Nick Pavlidis combined his head for numbers and his love of personal finance for the uniquely named, and highly informative, personal finance site Step Away from the Mall. Nick talked with us about personal finance and how having a family changes your personal financial perspective.
What drove your interest in personal finance?
I've always been a numbers guy. And I've always had an interest in taking care of my family and helping others. Those three interests really connect well with personal finance. Seeing how much of an impact having strong personal finances can have on others is so motivating and inspiring. So it was a pretty natural topic for me to get interested in.
What are some common incorrect ideas about personal finance you see online?
The three that stick out in my mind are that there is a secret way to build wealth, that the little guy can't get ahead and that "it takes money to make money." It's beyond doubt that there's no secret to building wealth. Spend less than you make, and you'll build it. Increase your income more than your expenses increase, and you'll build it faster. Wash, rinse, repeat. It's as simple as that. And the beauty of the world we live in is that there is opportunity everywhere. If you have a $50 laptop and an Internet connection or a coffee shop with free Wi-Fi anywhere near you, you can set up an online business for a few bucks a month. Finally, while more capital can earn more return from a pure volume perspective, there are countless profitable businesses you can start for just a few bucks or nothing at all. If you want to make a million dollars this month, it's probably not going to happen without some significant foundation, sure. But you can certainly make $500 this month starting from nothing and build from there.
Has there ever been a personal finance tip you've tried out with unexpected results?
Definitely. I was a stock picker for a while. I resisted index and large mutual funds like the plague. I wanted to own my return. I enjoyed picking stocks. And I did well. But I finally gave in and switched to almost exclusively index or large mutual funds and absolutely love that decision. The returns were expected, but it freed up a lot of time to spend more time with my family and make more money through things like business coaching and writing. And quickly doing the math, if you have $100,000 invested, spend just five hours per week researching stocks and are able to beat the market by 2% (which is extremely difficult on a regular basis, particularly if you're only working five hours per week), then you just earned less than $8 per hour for that time compared to sticking the money in an index fund and using that time to be with your family or make more than $8 per hour.
When you do your family budget, what gets cut and what gets added?
Cuts generally include eating out and clothing. We're pretty good with the clothes we have for a while. We do spend a few extra bucks on activities for our kids and things that spark creativity and imaginative learning for our kids. For example, we recently invested in some podcasting equipment for my 5-year-old son, who wanted to start a podcast with me. We went live in mid-July and it's topping the Kids and Family, Games and Activities, and New and Noteworthy charts on iTunes as we speak! It was so worth the couple hundred bucks we budgeted for it just for the time spent with each other behind the mic talking about life and being a kid.
How have children changed your perspective on personal finance?
They have completely changed my perspective. We do the obvious, like saving and investing in 529 plans so that we can have more options for when college comes. But more importantly, we focus on teaching our kids by example that money can be used to help people and provide a stable family. We also teach our kids to give, save and spend, and to get money you do things like work and create things. In fact, that's how my son came up with the idea to launch a podcast. He asked me what a podcast was when I was talking with my wife about starting one. I told him it was a show on the computer where you help people and can earn some money. He asked if he could start one so he could earn money to buy a "flying car" when he gets older.