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Run Your Household Like A CFO

by retirebyforty on April 23, 2014 · 10 comments

in book review, early retirement guide

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Get Rich Slowly: The Unconventional Guide to Mastering Your Money

I bet many of you have read something at Get Rich Slowly. It’s one of the earliest personal finance blogs and I have been reading it on and off for years. Luckily, J.D. Roth (founder of GRS) lives in Portland and I get to hang out with him occasionally. He is a huge inspiration to many bloggers and it’s a privilege to know him.

J.D. has been writing about personal finance for over a decade. Over this time, he transformed his life from being $35,000 in debt to having over a million dollars in the bank. How did he do it? You can read Get Rich Slowly from the beginning or you can check out his new Get Rich Slowly guide. The guide is centered on J.D.’s latest book – Be Your Own CFO. He has been working on this for the past year and he assured me it’s his best work yet. J.D. just sent it to me a few days ago and I’m still going through it.

Become your own CFO

JD was a business owner and he did a meticulous job with the finance there.  However, like many of us, J.D. didn’t run a tight financial ship at home.  He hit rock bottom in 2004 after bouncing another check and missing another payment. After that, he decided to run his personal finance like his business and drafted a 3 year plan to get out of debt. It worked! He tracked his expenses, improved his cash flow, and JD, Inc. became debt free in 2007. He wants you to become your own CFO and he will show you how with his Get Rich Slowly guide.

Here is how the book is laid out.

  • Missions, Goals, and Action Plans – This helps you figure out your goals and an overall plan for your financial life.
  • Process Improvement – Here’s how to organize and automate your finances.
  • Financial Reports – Track your monthly expenses, net worth, and saving rate.
  • Budgets – You either love them or hate them.  J.D. explains why you need a budget and helps you create one.
  • Profit – This section focuses on growing your profit (income – expense).
  • Overhead – Examine your household spending and see how you can reduce your monthly expenses.
  • Revenue – Increase your income.
  • Saving and Debt Reduction – What you should do with your extra savings.
  • Investing – Put that extra money to work.

My impression

J.D. is first and foremost a storyteller. He isn’t your typical personal finance guru. He relates his personal experience to make his work an interesting read. That can be difficult when it comes to personal finance. As you can tell, I love J.D.’s writing. It’s an easy read and there are many practical action steps that you can take.  Life has been a bit crazy lately, so I haven’t finished the book yet. However, I already learned something from the first chapter. It’s important to figure out why you want to save and invest. Why do I want to retire early? Many of us focus on how to become financially stable, but we don’t take the time to figure out why.

Here is J.D. –  “It’s important to be clear about your purpose so that you’ll remain motivated when times get tough, and so that you’ll be able to make better decisions as the CFO of You, Inc. To begin, you need a mission statement.”

You need a mission statement to give yourself purpose and to keep you going strong. As for me, I focused on early retirement, but I never wrote down a clear mission statement. I made sure the cash flow worked. We saved diligently over many years. We live a modest lifestyle. Why did we save and invest when other people are enjoying their money all around us?

My mission statement – I want to spend lots of quality time with families and friends in a low stress environment, live a comfortable lifestyle, and experience new adventures together.

My old engineering job was very stressful and time consuming. Leaving the rat race gave me more time and reduced my stress level quite a bit. Mrs. RB40 still works, so that’s one thing we are working on. Our life is pretty comfortable right now. It’s not extravagant, but we’re not lacking for any essentials. As for adventures, everything is a new adventure to a kid. Now that RB40 Jr. is a bit older, we can travel a bit more. Next week we’re going to Hawaii and I’m pondering an extended trip to Thailand next year.

Life is generally good at the moment. We are working on some things, but we are adhering to the core of my mission statement. Life is not quite perfect, but we’re getting there. Perfection is overrated anyway.

What can I learn?

Our finances are pretty stable at the moment. I’m sure I can learn more new things as I go through J.D.’s book, though. For one, our finances are too complicated. It seems like we have too many pots on the fire which is a source of stress for us. Anyway, check out J.D.’s guide if you’re a fan. If you are a blogger, you need to read this book as well. It will improve your writing. We all need to be more entertaining while trying to help people improve their finances.

J.D.’s book Become Your Own CFO is part of the Get Rich Slowly guide. You can preview the book from the promotional page. Just search for “Preview the Guide.”

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{ 10 comments… read them below or add one }

Chattanooga Cheapster April 23, 2014 at 5:59 am

Thanks for the book recommendation! I’ll definitely read it.

I do some of the things mentioned in the article, but I’m really intrigued by the simple concept of being a household CFO.

A mission statement is really important, especially if a spouse or loved one who has a hard time seeing the “big picture”. My personal mission statement is to have enough money to fund a secure life for my special needs daughter AND retire by age 55. That’s a lot later than 40, but I obviously have some special circumstances.

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freebird April 23, 2014 at 10:28 am

One of the big draws of early retirement for me was getting away from the corporate doublespeak! I hope his message doesn’t get interpreted as “managing your financial life requires the skillset of a C-suiter”. Personally I think common sense and simplicity have more mass appeal because more of us can relate. A 3×5 index card can probably explain what you really need to do (1) save regularly (2) invest immediately (3) insure against large exposures. I don’t think paying (in both money and time) financial advisors, personal coaches, or book authors offers any significant advantage. Ask any C-suiter how effective they found that team of consultants or best-selling author their company last hired turned out to be.

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Tom April 23, 2014 at 12:07 pm

I have to agree here. Sorry RB40, I’m sure you mean well, but having to pay money to learn how to save when there are already great free websites like yours makes no sense. It sounds like that website was sold and now its just a company trying to make a buck.

It’s not the nominal amount that is the issue ($39), it’s what the website seems to stand for now. Learning to save requires work and dedication, not some diet fad you try and fall off the bandwagon in a few months. None of the things that website offers are needed, its exactly why so many people spend more than they make now, instead of in-sourcing and reading up on their own, pay people to do it for you… huh???

Part of the fun in trying to attain financial independence is reading the various different blogs to get ideas on how to save.

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retirebyforty April 23, 2014 at 11:46 pm

JD sold Get Rich Slowly in 2009. I know it’s a bit confusing, but this is JD’s course. It’s sold under the unconventional guides (Chris Guillebeau.) Chris is helping JD out with marketing. They are friends.
Personally, I don’t need a guide, but I’m sure a lot of people will find this helpful. Well, the GRS course would have been really helpful when I was 22. Just reading blogs is good too.

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Ernie Zelinski April 24, 2014 at 1:28 am

Joe:

Great article, as usual.

Regarding, “Budgets – You either love them or hate them.” I hate budgets and have never used one even when I was broke and living under the poverty line.

That said, you also say, “Next week we’re going to Hawaii.”

I have always wanted to got to Hawaii. It’s not a money thing with me, just trying to find the right time and someone to go with me.

Weird, I just found this out about an hour ago, which you may find useful. This Kindle ebook is available for “Free Download” on Amazon just for today, April 24.

It is called, “Hawaii for Free.” Here is the link:

http://www.amazon.com/Hawaii-Free-Hundreds-Things-Do-ebook/dp/B00J4BA01K/

I am just about to download it to my PC, my iPad, my new Mac Pro, and my iPhone.

Have fun in Hawaii.

Ernie J. Zelinski
The Prosperity Guy
“Helping Adventurous Souls Live Prosperous and Free”
Author of the Bestseller “How to Retire Happy, Wild, and Free”
(Over 200,000 copies sold and published in 9 languages)
and the International Bestseller “The Joy of Not Working’
(Over 275,000 copies sold and published in 17 languages)

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retirebyforty April 24, 2014 at 3:43 pm

I just downloaded Hawaii for Free! Thank you. I don’t like budgets either. I keep track of all our expenses and I just make sure we don’t overspend. That works pretty well for us, but it seems most people need a stricter budget.

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Bryce @ Save and Conquer April 24, 2014 at 11:46 am

I like your mission statement. It’s short and to the point. My mission statement is very similar. My only addition would be that I want to make sure my wife and son are taken care of after I am gone.

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EL @ Moneywatch101 April 24, 2014 at 1:14 pm

Sounds like this is a great read. I like actionable steps to help people get a better financial foundation. The why can help transform your life with purpose.

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No Nonsense Landlord April 24, 2014 at 7:56 pm

Have fun in Hawaii! I lived there for 11 years.

Keep up the great work!

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Paul @ The Frugal Toad May 7, 2014 at 6:40 am

I’ve always believed that managing my finances like a business was the way to go. Yes I have a budget and watch spending but I also watch cash flow. Cash flow gives me a better picture of when outflows are highest during the month and allow me to adjust spending.

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