Plain Old Common Cents

I know what you’re thinking. Who is this clown? Why should I listen to him?

Well, let me tell you why I think I am a personal finance maven, and why I think my method works. But first, let me tell you about my current situation.

My wife and I are pretty young (mid-twenties), but we are completely debt free. We own two cars that are paid for, we do not carry any credit card debt, we have well funded retirement funds, we max out our roth IRA accounts every year, and we are paying cash for my wife’s MBA from Georgetown University. On top of that, we have saved up a 20 percent down payment for a townhouse in the expensive Northern Virginia region, and we plan to purchase a house in the very near future (we submitted an offer today- wish us luck). I don’t tell you these things to brag or to be elitist, I just want to show you that our methods have worked for us and we consider ourselves to be pretty well off for someone our age.

I am not formally educated in corporate finances, investment banking, accounting, or economics, but fortunately I don’t plan to teach you anything about those subjects. I want to teach you about personal finance, which I consider myself to be very well educated in. It started with my parents, who were pretty good with their money. They weren’t perfect, but nobody is (not even me). From them I had a strong foundation in common sense based personal finance, but the rest I had to pick up on my own. I learned from books, personal experience, radio, tv, magazines, my friends, my family, and my wife. My personality combined with my interest in personal finance has always pushed me to talk about money with whoever I could get to listen. I found myself trying to help as many coworkers and friends as I could, and I feel a great sense of accomplishment over some of the advice I have been able to give. This sense of accomplishment has pushed me to try to reach a wider audience on the world wide web, where I could potentially affect the lives of many more people. By writing this blog, I am also stepping away from the intimacy of face-to-face communication, which should allow me to delve into much more personal subjects that might be too invasive to discuss with friends.

Personal finance can be intimidating to a great many people, and instead of trying to deal with it they might ignore it all together. Everywhere I go I see people making mistakes with their money, and it isn’t always because they don’t know any better. Sometimes it’s because they are following social norms, the crowd, or conventional wisdom. My method works because it breaks down personal finance into pretty simple ideas that require a little bit of discipline and the guts to reject social norms and conventional wisdom. In America, there is a negative saving rate, which means that the average American spends more money than he makes. If the average American is in debt and spends more money than he makes, then do you even want to follow the crowds? My method, which isn’t really a method at all, but more like a philosophy based around the idea of living on less than you earn.

The most basic tenets are:

1. Live on less than you make. Easy to say, difficult to do, and absolutely crucial to building wealth.
2. The only acceptable debt is house debt. Yes, that means car debt is no good, student loans should be avoided, and credit cards should never carry a balance from one month to the next. Home equity line of credit is also a terrible idea.
3. Don’t make stupid decisions. This one is harder to qualify, but this is where common sense really comes in. Example, don’t buy a $30,000 car when you make $30,000/year and have $5,000 in the bank. I don’t care how good the APR is, it’s still a stupid decision!
4. Compound interest is your friend. And so are online checking and savings accounts.

This blog will strive to help you identify the stupid decisions you make with money today, and help you avoid them in the future. Don’t be ashamed, everyone makes stupid decisions with money, but you don’t have to keep making them over and over again. Use your noggin’ and think about what you want to accomplish financially in your life. If you keep it simple and follow these four tenets, you will be blessed with more wealth than you can shake a stick at. Even a large multi-branched stick.

This will mark the first post in what is hopefully a long standing and well read personal finance blog. Let me start by introducing myself. I am an engineering graduate from the University of Virginia, and something of a personal finance maven. I am recently married and in the process of purchasing my first home in Northern Virginia. I am very opinionated when it comes to personal finance and I think my opinions could help a lot of people increase their wealth, improve their relationships, and lower their stress levels during these uncertain financial times.

My mission statement for this blog is to cut through the complicated mess that is personal finance, and boil it down to plain old common sense.