Money Tips Network

I recently enjoyed a great article by James Clear on the Diderot effect, as he names it. What is the Diderot effect, you ask?

The Diderot Effect states that obtaining a new possession often creates a spiral of consumption which leads you to acquire more new things. As a result, we end up buying things that our previous selves never needed to feel happy or fulfilled.

The article uses an example from the life of Denis Diderot, the French philosopher for whom the effect is named, in which he uses a windfall to purchase new clothes, then notices that all of his other clothes now look shabby by comparison, spurring a round of clothes-buying that ended up hurting him financially.

Morehouse College commencement speaker Robert F. Smith made headlines in May of this year when he announced he would completely wipe out the student loan debt for every single member of the class of 2019.

It’s no secret to anyone reading The Simple Dollar for very long that I’m a goal-oriented person. I find a great deal of power in setting goals for myself, developing plans for those goals, and working toward them by executing that plan as well as I can and revising it as needed.

I view my own life as a series of spheres (physical, mental, social, spiritual, financial, professional, marital, parental, avocational, intellectual) and, ideally, I want to always have some kind of goal going that provides a lot of value to each of those spheres. However, that doesn’t mean I always have nine or ten goals going at all times; in fact, I usually try to keep that number around five.

I do that by aiming to come up with goals that serve two or more spheres at the same time. Most of the big goals I come up with in life are ones that really hit two or more of those areas at once and usually have a secondary benefit for some of the other spheres.

Congratulations — you’re about to snag a new ride! We’re assuming that you’ve already done some research: You know how much you can afford to spend, which car you want to buy, and the true market value (what other people are paying) for that car in your area.

It's funny. Fifteen years ago, daily personal finance was a chore for me. I didn't understand how to go day to day making smart choices that were aligned with my values. I wasn't even sure what my values were!

Today, things are much easier. Sure, there are challenges. Sometimes I make poor choices. But mostly, what I spend aligns with what I want out of life. (With the caveat, of course, that who I am and what I want shifts over time.)

In the last few months, I’ve received several specific questions on how exactly I envision my own retirement / financial independence and why I value it as a goal so much. I thought it might make sense to spell all of it out in a single article that I can link to going forward that addresses all of these things in one place.

So, let’s start with the basics.

How I View Retirement and Financial Independence

In my eyes, “retirement” simply refers to a situation where you’re financially able to walk away from your main career and/or job without having financial need to seek a replacement. You might choose to still work for money, but it’s not a choice that’s forced upon you. You might choose to do it because you enjoy the work or because you want some additional lifestyle perks, but you can live day to day life without the need to do so.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Early withdrawal from 401(k)?
2. Relationship strain renting to children
3. Reclaiming frugality
4. How target retirement fund works
5. Food spending question
6. Buying rental houses as investments?
7. When to replace a car?
8. 529 and financial aid

Okay, enough with the navel gazing! I've been very introspective around here lately. While that was necessary (and cathartic), it's time to get back to work, to turn our attention to money once more.

Before we begin, though, let's talk about some changes to my workflow. Mainly, these will affect me, but they'll indirectly affect GRS readers too.

Refining Get Rich Slowly

As most of you have gathered by now, I'm going to shift how I approach my writing schedule. As in: I'm not going to stick to a schedule. I'm not going to feel pressured to publish. Instead, I'm going to write what I want, when I want. I think we'll all like the results.

As part of this change, I'm going to be less frenetic, less scattered about my writing. For instance:

I am a huge proponent of setting financial goals. A well-considered financial goal not only gives you direction toward some of the biggest things you want to achieve in life, but is easily broken down into steps that you can achieve today – and I do mean literally today.

The big problem with this kind of big goal setting is that the bigger and longer-term the goal, the more likely it is that your life will change in some significant way before you reach that goal.

Sometimes those changes are good changes. Those kinds of changes can accelerate you toward your current goal quickly (like a windfall) or even cause you to consider an even stronger goal (like a major career advancement or change).

Others are simply life changes that make your current goal seem irrelevant, like getting married or having children or simply reconsidering your life priorities.