When it comes to saving and to giving, there is no substitute for just doing it. If you are not saving, find some way to begin right now, even if it is a very small amount. I am a Christian, and have the same conviction on giving to my local church — if you are not giving to your local church, find some way to start now. You will find that disciplining yourself in this way is very helpful — not only are you starting to work on one of your financial goals, but you are building healthy habits that will continue to serve you over the long haul.

But once you have started, I have found that the best way to continue saving and giving is to practice incremental improvements. Every time my income changes (either from a raise or due to additional withholding exemptions) I strive to increase my rates of saving and giving by an incremental amount. For example, if I am saving 6% and giving 11% of my income, when I get a raise I might adjust my saving to 7% and my giving to 12%. This means that I’m regularly growing my rates of saving and giving, but I’m doing it in a way that is relatively painless.

Of course, if you’re able to discipline yourself carefully and make more room in your budget, you should grow your rates of saving and giving at that time too. But when you earn a raise is a very natural and important time to increase your saving and giving.

Tags: budget, discipline, finance, giving, income, investment, Penny pinching, personal-finance, raise, salary, Saving, saving-money, wealth

Freemoneyfinance writes of how to pay off student loans while building wealth:

The real answer is: it depends. However as a rule of thumb, the lower the interest rate on your loans, the better off you’ll be just paying the minimum monthly payment and nothing more. Take the extra money you were going to pay on your loan and invest it instead.

Graduating from a private Christian liberal-arts school (Messiah College), my wife and I had $60,000 in student loan debt between the two of us. At first, because of some foolish spending habits and because of my introductory salary, we were barely able to cover the minimum payments. In recent years we have started to pay off our student loans at a faster rate (we are not done yet!). Our reason for doing this was mostly psychological — it is very satisfying to be getting debt out of the way. But the advice given above really is generally a wiser financial move for most graduates (depending on various factors, of course, as the article mentions), because in the long run it builds more wealth. In our case, our student loan rates are good enough that this is a wise move for us. So in the past year we have changed our strategy and are now socking away the money that we had been using to accelerate student loan payments.

Tags: Debt, equity, finance, interest, investment, money, personal-finance, psychology, salary, Saving, student-loans, tax, wealth

Robert Kiyosaki’s book Rich Dad, Poor Dad was a helpful and inspiring read for me. Among many smaller points, there were two significant points that I gleaned from the book:

1. Use creativity, ingenuity and counselors when it comes to making and investing money. Seek out ideas from other people. Brainstorm your own creative ideas. Don’t be afraid to try something new or engage in risks that you are willing to bear. Check your ideas against someone else to see if they are reasonable but don’t limit yourself to what other people are doing.
2. Take care to ensure your use of money is producing assets rather than liabilities. It is obvious that a dollar is better spent on a 3% CD than a 1% savings account, and it is better to payoff the 9% car loan first than the 5% student loan. But we need to think about more than interest rates. Is it better to put extra money into paying off your mortgage faster or to invest it elsewhere? There are many factors that go into this decision, so it’s not possible to give a rubber-stamp answer. But Kiyosaki points out that the paid-off house won’t be producing income for you — in some ways it’s even a bit of a liability, since it will continue to require upkeep. If you had invested some of that money elsewhere, it might be producing real ongoing income. Again, this observation certainly doesn’t force the decision, but it’s something that I had never considered before.

There are two things that I didn’t like:

1. Kiyosaki is very keen on real estate investment, almost to the exclusion of anything else. This is, after all, apparently how he made his own money, so that is understandable to a point. And there are legitimate reasons to invest in real estate: there are high potential profits; it is easy to obtain leverage via a mortgage so that you are potentially making a lot of money without a lot of personal money invested; there are ways to buy and sell properties without incurring taxes in for the exchange; etc. But the potential advantages of real estate investment are accompanied by their own risks and challenges. Real estate investment is not appropriate for every investor’s situation and risk tolerance.
2. My second concern is more a problem with me than the book. It is certainly appropriate to wisely plan your improvement and use of money. But as I read the book I found myself increasingly thinking about how this could be put to selfish use. As a Christian, I know that wealth is first a gift from God to be used in service to others, and second a gift from God to be personally enjoyed with an appropriately grateful heart. There is no room in either case for greed, so this is an attitude I must work to keep in check.

In general, Kiyosaki’s advice is general rather than specific. He encourages you to work to build wealth, but doesn’t provide a lot of specific ideas for how to do so. That’s fine — how you earn, spend and invest your money depends on your situation, so there is no “one size fits all” advice. But that means that reading this book is merely a start (some people have said that it is barely a start), a pep talk to get you going and encourage you to put the effort into actually doing something. I do recommend reading this book for the inspiration it serves, but it is only a beginning. Also consider other book recommendations (most of which I haven’t read) from places like freemoneyfinance and Get Rich Slowly.

Tags: asset, book, eternity, finance, greed, house, investment, liability, money, mortgage, personal-finance, Perspective, real-estate, review, rich, Rich-Dad, Robert-Kiyosaki, wealth