How J.D. Roth Got out of Debt, and Managed His New Fortune the Right Way

J.D. Roth is most well-known for founding the blog Get Rich Slowly in 2006, though he is no longer associated with the blog. He is also the author of Your Money: The Missing Manual, and teaches courses on how to master your money rather than letting it manage you. Roth's financial philosophy is based on things that people won't necessarily find very exciting, but which work:

  • Cutting expenses
  • Learning to budget properly
  • Boosting income to pursue your goals

Roth recently wrote a guest blog post on Financial Samurai that contains lessons valuable to anyone who wants to manage money better. Most of us could learn from Roth, because many of us can identify with him at some point or other in his unique life story.

Starting from Very Little

J.D. Roth was not born with the proverbial silver spoon in his mouth. Growing up in a trailer in Oregon, his family was not well off, and his father was often unemployed. Roth's father was also a serial entrepreneur, who always "had something going on the side." At one point, Roth's dad sold a business for a healthy sum, and spent his first few payments. Because he didn't save initially, once the buyer went bankrupt, Roth's family was quickly back to being broke.

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College: Hard Work and Hard Spending

Though Roth went to college and worked multiple jobs to supplement his scholarships to pay for it, he also had the spending smarts of a naïve college student, and by the time he graduated, he had several thousand dollars in credit card debt. By 2004, Roth was successfully running a family business, but his personal finances were a wreck. That was when he made the decision to start running his personal finances as if he himself were a business.

It worked.

Though it took three years to get out of debt completely, Roth chose to continue with the habits he had learned, and started the Get Rich Slowly blog, which became very profitable and allowed him to quit his day job. He sold the blog in 2009 and he and his wife made a very nice windfall, becoming millionaires. Roth knew, however, that if that money had fallen in his lap in 2004, he would have blown all of it and ended up with nothing, so he was determined not to let that happen. Here are some truths Roth has learned in the years since.

Know Who Are You 'Competing' With

Americans can be competitive and eager to "prove" they have wealth by having expensive electronics, cars, and homes, whether or not these things are actually affordable. In his guest post on Financial Samurai, Roth says, "I started to see that the primary reason I was chronically unhappy was that I lived my life trying to please others ... Worst of all, when I tried to please others instead of pleasing myself, I was miserable." Knowing what you really and truly want out of life is the underlying motivator to managing money wisely.

The Only Thing You Need to Know About Personal Finance

Roth says that very simply, "wealth comes from spending less than you earn." For the average person, having wealth is going to involve increasing what you earn and decreasing what you spend to maintain that balance. Though simple, most people don't take this advice seriously, and many become emotional or angry about their inability to stay financially afloat. But there's no avoiding the numbers: "It's nothing personal. It's just math."

Your Takeaways

If you're looking at a pile of bills and a bank account that appears totally insufficient, it's easy to think, "Well, if I sold a blog for a million bucks I'd have the luxury of telling people how to manage money too." But ignoring Roth's windfall, the underlying principles are sound. Short term sacrifice is often necessary for long term gain. Having money doesn't necessarily mean showing it off. Sometimes the neighbor who appears to have everything is up to his neck in debt.

If you want to make a start right this minute, you can begin by learning how to budget. With an app like Mint that connects to your computer and your smartphone, you can calculate your income and your bills so you'll have a place to start. Many times, simply seeing for yourself where you're overspending can lead to significant positive changes in handling money. Being "wealthy" doesn't have a set dollar amount, but it starts with how you manage what you have. And you can do that starting right now.

Next step: Sign up for Mint and start managing your finances today.