How Get Rich Slowly's Founder Retired at 40. Plus, What Higher Bond Yields Mean for Savers

0:00Today's episode is brought to you by Vinted. Sean, do you have clothes in your trunk that you've worn but have no idea what to do with? You know what? I do not because my car is super clean right now, but I'm betting that you do, Elizabeth. I sure do, Sean, unfortunately. And I've been wondering what to do with these clothes. And then I found out about Vinted. So they're like this secondhand marketplace app and their mission is to make secondhand your first choice. Yeah, Vinted helps their members find great deals and easily sell the clothes they no longer wear. And that helps give quality items a second life again and again.

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1:08See what's hiding in your closet or like me, your trunk. And you might be surprised how much you can earn with Vinted. Download the Vinted app for free to start listing with absolutely no seller fees. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome.

1:40Check responses set up required compatibility and availability varies 18+. How do you go from having over$35 ,000 in consumer debt to having enough to retire early? Well, that doesn't happen overnight, but today we are going to be sitting with someone who has actually achieved this. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. Today we are shooting from the beautiful Portland, Oregon, and we have a very special guest in the studio. Now, this episode is a little different from the other ones.

2:21Usually you guys are sending us your money questions, but today we have money questions for our guest. Right. We're joined by J.D. Roth. J.D. Roth is one of the originals, one of the pioneers of what you might call confessional personal finance, while also instructing others about how to manage their finances. J.D., welcome to Smart Money. Thanks. Thanks for having me. Now, J.D., I'm so excited to have you here today because listeners and views of the show know that I love FIRE because I am trying to get out of workforce. Don't take that personally, nerd wallet. I would love to retire early. So I am here advocating and learning everything I can.

2:55And you actually achieve that. You also have a book on Audible about FIRE, which is pretty awesome. I'm really excited about that book. I recorded it during COVID. And so it was released long, long ago. But it was really the climax of my entire personal finance writing career was that book. It's like I took everything I'd been reading and writing about for 15 years and I distilled it into that. Honestly, I had never gone back and reread it or re-listened to it until the drive up here to Portland this morning. And I was listening to it. I'm like, doggone it. I did a good job. I love that. Hide yourself up.

3:28I love that. Well, let's rewind the clock a little bit to when you first started writing about personal finance. I believe it was 2006 or so. Yeah, that's right. And you had a good amount of consumer debt,$35 ,000 across, I believe it was credit cards, personal loans, auto loan. Talk with us about the debt that you had and how you got out of it. I didn't have any kind of financial education. And growing up, my parents, they didn't know how to handle money. My father came from a very poor background. I don't really know what my mom's background was financially. But growing up, they fought about money constantly.

4:01When they had money, they spent it. But most of the time, they just didn't have money. And so they struggled to get by. And so the money scripts, the invisible underlying beliefs that I had about personal finance, where if you had money, you spent it. And that's pretty much what I did. I got to college. And in college, at least back in the 80s, they will give a credit card to anybody. And I think college students are a great risk because they're going to earn money eventually, and let's get them in debt now. But they couldn't really pay off their credit cards when they were in college because they were broke college students and thought, hey, I can go get a bunch of beer and pizza, and it's free on this credit card.

4:38Next thing you know, that bill comes to do. It's exactly what it was like. It's like it was free. And for me, I like books. So, you know, I would buy a lot of books. What a responsible way to get in debt. I like the way you think. So anyway, I ended up just racking up a lot of credit card debt. So I had over$25 ,000 in credit card debt by the time I was four years out of college, which was 1995. And what did that feel like? Because I know it can be very heavy, especially being so young, having all that debt. It felt awful. And yet at the same time, I couldn't stop myself. I would pay it down a little bit on the credit card when I got a little bit extra money and then I'd just go right back out and spend more.

5:17And that's tied to the money script you learned from your parents around spending when you have money, but also spending even when you don't have money. I did not handle my money well. And I'm upfront about that. I made poor choices and that's how I got into debt. So how did you get to the point from realizing, okay, I'm not great with my money. I've carried this debt for a while now. I need to turn things around and actually write about it. I had always wanted to be a writer, but I always thought I would write science fiction or poetry or something like that. I'd never set out to write about personal finance.

5:47And I was also a nerd, and I was also deep in debt. So these three things all magically came together with the advent of the Internet. And so in early 1997, I started writing a blog. We called it a web journal back then because the word blog had not been invented. I was not writing about money. I was just writing about my daily life. And eventually in 2004, I decided I've really got to turn my financial life around. And I started going to the public library of all places and checking out books about personal finance. And being the nerd that I am, I took notes on them. And then I like try to consolidate what are all these books saying?

6:23Are there common threads? And I decided the one common thread between all of these books was there's no reliable way to get rich quickly, but there is a reliable way to get rich slowly. And that was the name of your blog eventually, Get Rich Slowly. Yes. And so on my personal site, I wrote an article called Get Rich Slowly that basically tried to summarize everything I had learned. This is back in 2004, 2005 that I wrote that article. And it went the 2004, 2005 version of viral. There wasn't really viral anything at that time. It was being spread through email chains or however you did it back then.

6:56Yeah. Other blogs were sharing it. Why do you think that resonated with people so much? Because I think a lot of people struggle with personal finance. A lot of people grow up with these broken money scripts. They don't really know how to handle money. It seems mysterious or overwhelming. I know that there are plenty of people who grow up in families where their parents are responsible with money and they are able to demonstrate good financial behaviors. But I think that's the exception rather than the rule. And so after that was successful, I did eventually say, oh, people really like this. So why don't I start a blog about personal finance and call it Get Rich Slowly.

7:31So when you wrote this viral article, where were you on your debt pay down journey? Had you already completed it? At the very beginning. No, no, no, no, no. I was trying to figure out how the heck am I going to get out of this? I had$35 ,000 in consumer debt, which looking back, I mean, that was 20 years ago. And so it probably doesn't sound like that big of a deal to people nowadays, but you know, it's probably equivalent to$7 ,500 ,000 something. It was overwhelming for me. It was just overwhelming. What were some of the main themes from the material that you were synthesizing through your blog that really stood out to you and helped you begin to change the course of your financial journey?

8:05Well, the very first thing that really resonated with me was Dave Ramsey's debt snowball method. And I know that nowadays it's popular to hate on Dave, but I don't hate on Dave. I really like Dave Ramsey's approach to personal finance, especially because he addresses the psychological side of things. The math the personal finance is very simple. That's not the hard part. It's the psychology that's difficult. That's so true. And so Dave Ramsey's debt snowball, when I learned about that and we actually began applying it to my life and saw that, oh my gosh, this is actually working, that was a big moment for me.

8:44And so for those who don't know, with the debt snowball, you focus on paying off your debt with the smallest balance first while making minimum payments on your other account. And then once you knock out that smallest debt, you roll the amount you're paying on that into your next biggest debt and so on, gaining momentum like a snowball rolling down a hill. And so that is a really effective mathematical way to pay off your debt. Some people like the debt avalanche, which is kind of the inverse where you focus on the highest interest rate debt first that might be able to save you some money and interest, but it's not as rewarding psychologically as the debt snowball for some people.

9:12So it's a kind of personal decision there. But getting into the psychological aspect of it, something that has made me bristle about some personal finance bloggers and Dave Ramsey a little bit too is the shaming aspect of it because there can be a lot of shame around how people are spending money and that can be a motivator for some people. How were you feeling with your debt? Was it a shameful process of getting out of it or how did you actually navigate the emotions you were feeling? At the time, I didn't identify it as shame. I never named it, but I did feel shame. I felt guilty. I felt as if I knew I shouldn't be in debt and I knew that I was making poor decisions and I knew that I was hamstringing my future by staying in debt and buying stupid things.

9:54How long did it take you to pay off that$35 ,000? So from the moment I really got serious about it, which I think was 2004, it might've been 2005. I'm old now, so I forget these things. So I remember exactly what I did. I went in and I created a text document. It wasn't even a Microsoft Word. It was just in a text editor. And I listed all my debts and I laid them out and I made this projection. If I do this right, then I'll be debt free. I remember it was in 2007. I don't remember the month, like September 2007 or March 2007, something like that. And I just kept at it, kept doing the things I was supposed to do.

10:34And sure enough, like right on schedule, I was three months late, I think, paying off the debt. But it was pretty much right on target by following that schedule that I had set out for myself. In one year, you paid off$35 ,000? No, no, no. Okay. Oh, I see. It sounds like it based on that math. No, it was 2007 when I paid it off and it was 2004 when I started. So it was three years. Okay. So roughly$10 ,000 a year that you were paying off. Yes. But it was a snowball. It wasn't$10 ,000 each year or$12 ,000 each year. The first year was a much lower amount. But as time went on and I was building better financial habits, and honestly, we need to talk about income because that's a very key piece.

11:21I was increasing my income at the same time, and that is what helped me pay off the debt. That's a key thing because sometimes people are trying to pay down debt and the bills are still continuing. You still have things to pay, and if your income is not high enough, that debt just racks right back up. So that's such a key point you brought. Sometimes you just need to increase your income so that you can pay down the debt. Yeah, and I did at the time too. I was working extra jobs and it sucked, but I also knew it was short term. And I started the blog and tried to make money with the blog and did make money with the blog and that helped.

11:54The income side of things is so important and yet it's often neglected or people just kind of hand wave it away. Among personal finance writers, we often joke that there's only like 16 topics you can write about, and there's only really one thing you need to know, and that is spend less than you earn. And it sounds like we're being flip, but it's the truth. The only thing that matters is spending less than you earn if you're trying to accomplish some sort of goal like paying off debt or becoming financially independent. And there's only so much you can decrease your spending, right? You can never go below zero on your spending.

12:28and most people can't go below like$24 ,000 at a bare minimum a year. But your income, in theory, has no ceiling. Again, in theory. Practically, it can be quite hard to actually earn more money. Yes. But there are ways to earn extra income and they have a profound impact on getting out of debt or achieving any other financial goal. What made the difference in terms of actually spending less? How did you get to that point? Because it can be a really hard challenge for people to overcome is adjusting your lifestyle when you're used to a certain amount of spending and pulling that back to focus on paying off debt.

13:06For me, it was getting clear on what mattered to me, what was important to me, and understanding that at that time, getting out of debt and that just overwhelming sense of burden, just becoming clear that that was what was important to me and reminding me of that all the time, that was the most important thing, I think. In my work over the years, I eventually did develop a financial philosophy and a framework and things that I thought were important. And one of the things I talk about often is finding a purpose and setting up personal mission statement and aligning your spending and your financial decisions with the things that are important to you.

13:47And I didn't know that was what I was doing at the time, but that was what I was doing at the time, I was getting clear on what was important to me and then aligning my spending with that. J.D., in that process, is that when you discovered FIRE, when you decided to get clear about what matters to you and what you wanted? Yes, kind of is my initial answer. So one of the books that I read was Your Money or Your Life by Joe Dominguez and Vicki Robin. That book is probably the book or the work that has most popularized the concept of financial independence in the modern world. There are other things that have happened that have popularized financial independence even more.

14:25But for me, it was your money or your life. So I did discover it back in 2004 when I was reading on these books in the library. But it didn't really sink in. It never seemed like a goal that I could achieve. And there was no fire movement back in 2004 or 2006. That didn't really begin until the early 2010s. But eventually you began to work toward some idea of fire, even if that term wasn't really in your mind or in your books that you were reading. How did you begin to do that? Honestly, I didn't work toward it. I was very fortunate in that I developed a broad readership very quickly. And I was able to make some money with it.

15:05And eventually, by late 2008, early 2009, I was making a substantial amount of money with the blog. And a company approached me and asked me if I would want to sell the blog. And I said, okay. I mean, I didn't know whether I wanted to sell it or not. but I thought it wouldn't hurt to hear what they had to offer. And then they came back and they offered a large amount of money. And so for me, my story is different than almost anybody else because I was able to achieve it like that. For most people, it's a very gradual process of tucking away, you know, 50 to 70 % of your income into different retirement or investment accounts and just hustling in that way for years, depriving yourself of all the fun books and beer and pizza that you want.

15:46So yeah, you had a very unique path. Yes. But I get to see my, right now I get to see my girlfriend as she's working towards financial independence and I get to see it from her perspective. She's on that more traditional fire path. Yes. And I also want to point out how the timing of life, I'm going to get a little woo here. At the time that they offered you that money for that blog, you already had built such a strong foundation. And I'm sure if you ran into that kind of money before you did the work to change your financial habits and to learn about your money stories and develop those strong habits, you might have spent the money a lot differently.

16:17A hundred percent. I'm certain that if I had, I can't imagine a world where I would have started a personal finance blog before reading all these personal finance books. But if I had and I sold it and then made a lump sum of money all at once before reading the books, I would have done dumb stuff with the money. There's no question. But I hope you still did a little bit of dumb stuff with that once you got it. Well, I took my own advice. By that point, I had developed the rule of thumb that when you get a windfall, it's okay to spend 1%. 1 %? I've heard 10%. Very frugal. So you're being very frugal.

16:50Yeah. I guess 1%, depending on how much you get, could be substantial. Yeah, it depends. Right now, this is a tangent, but it's related. Right now, my girlfriend and I, we spend most of our weekends watching Star Trek and sorting this huge collection of Magic the Gathering cards that I was left when my cousin died. He left me his collection of cards, and there's about 200 ,000 of them. Wow. In order to sell them, they need to be sorted. And we've already decided that this money, once we're done sorting and selling, it's going to go into savings in our travel fund, basically. But we're allowing ourselves a certain amount.

17:25I don't know. We haven't decided exactly what the amount is. It won't be 1%. It'll be more than 1%. And we're going to allow ourselves to spend it on something completely frivolous. And this is hard for Kim because she doesn't spend frivolous money. I'm like, no, you are going to spend this on something completely frivolous. Yeah, go on a good vacation. Yeah. I want to ask a little bit about you and I know her name is Kim, but she's on her own fire journey. You by accident came on your fire journey. In what ways do you lend your wisdom to Kim on her current fire journey? Well, that's a great question because as you know, relationships can be complicated.

17:57Yes, yes. So I try not to say, oh, you should do this or you should do that. If I think that she's making some sort of mistake, I will point it out. But otherwise, I just let her make her decisions. When she comes to me and asks advice, then I will give her feedback. An example is just the other day. So right now, I'm the one paying the mortgage on the house. And I've done that because I want her to accelerate her journey to financial independence. And just the other day she came to me, she's like, hey, JD, what if I put$500 a month towards the mortgage? That would help you to make it so you're not paying the entire mortgage payment yourself.

18:36I'm like, wow, that's awesome. But the mortgage, our interest rate is only 2.6%. I would rather you kept that money invested in the stock market to accelerate your financial independence journey. And also, based on historical averages, you're going to make so much more than 2.6 % by investing that money. So she's like, oh, okay. So in that respect, I was able to offer some advice. But it was solicited. Yes. Yeah. I try not to volunteer information. It's a fine line. You know how relationships are. Yeah. I want to go back to those principles that you mentioned that sort of flesh out your financial worldview and way of thinking.

19:15You mentioned knowing your purpose, knowing your values, your motivations. What else drives your financial philosophy? I think one key aspect is understanding that this is more of a marathon than it is a sprint. Because I think a lot of people get frustrated at how long it takes to do some of this stuff. You're in it and you're slogging away for years and years. And you see progress, but it feels like it's never going to come. And one thing comes along and interrupts your finances. You have a big emergency expense and that can derail you and be demotivating, but that's why you have to keep going back to that motivation.

19:53Absolutely. Well, that's a natural segue into your own book, How to Achieve Financial Independence and Retire Early. Can you talk with us about some of the main points that you lay out in that book? That book, which technically is a course because it's for the great courses through Audible, that pretty much tries to take everything I'd learned about money, writing about money over a course of 15 years, and tries to distill it into this like actionable plan and an actual coherent philosophy regarding money. And so I talk about these things about learning to identify your money scripts, learning why the psychology of money is so important, creating a personal mission statement.

20:32I often say, or I don't anymore, but I used to say that I want people to act as the CEO of their own life or the CFO. I want you to treat your life like a business. And so that's the metaphor that I use throughout that course actually is learning to treat your own personal finances as if you're a business and learning to view your income and your expenses. And then the difference between that as profit rather than as savings, because I think for a lot of people, savings sounds so tedious, right? It's like, ah, it's just boring. What I want to do with savings. But when you hear profit, at least for me, there's something that energizes me about it.

21:15I think of profit. I'm like, oh yeah, I'm a good capitalist. I'm making profit. And even though you are not a business, savings is actually profit. What a business would call profit is savings. And so if you think of it for yourself as profit, I think it's much more motivational. And for me, actually, after I had achieved financial independence and was continuing to make money, I did start looking at it as profit. And I've tried to encourage other people. For a long time, I was doing speaking gigs and I would go out and I would meet with people one-on-one. I would encourage them to look at their own personal finances as if they were earning a profit and just trying to get that as high as possible.

21:57J.D., how old were you when you retired and what have you been doing since then? You know, we all talk about retiring early, but then it's like, well, what do you do with all this free time and all this money? Well, that's a great question. So I achieved financial independence at age 40. All right, I've got five years. There you go. And for the first few years of financial independence, I wasn't actually retired in a traditional sense. I continued to work. Actually, I would say it was like that for the first 10 years. And were you still saving? Well, were you saving towards retirement at that time?

22:31Or did you stop saving and kind of just live off of your profits and work? I was working. And so I was continuing to write for two or three years after I sold the site. I was contractually obligated to keep writing. I was earning income from that. Not a big income, but it covered my expenses. My expenses weren't high. And then eventually I started a new website. and I was earning some small amount of money from that. And then this course was like the last thing I did. And that was during COVID was when I was writing it and recording it. And so in 2020, after that, I guess you could say I did retire.

23:06And since then, I haven't done anything with personal finance. I mean, other than manage my own personal finances. Is there a reason for that? It's just a shift in direction, I guess. And so I found myself for a couple of years, as many retirees do, I floundered. I didn't actually understand why do retirees flounder. I get it now. I just sat around doing nothing and trying to figure out what am I doing? Because I had not prepared for that. And then eventually I decided I wanted to start a personal finance comic strip of all things. Oh, that's creative. I have no artistic skills. I've never taken an art class in my life.

23:45And my girlfriend, Kim, she encouraged me to take an art class through the community college. So I just randomly picked watercolor. And now for almost three years, I've been taking art classes, mainly watercolor. But the summer I've discovered oil painting. Oh, boy, do I love oil painting. See, but this is the lure of fire. It's not just about not working, but sometimes your working years take so much out of you that you don't have the time that you want to explore hobbies and discover things that you enjoy. And it sounds like you've been given the space to do that because now look at you, you're painting and you're doing all painting too.