's pretty cheap entertainment. And so it does

00:15:38.100 seem to be this return to thrift, but I don't know how long it's going to stay. And I have to say

00:15:43.900 that I think that one of the main reasons that there's been a departure from thrift in this

00:15:48.300 culture, because, you know, thrift was very popular for hundreds and hundreds of years

00:15:51.660 here. I think it's largely because the media influences away from that. The media is driven

00:16:00.600 by advertising dollars, and advertisers want people to spend money. And so I think the predominance

00:16:07.200 of the media is really what leads people to spending problems. And I don't think it's

00:16:14.700 necessarily going to change once the recession's over. I think we'll be back to where we started.

00:16:19.280 Man, well, that's a bummer.

00:16:23.180 I know.

00:16:23.880 Yeah, I know. But I guess what you're doing and what we're trying to do on the Art of

00:16:29.960 Man is kind of hopefully make those things kind of cool again, I guess.

00:16:34.740 Yeah, yeah. Well, see, the thing of it is, just because the general society might be going

00:16:38.720 that direction doesn't mean that your readers and listeners can't just take it upon themselves

00:16:44.040 to say, you know, I'm going to opt out. I don't have to be part of this consumer culture.

00:16:48.400 I don't have to be part of this culture that, I don't know, unmanly is not the right way

00:16:54.680 to phrase it. But your listeners and readers can make the choice to behave like our fathers

00:17:01.500 and grandfathers did, and to make the choices that lead to a better life, even if the people

00:17:07.520 around them aren't.

00:17:08.880 Exactly. So, J.D., last question. What are three things that a man struggling with his

00:17:15.000 finance can do today that will, I guess, get him on the path to manning up his personal

00:17:20.180 finances?

00:17:21.280 Manning up. Well, for me, I think one of the big ones, I'm huge on setting goals. I think

00:17:28.720 it's very important when you're trying to overcome your finances or overcome your debt

00:17:35.300 or your poor financial decisions to set goals to decide what your priorities are. And so

00:17:41.300 for each of us, it's going to be something different. Maybe your goal is to buy a house

00:17:45.000 or maybe you've got a daughter who's going to be married or getting married in a few years

00:17:49.380 and you need to save up to contribute to her wedding. Or maybe you've got kids who are going

00:17:54.240 to be heading to college in 15 years. Everybody's got different financial priorities. And I think

00:17:59.040 without setting financial goals, it's really easy to just lose direction and to spend on

00:18:05.240 whatever. If you don't have a financial goal, what does it matter when you go spend $2,000

00:18:09.380 on a new computer, even though your old computer does the trick? So I think setting financial

00:18:14.480 goals is the first one.

00:18:15.920 Another thing to do is take responsibility for your income. I think men today and women,

00:18:21.120 everyone needs to take responsibility for their income. And it's so easy to just kind of just

00:18:30.260 blow along with the flow of work, I guess, and just wait for raises to come to you. But

00:18:35.700 I think that in order to improve your financial situation, it's vital to seek self-improvement,

00:18:41.140 take classes, find ways to move up the ladder of work or to find better jobs, and to actually

00:18:48.380 ask for a raise. Learn how to negotiate a raise or to negotiate your income when you're being

00:18:53.500 hired for a job. I think these are great ways for a man to improve his financial position.

00:18:58.880 Yeah, I think a lot of men don't know how to do that, especially in America where it's

00:19:01.780 not traditional to negotiate.

00:19:03.340 Exactly. Exactly. And you're not always going to be successful when you're trying to negotiate,

00:19:09.140 but it's better to try and fail than to not try it at all, I think. And I guess the third

00:19:16.240 thing I would say is, vow to live without consumer debt. After having lived with consumer debt for

00:19:24.820 almost 15 years, or more than 15 years, I know how much of a psychic drag can be on people.

00:19:31.520 And right in a Get Rich story, I have all sorts of people write me emails saying,

00:19:35.020 oh man, it's just this burden, I just can't get rid of it. And if you can vow to live without

00:19:41.040 consumer debt, by which I basically mean non-mortgage debt, most people are going to have to take

00:19:46.120 on a mortgage. I understand that. But going so far as to say, you know, I'm not going to even

00:19:52.640 take on a loan for a car. I'm not going to take on a loan for a vehicle. If you can live without

00:19:57.140 debt to the furthest extent possible, you're going to be happier and better able to pursue

00:20:04.000 your financial goals.

00:20:04.940 Very cool. Well, JD, thank you very much for speaking with us today. It has been a pleasure.

00:20:11.200 Yeah. Thank you very much.

00:20:13.620 Our guest today was JD Roth. JD is the creator of the blog Get Rich Slowly. And you can find that

00:20:18.920 at getrichslowly.org. And also make sure to check out JD's book. It's coming out later this spring.

00:20:24.280 It's called Your Money, The Missing Manual. And you can pre-order it on amazon.com right now.

00:20:34.940 That wraps up another edition of the Art of Manliness podcast. For more manly tips and advice,

00:20:40.340 make sure to check out the Art of Manliness website at artofmanliness.com. And we want to let

00:20:46.000 you know that our book is available again after selling out of its first print run in just three

00:20:50.480 months. The Art of Manliness Classic Skills and Manners for the Modern Man is in its second print

00:20:55.240 run. And so you can find the book on amazon.com and other major bookstores. For more information

00:21:00.780 about our book, check out artofmanliness.com slash the book. And until next week, stay manly.

The Art of Manliness - April 03, 2014

Episode #16： Conquering Debt with J.D. Roth of Get Rich Slowly

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