Kickstarter School

Kickstarter is the premier crowdsourcing platform. It offers a way to finance your project by enabling current fans and wanna-be customers to pay you before you do your project. You don’t pay back your backers except indirectly with creative rewards as thanks. Often the reward is a unit of your project — a device, book, game, etc. Kickstarter is not the only crowdsourcing venue, but it is the largest, most active, and the most refined. So far, over 35,000 projects have been successfully funded — all kinds of creative dreams including games, gadgets, documentaries, music, shows, and one-of-a-kind happenings. One of those winners was a project I launched in 2012 — a graphic novel. We successfully raised $42,000 to complete a second book in our fictional universe. Like many financed projects, I believe that if we could not have crowdfunded it, the project probably would not have happened. In this way, Kickstarter is a fantastic cool tool.

There’s an art to running a successful crowdfunded campaign. While there are several guide books that offer advice on how to raise “big bucks” on Kickstarter, none of them (yet) are better than the simple free Kickstarter School section on the Kickstarter site. It tells you how to prepare the essential “video pitch” that seems to be needed, and gives suggestions on structuring your rewards (what backers get by funding you). Yet it is missing some things I wished someone had told me before we began our Kickstarter campaign:

1) We didn’t have enough cheap seats. Have a lot of different levels of support — including a lot of inexpensive ones of only a few dollars — to give everyone a chance to contribute. And don’t be shy about adding a few really high levels either.

2) Don’t rely on Kickstarter to find funders. You need to gather your fans first before you start, and then once gathered, use Kickstarter to engage them with your project. Once you pull the trigger, there’s no time to find new fans — and they don’t come from Kickstarter. Fans first, then Kickstarter.

3) It’s a full time job. Kickstarter campaigns ordinarily run about one month and during that time, it takes almost full time work to cheer, coax, and promote the project to your fans. There is nothing automatic or easy about it. Somebody has to lead the crowd during the whole time.

4) It all happens at the end. Even with successful grants, the bulk of the contributions come in at the end. So don’t stop drumming; keep sprinting till you’re past the finish line.

5) Don’t forget the Man. When calculating how much you need, remember not only to include the cost of delivering your supporters their rewards, but don’t forget the 8% commission Kickstarter and Amazon will take. That’s a hefty chunk of your total that you need to compensate for when setting your goal amount.

I have friends who skipped Kickstarted and opted for other crowdfunding sites. For instance Indiegogo will deliver funds even if you don’t meet your goal (Kickstarter is all or nothing), 33Needs shares profits with backers for ongoing enterprises (Kickstarter only funds projects), and so on. However for most projects I think Kickstarter is the place to start; it’s well crafted. I hope to do another crowdsourced project, but not as large. In fact, while the giant successes get the most ink, what Kickstarter really excels at is financing medium and small projects that one or two people can reasonably achieve.

-- KK  

Seth Godin on Marketing

The guru of marketing is Seth Godin. He’s done more innovative marketing than most Fortune 500 departments combined and can explain the art of marketing better than anyone I know or have read. In Godin’s view marketing is much more about an approach to life rather than a department in a business (which is the norm). In fact, as Godin preaches, business is more a lifestyle (as in a way of living) than about maximizing money. Money will flow from a finely-tuned approach to life. Your job as a businessperson is to navigate a thousand tradeoffs in the rugged terrain of reality in order to tune your enterprise to maximize learning, difference, and value to others. If you succeed, the process will also produce money. The art of perceiving and managing these tradeoffs (niche of 1 vs niche of 1000? ) is marketing. It is not about advertising.

Godin is a prolific writer. Some of his best advice flows in a river from his daily blog. A distilled version of his messages can be found in the essential three of his many books: Purple Cow, Free Prize Inside and All Marketers are Liars. One thing I really like about Godin’s work is that it is technology independent. He embraces all that social media does (before it materialized) without getting stuck in the minutia of any technology. Read any of his books and blog and you’ll be ahead of this rapidly advancing curve.

-- KK  

Purple Cow
Seth Godin
2009, 224 pages
Available from Amazon

Free Prize Inside
Seth Godin
2007, 256 pages
Available from Amazon

All Marketers Are Liars
Seth Godin
2009, 240 pages
Available from Amazon

Seth’s Blog

Sample Excerpts:

From Purple Cow:

Stop advertising and start innovating.


Imagine how cool Pop Tarts would be if the brand manager was the sort of person who ate them for dinner.


Before you spend another dollar on another brain-dead ad campaign, trade show, or sales conference, spend some time with your engineers and your customers. Challenge your people to start with a blank sheet of paper and figure out what they’d do if they could do just about anything. If they weren’t afraid of failing, what’s the most audacious thing they’d try?


Remarkable isn’t always about changing the biggest machine in your factory. It can be the way you answer the phone, launch a new brand, or price a revision to your software. Getting in the habit of doing the “unsafe” thing every time you have the opportunity is the best way to learn to project–you get practice at seeing what’s working and what’s not.


From All Marketers Are Liars:





There are only two things that separate success from failure in most organizations today:

1. Invent stuff worth talking about.
2. Tell stories about what you’ve invented.

Make up great stories. that’s the new motto.


People are superstitious about whatever it is you’re marketing. You can ignore that superstition or you can rail against it, but both strategies will cost you. The alternative is the only one that works: use personal interactions that are so extraordinary and so powerful that they cause people to tell themselves a different story instead.

If a consumer has a lousy telephone experience with a hotel reservations agent, his impulse will be to hate the service from every person he interacts with when he finally arrives at the hotel. The only solution? It’s not expensive carpeting, lower rates or a better mattress. The only solution is a warm, personal interaction between an authentic and caring individual and your disgruntled customer.

Facts are not the most powerful antidote to superstition. Powerful, authentic personal interaction is. That’s why candidates still need to shake hands and why retail outlets didn’t disappear after the success of Amazon.

Marketing 101

Marketing is the practice of making products worth talking about, and then creating stories that get them talked about. It sometimes (but only rarely) uses advertising as a tool. Most of all, it starts with what gets made and why and how.

Tools that are useful:

A phone

The most important element of marketing is story telling, figuring out how to make something worth talking about, and talk about it in a way that resonates. While social media seems like a magical wonder megaphone, the fact is, calling your customers and talking to them is an overlooked shortcut. Humility plus compassion opens you to true connection.


This is software built on the idea of permission marketing. You can deliver millions of emails to people who want to get them (your true fans, your customers or the merely interested) for just a few dollars. Easy to use, helpful people and beautifully done.

Behance and Dribbble

Very different sites with similar goals: to help you find talented designers and other freelancers that can take your work and make it professional enough to sell. Rule of thumb: pay a lot and try to get more than you pay for.

An RSS reader

It doesn’t really matter which one. Marketing is about learning how to see — to see opportunities, to see stories that resonate, to see dissatisfaction. One way to see better is to read more, daily. And blogs are a priceless way to do that. In fifteen minutes a day, I can keep up on more than 100 blogs a day. Consider: Copyblogger, Scott Adams, David Meerman Scott, Mitch Joel, Steve Dennis — and then, with gluttony, add every blog you can find, then prune.


Marketing lends itself more to discovery and education via books than any other topic I know. A thorough reading of a hundred books is enough to make you aware of just about all the nuance (at least the nuance that you can get without actual experience), but perhaps you could start with a few:

John Jantsch’s Duct Tape Marketing is a fine primer for the small business person who wants to market without relying on merely buying ads or spamming the world. He offers free ebooks as well.David Meerman Scott’s New Rules of Marketing & PR is quite tactical and helpful.

-- Seth Godin  

Available from Amazon

Sample Excerpts:

Sample excerpts from Duct Tape

Price, as I suspect you’ve learned, is a terrible place to compete. There will always be someone willing to go out of business faster than you.
Find something that separates you from your competition; become it and speak it to everyone you meet. Quality isn’t it; good service isn’t it; fair pricing—not it. These are all expectations. The difference needs to be in the way you do business, how you package your product, the way you sell your service, the fact that you send cookies to your clients, your ability to show people how to transform their lives—it’s in the experience you provide.
My definition of marketing is: “getting someone who has a need, to know, like, and trust you.”
Don’t think about making a sale online; think about getting a chance to make an impression.
Develop your marketing strategy around a narrowly defined ideal client above all.
Few businesses really provide great service. In fact, stealing market share in mature markets is one of the easiest paths for smart start-ups to run.

From New Rules:

I’m absolutely convinced that you will learn more by emulating successful ideas from outside your industry than by copying what your nearest competitor is doing
When you stop talking about you and your products and services and instead use the web to educate and inform important types of buyers, you will be more successful.
For most people and organizations, it’s better to be active in a few social networking sites instead of creating profiles on dozens of them and being too busy to spend much time in any one.
Instead of a one-size-fits-all website with a mass-market message, we need to create many different microsites—with purpose-built landing pages and just-right content—each aimed at a narrow target constituency.
You are not just creating a big brochure about your organization. You’re writing for your buyers, not your own ego.


The easiest way to add a shopping cart, or e-commerce, to your website is with Tictail. You can set up a digital store in only 30 seconds for free. Tictail gives you a way to present a storefront, track sales of your items, interface with social media, collect money, manage customers, and organize an online catalog. A number of alternatives such as Shopify and Magento offer easy e-commerce storefronts as well, but their cheapest plans require a $15-$30 monthly fee. That recurring payment may be okay if you already own a physical store, or are operating a large website, but if you are a small-timer and just want to try out a small store online, free Tictail is perfect.

It is not a marketplace like Esty; you’ll have to attract your own audience. But, unlike the “craft” constraints of an Esty store, you can sell whatever you want. Tictail makes their money selling freemium functions and add on services on top of the free base service — growing as your store and needs grow. (I set up a storefront for Cool Tools in less than a minute; as soon as we have more things to sell, we’ll make it public.)

-- KK  

Snowball Debt Reduction Calculator Spreadsheet

During law school I had unfortunately accumulated a decent amount of credit card debt. This calculator helped me to pay down all my credit card debt in a short time.

The snowball method helps users pay down multiple credit cards in a way that minimizes the interest payments. It asks for details including interest rates, minimum payments, and any special rate sunsets and then asks how much you can afford to pay to each card. The spreadsheet will then give you the amount to pay to each card each month as well as showing you a graph forecasting the slowly diminishing interest payment you will be making each month.

I’m surprised its not already up here! (Pro-tip: this debt-reduction method, in conjunction with a negotiating session or three with the the banks holding your largest, highest interest rate cards, can save you a lot of money.)

-- Aric Bright  

So Good They Can’t Ignore You

“Follow your passion” is the dogmatic advice for building a career. But it is woefully incomplete and even misleading for some people. Better advice is “Become so good they can’t ignore you”; that is, become expert in something, and the passion will follow. In other words, flip the mission from “find your passion so that you can be useful” to “be useful so you can find your passion.” Acquiring expertise is a lot of work, requiring deliberate practice, patience, shrewd acceptance of control of your time, and other meta skills. While this book changed my mind about how skills trump passion, I consider it the only first word in outlining how one goes about this. But it’s good enough for framing the question that I gave all my young adult kids a copy.

-- KK  

So Good They Can’t Ignore You
Cal Newport
2012, 304 pages

Available from Amazon

Sample Excerpts:

There is, however, a problem lurking here: When you look past the feel-good slogans and go deeper into the details of how passionate people like Steve Jobs really got started, or ask scientists about what actually predicts workplace happiness, the issue becomes much more complicated. You begin to find threads of nuance that, once pulled, unravel the tight certainty of the passion hypothesis, eventually leading to an unsettling recognition: “Follow your passion” might just be terrible advice.


If a young Steve Jobs had taken his own advice and decided to only pursue work he loved, we would probably find him today as one of the Los Altos Zen Center’s most popular teachers. But he didn’t follow this simple advice. Apple Computer was decidedly not born out of passion, but instead was the result of a lucky break — a “small-time” scheme that unexpectedly took off.

How do we find work that we’ll eventually love? Like Jobs, should we resist settling into one rigid career and instead try lots of small schemes, waiting for one to take off? Does it matter what general field we explore? How do we know when to stick with a project or when to move on? In other words, Jobs’s story generates more questions than it answers. Perhaps the only thing it does make clear is that, at least for Jobs, “follow your passion” was not particularly useful advice.


To summarize, I’ve presented two different ways people think about their working life. The first is the craftsman mindset, which focuses on what you can offer the world. The second is the passion mindset, which instead focuses on what the world can offer you.


The Career Capital Theory of Great Work

  • The traits that define great work are rare and valuable.
  • Supply and demand says that if you want these traits you need rare and valuable skills to offer in return. Think of these rare and valuable skills you can offer as your career capital.
  • The craftsman mindset, with its relentless focus on becoming “so good they can’t ignore you,” is a strategy well suited for acquiring career capital. This is why it trumps the passion mindset if your goal is to create work you love.


“Doing things we know how to do well is enjoyable, and that’s exactly the opposite of what deliberate practice demands…Deliberate practice is above all an effort of focus and concentration. That is what makes it “deliberate,” as distinct from the mindless playing of scales or hitting tennis balls that most people engage in.”

If you show up and do what you’re told, you will, as Anders Ericsson explained earlier in this chapter, reach an “acceptable level” of ability before plateauing. The good news about deliberate practice is that it will push you past this plateau and into a realm where you have little competition. The bad news is that the reason so few people accomplish this feat is exactly because of the trait Colvin warned us about: Deliberate practice is often the opposite of enjoyable.

Incredible Secret Money Machine

When I first started to get serious about making money I ran into this book written in 1978 by a hippy-hacker living in Arizona. His advice was aimed at “craft and technical” types who wanted to create a small business “doing their thing” whether that was creating ceramic pots, designing outdoor gear, or writing computer code. He talked about doing a starting up before that term was subverted by the implication that your start up would take over the world. Instead the author preached one-person self-employment that made you a living. The concept of entrepreneurism as a small-time life-style has evaporated from the culture, and now entrepreneur and start-up means “get big fast.”

That did not appeal to me then, or now. But making a living doing what I was passionate about did. I learned how to earn a self-employed living from this book, which was mostly about what not to do. (I have been self-employed now for most of my adult life.) A lot of Don Lancaster’s specific examples are now terribly dated, but his core principles still stand and are worth listening to particularly if you are starting out. (If you are already successfully self-employed this book won’t help you much.) His idea that you should aim for a business that grows organically (income > expenses), is a total life-style approach (your business is you), and is dependent on your own value-added rather than market domination is as potent as ever.

If I had to sum up this book in my own words it would be; “If you are willing to build your business on expertise, you can make a living instead of making a fortune — and occasionally the fortune comes anyway.”

Best of all, unlike any other “make-money” book I know of, this one is free. You can read the author’s PDF version of the original paper book.

-- KK  

Incredible Secret Money Making Machine
Don Lancaster
PDF, Free

Available from The Guru's Lair

Sample Excerpts:

Getting filthy rich should be nowhere in your plans. So long as you can continue doing what you like in the direction you want to go, that’s all that should matter. The great irony of your incredible secret money machine is that the less you strive for income, the more of it will come your way, and, more importantly, the more you will be able to do with what you already have. Any time or effort spent directly toward making money is time not available for your main trip. This is wasted time and energy that eventually hurts you rather than helps.

As a ferinstance, let’s talk about an ordinary piece of typing paper. If you are running an office supply store, you can make a penny on this piece of paper. That penny reflects the difference between the wholesale price and your selling price. Your personal value added here consists of what you put into making your store attractive and in how you relate to your customers. If, instead, you are running a typing service, you can now buy the paper for a penny and sell it for fifty cents or more. Now, you have over fifty times the return since your personal value added consists of putting information on paper just the way the customer wants you to. Things get much better if you make up the words yourself instead of using those somebody else already wants. A medium length story in a larger magazine should pay you several hundred dollars for a dozen or so sheets of paper. This will average out about ten dollars per page, another 20: 1 improvement.

Employees are a hassle, a waste of time and a psychic energy sink. You should avoid them at all costs. Your incredible secret money machine should have 0.834 employees — that is 83.4 percent of you, nothing more,no less. The remaining 16.6 percent of you should go for fun and rewind time. Spend much less time on your money machine and the job will never get done. Much more and you’ll be grinding yourself down.

But, your money machine will work best of all if it has hundreds or, better yet, thousands of tiny sources of income. There are several good reasons for this. No customer will think he owns you if he is one among unwashed thousands. Customer expectations will also usually be lower since they are probably dealing in a smaller way with you. Better yet, if you can get enough small customers, they will start to obey the statistical laws of large numbers. This means you will be able to predict future sales and cash flow with good accuracy.

Eventually, several of the smaller customers will become bigger ones that take up more and more of your money machine’s product. This is fine when it happens, but it is not something you want to aggressively go after when you are starting out The important, even crucial, point is to never let any one customer dominate your money machine to a point where he is in control.

Should you ever end up with one very large customer and many small ones, arrange your money machine and your whole lifestyle to live within the nickels generated by all the smaller sources combined. Force yourself to be independent of the income generated by the biggie. Funnel this extra single-source income into improving your money machine, into the “investments” of the final chapter, or into having fun-but always keep this extra income separate from your bread-and-butter smaller income sources.

You should always think of any dollar that goes out your door in terms of the larger number of incoming money machine dollars needed to create it.

I’ll define a Reversed Cash Flow, or ReF as any method you could conjure up to cause all of the nickels to head on out exactly In the opposite of the “usual” direction. And preferably end up in your own pocket. Knowing and using relevant and workable ReFs are key secrets to a successful money machine venture. Some ReF examples that have worked for me do Include: Having the Forest Service pay me to stay in a mountain vacation cabin as a fire lookout. Getting paid several hundred dollars a year (or similar perks) for drinking rootbeer every Wednesday night as a volunteer fireman. Forming various clubs and user groups to gain big discounts on all types of new software, hardware, and advance freebie technical info. Getting hired as a sysop on a BBS to pick up free access and actually getting paid a royalty as others call the service. Receiving free toner for testing to yield negative per-page toner costs on my desktop publishing. Or, becoming a developer or an Independent Software Vendor that gives you free or discounted hardware and software.

Over the years, I have seen hundreds of examples of money machine people being severely done in by the patent system. Even murdered by it in several heart-attack-during-litigation cases. And not once did I see anyone approaching the patent system on a small scale basis and profiting from it. Ever. Once again: Unless you are well within a Fortune 500 context, any and all involvement in the patent system in any, shape, or form is absolutely certain to cause you the net loss of time, energy, money, and sanity. Besides ending up a totally useless and utterly unnecessary psychic energy sink.

Having enough advance financing for your money machine is about the worst possible thing you can do and is almost certain to scuttle the whole machine.

Even when it is up and running perfectly, your money machine at its largest shouldn’t have more than a year’s income tied up in your total plant and equipment. This one year limit has been called the convivial workplace and forms the dividing line between the good guy or gal craftspersons and the bad guy industrialists.

In cash flow accounting, you keep track of how much money comes into your machine and how much goes out, just like a piggy bank. You enter each and every transaction as it happens in some simple way, like writing it on a “cash out” pad. Once a week you do a running balance of your totals. Once a month, you look at your bottom line to see if you are winning or losing. After several months go by, you project your annual returns. You don’t count anything for materials unused but on hand, things produced but not sold, the value of the place where you work, or things you have delivered but have not been paid for. This sort of accrual accounting can be important for a large corporation, but will only deceive you if you include these things too early in the game. You should set aside income as it comes up for tax obligations, retirement funds, and other fixed expenses that will be paid out at a later date.

Nerd Wallet

I needed to set up a new business checking account recently, but I didn’t know how I should compare the options. Nerd Wallet kept showing up in my search results, so even though I hadn’t heard of the site before, I finally bit. It offers a broad range of financial advice, including several articles about choosing business checking accounts (a small business checking primer, an FAQ on how to pick an account, an explanation of fees, and general recommendations for the best and free business checking accounts).

Even better, it has a tool that will suggest banks based on criteria you can specify: location, bank type (big bank, community bank, internet bank, credit union), business type, typical monthly and daily balances, monthly transactions, cash handling requirements. It’s a great way to start a list of candidates, though I still called all the banks I was considering to verify the details and to ask questions not covered by Nerd Wallet’s summary. One thing to be aware of: Nerd Wallet’s search tool will recommend specific accounts, so the same bank may show up several times in your search results. Sometimes the same account name will be recommended multiple times, which seems like a bug.


Nerd Wallet’s founders and editors are experienced financial professionals, and the advice articles I found were all reasonably fresh (published in the last year). It has also been recommended at least twice in the last year by the New York Times’ Bucks blog (here  and here).

There are other similar bank comparison/recommendation tools out there. The Bucks blog has also reported on a few alternatives, including FindABetterBank. That tool has a more in-depth questionnaire, but it doesn’t cover business accounts so didn’t work for my needs.

Business Checking is just one small area of the Nerd Wallet website, which offers similar tools for other types of bank accounts, personal finance, investing, and credit cards. I look forward to exploring these other subject areas on the site, but I can’t speak to them just yet.

BioBrite Sunrise Clock


The recent return to so little sunshine had me reflecting on a wake-up combo that’s so subtle I enjoyed it for years without really recognizing it. I use a dawn-simulating BioBrite alarm clock along with a programmable thermostat (anyone who has central HVAC without a programmable thermostat these days is just missing out). The combination of light and warmth really gets me awake at consistent times in the morning without really relying on any audio cues. The BioBrite can also be adjusted to increase the light output over longer periods of time (15/30/60/90 minutes), reversed to simulate dusk, or be used as a nightlight.

In the winter, having light come up along with heat is the most natural way to ease back to consciousness that I can imagine.

-- Wayne Ruffner  

BioBrite Sunrise Alarm Clock

Available from Amazon

Manufactured by BioBrite

Your Money: The Missing Manual


This is the best user-guide to personal finance I’ve found, and I’ve probably read them all. It is certainly the sanest and most level-headed. There are no get rich quick schemes here, just plenty of ways to get rich slowly. Indeed, Get Rich Slowly was the name of author’s very popular personal finance blog, which led to this book. J.D. Roth takes the great investing advice of Andrew Tobias in The Only Investment Guide You’ll Ever Need, and he summarizes the life-earning wisdom in the previously reviewed (and still recommended) book Five Rituals of Wealth and he includes the needed crystalization of priorities found in Your Money or Your Life, and financial motivations from Suze Orman and the Millionaire Next Door and then adds key insights and tips from hundreds of other lesser-known money gurus.

Basically, Roth has read every book and blog on money managing, investing, saving, and earning and digests and integrates all this hard-won knowledge into an amazing selection of smart, practical ideas for today. I could hardly turn a page without learning a solid investing tip or two, or a clever way to save a few hundred dollars, or an example of something I already knew, but was looking for a vivid way to teach my kids. I like the fact that Roth emphasizes the value of sharing whatever wealth you have, and keeps returning to the long view.

I would not call this an inspirational book (plenty of those on the shelves), nor even a memorable book like the ones mentioned above. Rather it is what is advertised: a day-to-day operating manual for your money. Specific details, sources, methods, tricks. Dip into it when you are stuck, check it before trying something new, re-read it when you think you know it all. I’ve done pretty well financially, and if you were to ask me my practical advice — like what to do tomorrow — I would simply give you this book. It’s slow, but true.

-- KK  

Your Money: The Missing Manual
J.D. Roth
2010, 336 pages

Available from Amazon

Sample Excerpts:

Because you earn pre-tax dollars but spend after-tax dollars, a penny saved is actually more than a penny earned. Depending on your tax bracket, you might have to earn $111 , $133, or even $150 to put $100 in your pocket. So if you re in the 25% tax bracket, saving $750 a year is like giving yourself a $1,000 raise!


Destroy Existing Debt
After you’ve stopped using credit and created an emergency fund, then go after your existing debt. Attack it with vigor, throw whatever you can at it. The best way to do this is to use a technique called the debt snowball, which lets you build and maintain debt-destroying momentum. Here’s the basic method: Make a list of your debts in the order you want to destroy them. (You’ll learn a couple of good ways to prioritize debts in a moment.) Set aside a certain amount of money to pay toward debts each month ($500, say). Make the minimum payment on all debts except the first one on your list. Throw every other penny at the first debt on the list. But here’s the key to making the debt snowball work: After you’ve destroyed your first debt, you’ll find you’ve freed up a bit of cash; because one of your debts is gone, you have one less monthly payment. You could take this money and use it for something else, but you re going to do something smarter: keep paying the same total amount, $500 in our example, toward the debt every month.


Destroying low-balance debt first
If you’ve tried following the highest-interest-rate-first advice and still struggle with debt, there’s another way. In his book, The Total Money Makeover, Dave Ramsey advocates an approach to the debt snowball that tackles accounts with low balances first. (Ramsey didn’t invent this method, but he’s popularized it over the past decade.) With this version of the debt snowball, you ignore interest rates when determining the order in which you’ll pay off your debts. All you look at is how much you owe, organizing the debts from smallest balance to largest balance.

That’s not to say you shouldn’t try this method: If it works for you, use it! But if you struggle, consider the next method, which is the one that helped me succeed. It might help you to have a visual representation of your debt-paying progress. Try this: take a piece of graph paper and block off squares to represent your debt. (You might use one square for every $ 100, say.) When you make a payment, mark off a square and give yourself a pat on the back. (If you re a geek, build yourself an Excel spreadsheet that does something similar.) These little progress reports are cheesy, but they can keep you on track.

This method may not be as quick as paying your high-interest debt first, but it provides tremendous psychological reinforcement. You get some quick wins checking creditors off your list that encourage you to keep at it. Dave Ramsey calls this behavior modification over math, and he’s right: the most important thing when paying off your debts is to, well, pay off your debts; the order in which you do so is irrelevant. Critics of this approach argue that the math doesn’t make sense, and they’re right: If you use this method, you will pay more interest than if you had the discipline to pay off your debts based on interest rate. But humans are complex psychological creatures, not adding machines. We usually know what we ought to do, but that doesn’t mean we always do it. If we were adding machines and always made the best choices, we wouldn’t get into debt in the first place!



Protecting Yourself with Parallel CDs
With a CD, one of the biggest risks is that you’ll need to pull your money out before it matures. When you do this, you pay a penalty. The site suggests that you can decrease this risk with parallel CDs: here’s how it works: Let’s say you have $5,000 you’d like to put into CDs. Instead of opening a single CD and putting that whole amount in it, you’d open multiple CDs, all with the same maturation date. You could open five CDs of $1,000 each, say, or open two with $1,000 and one with $3,000. This gives you a buffer in case you need to get at the moneyearly. If you need $500 for an emergency, for example, you can break just a single $1,000 CD. That way you don’t pay a penalty on the rest of the money you have in CDs, and the penalty will be smaller than what you would have paid if you’d put the whole $5,000 in a single CD.


Pay Yourself First
If you’re living paycheck to paycheck, saving may seem impossible. You have to pay for things like rent, a car payment, groceries, and maybe even student loans. You’d like to save, but at the end of the month, there’s no money left to set aside. And that’s the problem: Most people try to save something out of what s left over instead of saving first. One of the best ways to build wealth is to set aside a portion of your income for savings before you pay your bills, buy groceries, or do anything else with yourmoney. Here are three reasons to pay yourself first: It makes you the priority. You’re telling yourself that you are more important than the electric company or the landlord. think of the money you put into savings as a down payment on your future. It encourages sound financial habits. Most people spend their money in the following order: bills, fun, savings. But if you bump savings to the front of that list, you can set money aside before you come up with reasons to spend it. That way, since the money is no longer in your checking account to tempt you, you end up spending less.


Targeted Savings Accounts
Most people work toward several financial goals at once, but keep their money clumped together in a single account. With that setup, it’s easy to forget how much you’ve saved for each goal and to borrowmoney from one goal to pay for something else. In The Six-Day Financial Makeover (St. Martin’s Press, 2006), Robert Pagliarini advocates targeted saving through what he calls purpose-driven investing: Purpose-Driven Investing [lets us think] of each of our goals as a separate basket. Each of our baskets represents a single goal with a clear purpose that we can see and grow. What does this mean in the real world? It means that we have a single investment account for every goal.

If you want to try targeted saving, ask your bank or credit union if you can give your accounts nicknames. My credit union let me name my new savings account Nintendo Wii when I decided to save for that goal. And my accounts at the online bank ING Direct are named for the things I’m saving for, as you can see in the following image:



Ramit Sethi popularized the concept of conscious spending in his book I Will Teach You to Be Rich (Workman Publishing, 2009). The idea is to spend with intent, deliberately deciding where to directyour money instead of spending impulsively. Sethi argues that it’s okay to spend $5,000 a year on shoes if that spending is aligned with your goals and values and you’ve made a conscious choice to spend this way.


As a general rule, you shouldn’t borrow money to buy things that are likely to decrease in value. That means you shouldn’t buy your new plasma TV on credit next week, it’ll be worth less than you paid for it. Nor should you go into debt to buy food, clothes, or computers. But many experts say that it’s okay to take on reasonable debt to pay for a handful of things that are likely to increase in value. This good debt includes an affordable mortgage on your home, student loans to pay for education, and loans to start a new business. Car loans are borderline: they generally carry low interest rates, but as you well know, cars lose value the moment you drive them off the lot.