Archives for March 2014

I Am Jeremy Biberdorf, Founder Of Modest Money, And This Is How I Work

Recently, I’ve been going around the blogosphere (what an overused word!) and interviewing the top financial bloggers on the net. Two months ago I interviewed the famous J. Money from Budgetsaresexy.com. You can read that interview here. Today, I had the fortunate opportunity to get to know Jeremy Biberdorf, the founder of Modest Money! His site is rapidly growing and currently ranked in the top 35,000 websites worldwide. As a leader in the financial writing world, I wanted to get to know his tips, tricks, and super secrets for success. Here’s my interview with him:

What inspired you to begin ModestMoney.com?

My main inspiration was a major shift in my personal life. After years of coasting through life, I decided it was time to take my long term goals more seriously. Improving my finances was right at the top of that list. I seriously needed to get my act together with how I was blowing my money and not saving enough. When I started Modest Money, my goal was actually focused on using the blog to increase my income. As an internet marketing professional, I knew a thing or two about website marketing and monetization. Little did I realize that jumping into the finance blogging community would teach me so much. The knowledge, lessons, and contacts helped my finances even more than the extra income.

How did people (friends, family, etc.) react when you first started?

Since I had a history of running financial affiliate websites, nobody was particularly surprised. They probably weren’t expecting me to be so open on my blog though. By opening up I was keeping myself more accountable and ensuring my blog was more personable. My Mom started using my blog as a way to keep up with what was going on in my life. I generally didn’t share my blog with my friends as I wanted to be as open as possible. When I met my fiance and I told her about my blog, I’m sure she was shocked to learn so much about me from my blog. Luckily I didn’t scare her off with all of that public history. Now she is my biggest supporter.

Modest Money Financial Site — *Screenshot of Modest Money*

What was your experience with design, code, web work prior to starting your site?

This is an area where I had an advantage over most finance bloggers. I originally went to college to learn programming and other IT skills. I later transitioned into a website marketing career. Eventually I managed my own websites for several years. So I knew a lot more about the technical and marketing side of blogging than most bloggers do when they first start out. Although I had a lot of those skills, I also knew when it was best to outsource some of that work. Sometimes it’s best to get things done right and without it taking up too much of your own time.

What advice would you give to those thinking about starting their own site?

Do not underestimate the power of networking. At first I didn’t realize how much bloggers are willing to help others within the blogging community. If I had understood this from the beginning I could’ve got off to an even quicker start. Be willing to do lots of favors for bloggers and they’re bound to help you out in some way down the road. Concentrate on networking and marketing as long as you can. The other thing to understand is that blogging is not a get rich quick scheme. Most bloggers don’t make any money at all during their first year, yet they put in a ton of time and effort. Too many of those bloggers do not even get to the point where their blog is making money. To be successful you really have to think long term and be willing to put in countless hours without seeing the fruits of your labor. Work at your own pace and know it will pay off later if you stick with it.

How do you make money from your site?

There are several ways that I make money with my blog. Currently the big money maker is private ads from companies that reach out to me directly. That isn’t a sustainable income source, but it is super easy. So I see it mostly as transitional money while I work to build up other income sources. I also do some contract SEO consulting for people who hire me through my blog. Since I have helped so many fellow bloggers, a lot of them are aware of the website marketing knowledge that I have. I charge them reasonable pricing knowing that it can build up customer testimonials for securing future work. The area that I’m working at building up these days if affiliate income. If I refer enough visitors to relevant products or services I can make decent commission. This is likely going to become my big income source over time, but it takes a while to build up. Lastly I am now getting into staff writing for other blogs. Well it’s only one blog to start, but we’ll see how that goes. The part I really like about staff writing is that it can be a much more stable source of income while also helping market my own blog. If only I weren’t such a slow writer.

What do you think you’ve learned from your readers and fans?

That’s an interesting question because blogging is definitely a two way learning experience. On pretty much all of my posts readers leave comments that I can learn from. I couldn’t possibly list everything I’ve learned. The number one thing is probably how lots of people are going through similar struggles. The financial blogging community isn’t like Facebook where most people are only sharing stuff that they can show off. Instead it’s people being very supportive and sharing their experiences good or bad. Because of that support and understanding, I don’t get as stressed about facing any financial challenges.

How can somebody in lower incomes best overcome financial hurdles and prosper?

The first step is educating yourself about day to day finances. Unfortunately there are lots of areas of personal finance where people with lower income face an uphill battle. Think of how the rich get better interest rates and better credit card rewards. Then lower income people get stuck with high interest and big fees if they can’t keep up with their finances. So to combat these kinds of things, you need to arm yourself with the knowledge about how to get the upper hand on this system. Then get in the mindset that you have the power to change your circumstances. If you’re willing to put in the effort, you can reach your financial goals. Almost everyone can find ways to both reduce their expenses and increase their income. Get researching how to save money and how to earn side income. Take on the challenge and you’ll probably be surprised about what you can achieve.

Who are your financial role models?

My number one would have to my mom. She raised my sister and me as a single parent while overcoming all kinds of obstacles. Not only did she get by, but she did incredibly well. Through hard work she was able to become a successful entrepreneur. My dad played a pretty big role too. He may not make a lot of money or even manage it very well, but he provides a great example of being very happy without needing money. Although I will push to do well financially, I still know I can be perfectly fine even if I don’t become wealthy.

What personal finance sites do you read?

To be completely honest I don’t have much time for reading financial sites these days. When I first got into financial blogging I read so many finance blogs that I might have overwhelmed myself. There are only so many times you can read about certain topics that keep getting repeated. That’s not to say there aren’t awesome finance blogs out there that manage to take a unique approach, but I’ve been too busy to keep up with them. I do wish I had the time to keep learning and keep up with all the great blogs.

What else would you care to share with the readers of Frugaling?

First of all, thank you very much for inviting me to do this interview Sam. You’re doing an awesome job with Frugaling and I expect to see you around for a long time to come. For the readers of Frugaling.org, remember that personal finance is personal. You’ll read all kinds of advice and tips on finance blogs, but it’s up to you to find what ultimately works best for you. Everyone’s situation is unique. You can’t always fit a square peg into a round hole. So keep that in mind when reading finance blogs. Take what you can from that advice, but don’t expect to be able to apply all of it to your own finances just as successfully. What you do learn can still help tremendously.

Want to read more interviews like this one? Read the entire interview series here!

My High School Gambling Problem

By Frugaling 9 Comments

Poker Table Chips Cards Gambling Problem — *Photo: flickr/imagesofmoney*

As a Millennial and part of the tech generation, I grew up around computers. I can’t remember much of a time before the Internet. Computers were ever-present by the time I reached middle school. When I was in fourth grade, I learned HTML and began writing code by hand – a geek of the highest order.

In elementary school, my parents bought their first computer. I was glued to the magic of the mouse, keyboard, and screen working together in a confluence of beautiful technology. These integrated zeros and ones seemed to dance before me, and it wasn’t long before I started making money from it all.

Today, I have a secret to share with you all: in high school, I had a gambling problem. In 2004, I started playing poker with my friends. It started out pretty casual and fun; lighthearted, even. Large groups of people would coalesce at one person’s house every couple weeks, and a doable $5 buy-in would be advertised. Texts and phone calls would be sent out, and the get-togethers were great.

Poker Cards Chips Texas Hold Em Gambling Problem — *Photo: flickr/deutero*

The buy-ins (the amount to play in tournament-style texas hold ’em poker) grew, too. What was $5 soon became $10, $20, and there were even re-buys (to buy back in for extra if you had lost once) at another $20. The shared prizes were amounting to hundreds and hundreds of dollars. If you won, you could easily walk away with an extra $100-200+ in your pockets. The infusion of funds was electrifying. I was hooked and loving it.

Some people were inspired by the statistical underpinnings. Behind it all, poker between friends was a stats-based game of skill and chance. But if you mastered the art of stats, your chances became stronger. Poker wasn’t pure gambling, as the same winners would be on the leaderboard week-to-week. They were doing something right.

The mathematics never appealed to me; instead, I loved the interpersonal dynamics – the play, candor, and fight between personalities at the table. Give me 8 other opponents, and I believed strongly that I could understand their style, bets, and choices. This was exciting and enticing. Unfortunately, at the end of every tournament, the game would be done for a couple weeks. I’d have to put my earnings and love for poker on hold.

I was looking to fill that gap, and that’s when I found online poker. The world of online poker is complicated to explain in the space and time I have today. Basically, the in-person life I was experiencing every couple weeks could happen every day – at any time. There were hundreds of thousands of players worldwide. Money was flowing – some would say overflowing. A growing mass of amateurs were joining, dropping $100, $200, $1,000 into online accounts. Frankly, they were suckers and I was ready to take advantage of their inexperience.

In 2005-2006, I was playing regularly online through two websites. I entered a couple tournaments and made nearly $2,000 in a couple weeks. When I played “cash games” (no buy-in and not in a tournament style), I was averaging anywhere from $7-10 per hour. Mind you, I was a sophomore/junior in high school, and this kind of money was astronomical to me.

Unfortunately, I had one major problem: I couldn’t stop. The money was so powerful and my earnings were ridiculously lucrative. I lost respect for money, and that’s where things got troublesome.

I was only 16 years old, had made thousands of dollars off of poker, and I was getting bored. Better said, I wanted to raise the stakes and make more money. $2,000 here and there was no longer enough – I wanted the $50,000 prizes and $50 an hour average pay. Amidst this mix of greed and boredom was a toxic combination. I started playing one-on-one (colloquially: “heads-up”) for hundreds of dollars at a time.

The numbers didn’t really mean anything, and it all began to feel pretty surreal. Once, I continually bet $100 against someone – over and over again – until I lost about $400. My heart was racing. I didn’t know whether to laugh or cry. Within seconds, I had lost hundreds, and all without care. I had been gambling for entertainment, and this was never the intention.

Off and on, I struggled to stop or curtail it – a telltale sign of addiction. The rush was calling and I itched to play more – in time and money. As my winnings disappeared, I saw my savings account go back down to near-zero. In addiction parlance, I had hit rock bottom, and began selling off dvds, books, and anything I could get my hands on to keep funding the rush. When I ran out of that, I used credit cards. When I ran out of that, I realized I had lost everything.

I’m about 5-6 years “sober” from poker/gambling problem. I haven’t touched a deck of cards to teach or play texas hold ’em. I blocked and closed all online accounts. Like all dependencies, I know this itch is eager to get back out there and play another hand. Instead, I’m writing this article and saving my precious pennies. Now, my life is changing and it has nothing to do with the cards I’ve been dealt.

Burnout: My Into The Wild Craving

By Frugaling 8 Comments

From Into The Wild Movie Burnout — *Burnout makes me want to take off to Alaska, and have my own Into The Wild moment*

Today’s diary-like article is brought to you by my head’s burgeoning desire to really see the world and diversify my experiences. As a student for about 21 years straight, I’m really starting to develop an itch for more. Stuck inside classrooms with esoteric professors (at times), and told to read ever-increasing amounts of onerous text, I’m burnt out.

My head keeps thinking about bigger questions:

Why are we here?
What motivates me?
How can I follow my dreams?
Why am I sitting in certain courses, losing an hour-and-a-half of life each class?
Am I benefiting from these more pedantic exercises in endurance for endurance sake?
How can I better help others?

Before I can focus on these questions, I’m swept away by the confining, time-limiting world of graduate school. I can’t tell you how many times I’ve heard this cliche: “Graduate school is like a marathon.” The purpose of this phrase is to both reassure and reevaluate your place. A marathon is all about pace; to finish 26.2 miles, you must have a perfect confluence of both time and energy. Just pace yourself in grad school, and you’ll make it through.

The analogy works, until I remember that I finished two marathons in the first two years of graduate school. See, I’d take a marathon any day over the drool-inducing caverns of classrooms. In these moments of both clarity and disillusion, I wonder what I’m doing and desperately want to buy a ticket to some far away place.

Dorothy from Wizard of Oz — Dorothy from the Wizard of Oz, clicking her red heels…

I want to see the world before it’s too late. I want to feel more before it’s too late. Life is finite, and precious. Being in a classroom, sitting through an incomprehensible lecture on a subject I will never apply to my work as a psychologist is hard to swallow. Like Dorothy, I’m clicking my shoes together, hoping to be anywhere but within these four academic walls. I want to be out there, helping people, and making a difference – concretely, directly.

That’s when my more frivolous self comes into the picture. That airfare to a remote destination is most certainly not frugal. The desire to experience, see, and do often comes with a price; frankly, Groupon doesn’t help. I’m in debt. Nothing is truly affordable; yet, I’m itching to get up and go.

Burnout is a warning. Burnout is when the presses stop, wheels cease to spin. Burnout can be disastrous to a frugal budget. That’s the last thing I need. Nowadays, my solution to these moments is to accept my body’s non-acceptance. My head and heart are telling me: something’s gotta give.

If you’re beginning to feel burnout, your body is communicating something about stress and flow in life. Likely, your time and energy is primarily going to tasks that aren’t fulfilling. The answer is simple: keep doing the same thing or change it up. Usually, it’s not about needing more time; rather, a reallocation of time. If you’re burnt out it’s probably time to starting saying “no” to certain projects, taking more time to pursue passion projects, and giving up a little bit of the expected path. It helps to remember that this is your path – no one else’s. You can change course whenever you feel like it.

8 Proven Purchases For Happiness

By Frugaling 8 Comments

Happiness = Money, right?

Research suggests that happiness and money are poorly correlated. In other words, money doesn’t tend to make people happy. Pretty crazy, right? Everything about our society seems to be predicated around the synergy of these two variables. But most of the time, happiness is correlated to other behaviors (i.e., closeness to friends, enjoyment at work, and balance in life).

In this consumer-driven society, encouraged to buy from our very own presidents and leadership, we are primed and ready to spend and spend – well beyond our budgetary restrictions. Our world tends to eschew philosophical questions about why you need to have something, in favor of taking advantage of the present moment to spend.

Happiness is often a marketing tool, used to increase sales. For instance, a commercial may feature scantily-clad women partying with beers in hand. It doesn’t take a scientist to decipher the claim: drink more beer, get more women – prettier ones, too! But lasting happiness isn’t at the end of a bottle.

You’re Doing It Wrong

In Martin Scorsese’s The Wolf of Wall Street, Jordan Belfort wreaks havoc on financial markets, his family, and to anyone else in his way. He has a ruthless charm, narcissism, and greed. He spends and drives recklessly. Jordan is the living embodiment of a metastasized compulsion to capitalism.

What our antagonist fails to understand is that happiness, purpose, and meaning are not contained within another $100 bill (or, however many millions he makes). Who can blame him, though? When a society values money like we do, and encourages spending without regard for the future, he’s actually playing by our rules.

Moreover, he’s not alone. Many struggle to understand and say “no” to a society that propagates this need to spend and make more money. But what if money did actually make you happy? What if there was a way to make these two things more correlated?

An Action-Plan For Money And Happiness

Newer research suggests that money can make you happy, but up until now we’ve been spending it wrong. All the beer, fast cars, and yachts can’t make us happy. Instead, happiness comes from some specific action-oriented spending.

Take the trip, ditch the tchotchkes
When it comes to happiness, buying material goods rarely suffices. Whatever positive emotions are initially experienced tend to fade rapidly over time. In fact, 57% of people reported greater happiness from experiential purchases versus 34% for those purchasing material goods.
Give a little, give a lot – just give
Researchers found that personal spending – buying for yourself – did not relate to long-term happiness. On the other hand, those who spent money on others acknowledged greater happiness. When you think about all of your expenses for a month, it might help to think about how much of that is going to help others.
The tiny purchases are more important
Unlike Jordan Belfort and his bags of cash, you’ll likely be restricted by current bank account balances. When you purchase expensive, rare items, there’s a finality and adjustment that occurs – a new norm develops. If you buy smaller, more frequent items, you actually can take advantage of novelty and variability – both key health indicators.
Avoid extended warranties and overpriced insurance
Turns out that there’s quite a lot of psychological evidence to suggest that buying extended warranties may be an unnecessary “emotional protection.” Essentially, because we do not want to lose/damage our new purchase, these warranties pull out an emotional response regarding loss. Most of the time, buying or reacting to this makes you spend more than you have to and occludes happiness.
Delay gratification, consumption
Researchers suggest that “anticipation” is a key ingredient to a healthy, happy purchase. By waiting to purchase and letting that eagerness build, we may actually enjoy it more when we finally have it. Likewise, by delaying purchases, consumers may spend less – or not at all.
Clear pros and cons
Looking to buy that dream home someday? Where do you envision it? Maybe you want to buy a dream lakehouse? Researchers found that many people tend to downplay the negatives of an imagined purchase. What about the tax implications, a plumbing issue while you’re away, and/or an exceptionally mosquito-filled summer? Imagined happiness is often easier than the reality of an impending purchase. By trying to realistically imagine your purchase, while creating an objective, logical pro and con list, you may be able to avoid this pitfall.
Don’t dare compare
We’re notoriously awful comparison shoppers/buyers; at least, when we account for happiness. Dunn, Gilbert, and Wilson (2011) found that Harvard University students living in their residential system tended to downplay social ties and try to pick physical features of a building first.

…when these students later settled into their houses as sophomores and juniors, their happiness was predicted by the quality of social features but not by the quality of physical features in the houses.

The point is that even though the social features matter far more, before we choose something, we don’t always process and think about our own social needs. Interpersonal connections with others are necessary for most everyone, and they tend to bring greater happiness.
Think of others’ enjoyment, too
Online review sites and movie rankings bring swaths of people to rate their own experience with a product or experience. By utilizing these websites, you can measure your own enjoyment and future experience to theirs. If lots of people experienced happiness, odds are you will, too!

This action plan for making happiness from money is based off the research by Dunn, Gilbert, & Wilson (2011). They found that people were spending their money inappropriately, thinking they’d be happy, when there were better ways.

How do you spend your money? What do you do to find long-term happiness?

Archives for March 2014

I Am Jeremy Biberdorf, Founder Of Modest Money, And This Is How I Work

What inspired you to begin ModestMoney.com?

How did people (friends, family, etc.) react when you first started?

What was your experience with design, code, web work prior to starting your site?