Here is my recent interview with Life Hacks magazine.
Life Hacks is a free magazine that you can download on your iPhone or iPad.
You can get the magazine here (my issue is the fourth free one).
A Few Key Points for Skimming
[4:26] Meet the expert who can help you get control of your finances and your life
[6:16] Kalen’s #1 suggestion to get out of debt – for good
[7:22] What is Debt Snowball?
[8:28] What is Debt Avalanche?
[9:58] A multi-millionaire’s secret that everyone can do
[10:51] The Excuse everybody tell themselves why they can’t build wealth, and why Kalen would rather get a second job
[12:05] Kalen’s Top 3 favorite resources that he wants you to see
[12:56] The first step to get control of your finances
[13:31] A creative trick to automatically send money to someone without a bank account, without doing it yourself.
[16:00] The financial advice Kalen wishes he had while growing up
[17:16] Kalen’s ultimate LifeHack advice
[19:14] Failure Goals?
[20:35] A different take on Rejection
[23:11] The awesome thing about Paletting
[25:19] The #1 mindset-shift that needs to happen
[25:36] What you don’t know while you’re Keeping up with the Joneses
[25:52] The one thing that keeps people broke
[26:05] You’ll know you can’t afford it if…
[26:35] What you think they are thinking VS. What they really are thinking
Enjoy the video…
Garik: Hello there, LifeHackers! Garik here, and today I have the great pleasure of talking with Kalen Bruce. Now, Kalen is an expert in the personal finance industry. And personally, the only millenial that I know who is an expert in the personal finance industry. But more on that, he’s an expert in the art of productivity. The art of getting more done with less time and less stress. But what he really is, is he’s an expert at getting control of your finances, time, work, and really just getting control of your life. And he’s also the brains behind the website MoneyMiniBlog.com.
So Kalen, you wanna tell us a little bit about yourself?
Kalen: MoneyMiniBlog is about two years old. That was my first, real personal blog, so I’ve been freelance writing for a while, actually starting on my own project MoneyMiniBlog first. I’m married, with four children, recently adopted two of them. I’m active-duty military of the United States AirForce, so I got that going on too, on top of freelance writing, and trying to find a way to take care of four children.
Garik: Here at LifeHackers, we try to find the best mix for effort versus output ratio. So if you were to suggest one thing for our LifeHackers to improve their finances — and probably in today’s life, just looking at the trend of the economy — probably getting out of debts specifically. What would be the #1 tip that you would suggest?
Kalen: #1 for sure I would say Automation. You can have an entire automated financial system easily. It’s as simple as automating all your payments, automating every single area of your budget you can, so that you can reduce your actual budget.Our budget is maybe a few hundred dollars a month (I think it’s $500 a month). It’s what we actually budget every month, based on the $3,000-$4,000 that we’re earning. Everything else is automated: our investments, mortgage, rental property, rent on our house, if we have car payments, anything like that. And that’s the exact way that we got out of debt — it was automation. We did debt snowball, you can do debt avalanche…
Garik: Can you explain those two terms?
Kalen: Snowball is what we did. That’s basically just listing all your debts starting with the smallest monthly payment, all the way down to the largest, which would usually be your mortgage. Basically you’re just paying that smallest payment and you put everything you can towards that small payment. So whenever you’re working extra jobs, getting extra income, doing whatever you can, you put everything towards that smallest payment. Once you paid that off, you take the amount you were paying on that payment and start putting it on the next item, on top of all of the rest of your payments that you’ve been putting towards it. So it really “snowballs,” it really is a snowball to pay off everything as fast as you can.
For us it was, because we had 15-20 different debts, different debtors that we were paying. So we got the small winds in the beginning: you pay off the $400 debt, and then you pay off the $600 debt. Those were usually the ones at the lower payments.
Now the debt Avalanche is similar, except you order things from highest interest rate to the lowest interest rate. You’ll actually save more money; 9 times out of 10 (pretty much every time) if you do the debt avalanche because you’re gonna be paying less interest overall, because you’re getting the highest interest knocked-off first. But a lot of people prefer the snowball method. Because of the small winds in the beginning, it’s easier to stick with. Either way, whichever method you use, you can automate it. You can automate all of your bills to be paid, pay the minimum payment on everything. Except the highest interest if you go with the avalanche, or the smallest payment if you get with the snowball. You can actually set credit card payment, student loan payments; you can set to pay the minimum plus however much extra, and then once you pay that, whatever the first debt is you’re trying to pay off, you go in there and you have to change your automation, and you can set the next payment, you can add the payment to it, and whatever extra you can. So that every month, if you’re paying off that $20 minimum payment, you can schedule it to pay the $20 minimum payment plus an extra $300 or whatever, and then once you pay off that in full, you go to the next one and so on and so forth, and you’re automatically debt free. And that’s exactly how we did it.
Garik: I remember at one of my listing to Ramit Sethi at HowToBeRich.com (actually IWillTeachYouToBeRich.com), and he was saying that he only does one hour per month working on all of his investments, savings — he just does one hour per month. Everything else is automated. From the very top it’s used. And I really like automation because, people are always trying to change their lives with effort, with “doing”, and if you can set it up so that things are just done automatically, so that you won’t have to think about it — there’s no willpower involved. And I think that’s where a lot of people get snagged.
Kalen: Exactly. Actually, it’s been a long time that I learned an article about why discipline is no longer required for building wealth. It’s basically what you’re saying. You don’t even have that excuse anymore of not disciplined enough to do that, because you can set it up. Like I was saying earlier, every single month all of my payments are made, all of my investments come out (from my kids’ college, my retirement, other various investments for different things and reasons), and they all come out every month. That’s just how I prioritize it. They’re the first priority, as far as my finances are concerned, and I’m not gonna touch them if something happens. I have to go get a second job for two days to feed the family for whatever reason, if something or chaos happens. I would do that, but I’m not gonna touch those automatic investments no matter what. That’s what’s going to stay, they’re going to keep coming out month after month.
What you said about him, that’s a great book on automation and finances. My buddy overread JMoney BudgetsAreSexy.com; he actually told me about that originally, initially. And then Tim Ferriss’ podcast is probably my favorite podcast right now and they’re good friends. That’s another great resource.
Garik: Getting on the nitty-gritty of it, if somebody doesn’t know where to start or start looking when they’re thinking about automation. It’s somewhat of a nebulous term for some people. Where would you suggest to start, what tools… have a nitty-gritty tactical level… What kind of things would you suggest to first steps for automation?
Kalen: First steps for automation. ‘I Will Teach You To Be Rich’ is a great book to read. I have articles on MoneyMiniBlog about automation, I think I have some articles on CNNFinance.com about automation.
The main place to start is, it’s really as simple as writing down every single payment you have (debt, payment, everything) and just go down the list and figure out what you can automate. Figure out, “Can I have rent? Can I automate that?” “Well, I pay rent to a little old lady who lives in the house behind me, so I don’t know if I can automate that.” But then you can go through your bank, because usually with your bank, online banking, you can almost always set up a business or an individual and you can have a check sent automatically every month. Whether that’s rent or another bill, or even if you owe somebody money, you can automatically have that sent every month. So almost everything you can automate. In my church my monthly giving, my tithe every month, it’s all automated. I have that automatically come out of my account so I know I’m gonna give and I’m gonna invest whether I want to or not. It’s automatically gonna happen.
Garik: I don’t know why I’ve never thought of that, of setting up an automatic charity to your local church. I’ve never thought of that for some reason. That’s really unique, I like that. I think what a lot of people have trouble with automation is that they might not know where to get started. But giving the example of the little old lady living behind my house, talk to your bank advisor. They can set it up basically for you. They can tell you what to do, how to do it. Even if it’s something you don’t know how to do, you can just figure it out, ask for help because the bank will help you with that. They’ll set it up pretty much for you. That’s really powerful stuff. That’s really great information.
Taking a step back from one particular half, and automation’s a fantastic one. In LifeHacks, we want to give our LifeHackers the best tactics, strategies for improving their lives. But moving behind the tips and tricks, you’re an expert I respect deeply, both an expert at personal finance and productivity, and a lot of areas. And I would love to hear, what’s the best piece of advice you wish you had while growing up, that you could give to our LifeHackers?
Kalen: I’ll split in two here. I’ll say financially, and this seems like an obvious one now looking at kids today, but I would just say to beware of credit cards. I grew up with parents who pretty much spent money on credit cards like it was free money. So I grew up thinking that it was normal to use credit cards. I’ve been through the whole cycle: I started getting credit cards, I started realizing how easy it was to rack up the money, and increasing my credit limit, and that went on and on. Got $10,000 in debt, and then I figured out what I did wrong, paid off all my debt, and now I use credit cards for everything. My wife and I have a rewards system setup to where we can get the most rewards for every purchase on credit cards. I think credit cards are an amazing thing if you pay them off every single month without fail. That would be my money tip. Watch out for credit cards. Know what you’re doing, know how to use them responsibly.
But for overall life hack, life tip in general, it would be to utilize failure. Learn from failure and don’t see it as a bad thing. I grew up with the mindset of thinking that you fail, you make a mistake and something bad is going to happen because of that, so don’t do that again because you don’t want something bad to happen VS. LEARN FROM THAT. You don’t want to do that again because don’t want to have a bad thing to happen as a child.
As an adult, you make way more mistakes than you did as a child. Learning from your mistakes, that just something I wasn’t taught. I think it’s really valuable, we can instill that in our children. It’s okay to make mistakes. That’s actually a good thing and you can learn from them.
Garik: When you’re thinking about failure, you got to realize that if you’re ever you’re going after anything big in life, you’re just gonna fail a lot more than you’re going to succeed. You’re always going to have about a 70%-80% failure rate and maybe 20%-10% success rate, if you’re lucky. But the truth is you only have to succeed once. You only succeed once in this business, or you only succeed once in finding the right soul mate for you. Only succeed once and then you’ve made it. If you’re gonna increase your failure rate then you automatically will rack up more successes. You only need one. That’s a really powerful idea.
Kalen: I’ve actually set failure goals before. I’m a big advocate of it. Like, if I’m gonna go out and submit writing, if I’m trying to get picked up by bigger websites with my writing, something like that for example, I’ll set a failure goal to get 20 rejections a month, or something like that. You can’t guarantee that you’re going to have successes. You could have thousands and thousands of rejections without successes, but you can guarantee if you submit to enough people, you are going to have rejections. So if you submit to enough websites with writing (just as an example) to get 20 rejections, then you know your odds. Say, you get 20 rejections for every 5 or 10 accepts, whatever the case is. But the acceptance rate is always going to be much lower in everything. That’s just how it works. I think that’s just an interesting thing. Especially for people in sales is to set a goal to get X amount of rejections. Not only will it make it easier for you to understand how beneficial rejections are, for you to get rejected, but you’re going to have a lot of successes along the way. It just happens.
Garik: I think that psychologically one of the easiest ways to look at rejection is to say, “Okay so I have probably a 10% success rate in this area. And if you succeed, hopefully you’re going to get a rather big return on that.” Like in business, “Okay, this business weighs like a 20% chance of success. Then if I just do 5 businesses over my entire lifetime, just one after the other, one of those 5 is going to generate the income for me for the rest of my life.” And you realize that it’s not whether this is going to succeed or fail. And then each one is “I have to do this again if it fails.” You don’t have to do it five times, but then if you do it five times you are never going to have to work again in your life, or you are going to be able to give all this money to your family, to your children, or whatever your goal is; but if you can look at that way, often people are like, “That doesn’t sound too bad. I can do this 4 times, 3 times, 5 times, if I have to.” Once you just look at it as a complete package, it’s not too bad. It’s quite a lot easier if you look at it that way.
I just wanna go back with the credit cards. Credit cards are interesting because psychologically they’re short term. “Okay I just got this car, sweet!” But if you pay something with a credit card, something that costs $20 is going to cost you $100 over the long term. And that’s where more people get screwed up with making credit cards over a long term. They just don’t realize that “No, this just cost me $100.” I just wanted to add that.
We’re almost running out of time, but I wanna squeeze a few more questions. Looking at your website, you suggest something called “Paletting.” It’s how to get financial advisors, right? Who do you think are the kind of people who should get a financial advisor?
Kalen: I think anyone should look into it. I think anyone should. The thing I like about paletting is that all you have to do is go in and you fill out your information and then they contact you. They contact you regardless of how much money you have to invest. Most investment firms aren’t gonna talk to you if you have less than $100,000 in investable assets. That’s pretty typical to find. And the thing about paletting, the reason why I’m such a big advocate for them is because if you put in that “I have $100,000” or $500 in investable assets, someone WILL contact you. They’ll let you know that they can do it for you. And if you decide “Well, it’s not going to be worth it for me, I only have $500, I can only really do one thing.” I think everyone should really look into it. Don’t be sold for anything, don’t let them talk you into anything, but definitely look into it.
Garik: That’s good to hear because, the real question is: Is it worth getting a financial advisor at my level, financially? And you’re saying that pretty much at any level, you can use paletting.
Kalen: Paletting, you can. There’s a lot of free articles in the internet if you don’t have a whole lot of investable assets and you’re just looking to get started. But paletting is awesome because you don’t have to have a minimum before they’ll talk to you.
Garik: That’s fantastic. So the last question kind of piggy-backing off of the mind-shift with failure as my last question. What mind-shifts — like different ways of looking at finances, product, life — do you think most people need to make in order to really cross that boundary and get control of their bank accounts, or just get control of their lives?
Kalen: It’s what it’s all about, it’s mindsets. It’s all about mindset-shifts. The #1 piece of advice I would give myself when I was in my early twenties — is stop trying to impress people. “Keeping up with the Joneses”, you can call it what you want. The Joneses are broke. They don’t have any more money than you do. Seriously, the Joneses are the ones making thousand-dollar car payments every month. That’s another thing, vehicles. I think vehicles keep people broke. That’s where a lot of the mindset-shift needs to happen. Spend the money you have. Spend what you earn. Spend LESS than you earn. If you have to finance it, you can’t afford it. Now, I understand home, mortage — you could finance that if you want to, but it still means you can’t afford it if you have to finance it. Same thing with the vehicle. If you have to finance it, you can’t afford it. But there are circumstances where you need to. I would say the big shift is stop trying to impress people. Because honestly, they don’t care about you. I mean, you’re trying to impress people with all your things, and at best, people are going to be envious and say “Oh, I want that.” They’re not going to be thinking “This person is so awesome because they drive the 2015 Landrover,” whatever it is. I think we have a different perception of what people actually think about us and what we feel like they think about us. We definitely have an inaccurate view of how people view us. Because honestly, most people are thinking about themselves. They’re not thinking about you anyways. It’s just like you’re thinking about yourself whenever you’re in that situation thinking about how awesome people are going to think you are with that new car. So I think that’s the big mindset is, stop trying to impress people. Spend less than you make. And vehicles are such a big one. I know so many people staying broke because of vehicles, and it’s because they think that you have to have a car payment and they think you have to have a brand new car. That’s a big one for Americans.
Garik: Going around cars, I remember seeing in your website, you have a really great article about how to get a car cheaply. It’s a used car, but it’s a good article. If you need a car, you don’t need that brand new, expensive car. You can get it without hurting yourself. I think that’s a great line to end on: “The Joneses are broke.” I love that.
So thank you Kalen, it’s been fantastic. And unless you have any closing statements, I think we’re good.
Kalen: No, I think that’s it. Thanks for giving me the time. Thanks for giving me the interview, I appreciate it. I appreciate talking to everybody, it’s been a lot of fun.