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Money Boss Theater: The Cluttered Lives of the American Middle Class

by J.D. Roth on 02 June 2017 26 Comments

Long-time readers are familiar with my decade-long war on Stuff. I was raised in a cluttered home. From a young age, I was a collector. (Some might even say a hoarder!) After Kris and I got married, I began to acquire adult-level quantities of Stuff. When we moved to a larger house, I found ways to acquire even more Stuff. I owned thousands of books, thousands of comic books, hundreds of compact discs, and scads of other crap.

Eventually, I’d had enough. A decade ago, I began the s-l-o-w process of de-cluttering.

While I still bring new Stuff into the house — Kim would tell you I bring too much Stuff home — I’m not nearly so acquisitive as I used to be. In fact, for the past decade I’ve purged far more than I’ve acquired. And that process continues, week by week, month by month, year by year. In four weeks, when we move out of this condo into our not-so-big house, I intend to get rid of even more Stuff.

The Cluttered Lives of the American Middle Class

Turns out, I’m not the only one fighting this battle. Many Americans struggle with clutter. This is one reason for the popularity of the simplicity movement. When I visit my friends who live in tiny houses, they rejoice at the lack of Stuff in their lives. And it’s why books like Marie Kondo’s The Life-Changing Magic of Tidying Up become popular bestsellers. (That book is great, by the way. Here’s my review from my personal site.)

Last week, I stumbled on a video that documents the work of a group of anthropologists from UCLA. These researchers visited the homes of 32 typical American families. They wanted to look at how people interacted with their environments, at how they used space. They also wanted to look at how dual-income, middle-class families related to their material possessions. They systematically documented the Stuff people own, where they keep it, and how they use it.

This team produced a book called Life at Home in the Twenty-First Century, which records their findings. They also produced this twenty-minute video that provides an overview of the results:

“Contemporary U.S. households have more possessions per household than any society in global history,” says Jeanne E. Arnold. That’s both shocking and unsurprising all at once.

Her colleague Anthony Graesch notes that our homes reflect this material abundance. “Hyper-consumerism is evident in many spaces,” he says, “like garages, corners of home offices, and even sometimes in the corners of living rooms and bedrooms.”

Graesch continues: “We have lots of Stuff. We have many mechanisms by which we accumulate possessions in our home, but we have few rituals or mechanisms or processes for unloading these objects, for getting rid of them.” All of this stuff causes stress. It carries very real physical and emotional tolls.

One interesting finding? Clutter bothers women more than men. This might be because the responsibility for cleaning the clutter generally falls to women.

“The United States has 3.1% of the world’s children but consumes 40% of the world’s toys,” notes Arnold. In households with children — or, in my case, puppies — the toys can take over the home. Children’s toys and objects spill out of their bedrooms into living areas, kitchens, and bathrooms. The push to become consumers, to value Stuff, starts at an early age.

Why do modern kids have so many toys? It may be because there are so many playthings available so cheaply. There’s more Stuff available for kids than there was fifty years ago, and that Stuff costs less. Plus, priorities seem to have shifted. Modern parents see spending on kids as a priority; parents fifty years ago did not. [Read more…]

How to Make Better Decisions

by J.D. Roth on 24 May 2017 18 Comments

It’s been a busy two weeks in the Rothwards household!

Last Monday, Kim and I had inspections on the home we want to buy. The results weren’t good. The inspector concluded that, overall, the house shows evidence of deferred maintenance. Needed repairs have been left undone. Translation: Nearly everything related to the exterior of the home needs work. The roof needs to be replaced, as does the siding. The deck and fence are beginning to fail. And, worst of all, the foundation may be severely damaged.

The country cottage we'd like to buy

When I was younger, this news would have made me distraught. Back then, I was an emotional buyer, not just for small stuff but also for big things like houses. When my ex-wife and I bought our home in 2004, for instance, almost everything about the transaction was emotional. I loved the house (or the idea of the house, anyhow), and that clouded my judgment.

Now, in 2017, I find that I’m much more rational. I understand that there are lots of other houses out there, and that Kim and I could live almost anywhere and be happy. Sure, this particular place meets most of our needs — and it’s cute — but neither one of us is overly attached to it. We’re making this purchase from a business perspective first and a lifestyle perspective second.

In short, we’re doing our best to make a rational decision instead of an emotional decision.

How to Make Better Decisions

Decisive by Chip and Dan Heath
When I first announced that Kim and I were looking for a not-so-big house, Money Boss reader David Hatch suggested I read Decisive by Chip and Dan Heath. This book is all about how to make better decisions in life and work.

“If you study the kinds of decisions people make and the outcomes of those decisions,” the authors write, “you’ll find that humanity does not have a particularly impressive track record.” Business decisions are frequently flawed. On a personal level, people fail to save for retirement. We make irrational purchases. We date people we know we oughtn’t date.

How can we be make better decisions? It all comes down to process.

“Understanding our shortcomings is not enough to fix them,” the authors write. “It’s hard to correct a bias in our mental processes just by being aware of it.” Just because you know which foods are bad for you doesn’t mean you’ll stop eating them. Being aware that you tend to spend compulsively won’t stop you from spending compulsively. To actually make better decisions, you need a plan.

According to the authors, there are four major villains when it comes to making good decisions:

  • Narrow framing, “the tendency to define our choices too narrowly, to see them in binary terms”. Too often, we see our options as either-or, when in fact we have a wide array of choices. We ask ourselves, “Should I do this or that?” instead of “What is my best option here?” So, for instance, you might ask “Should I buy a new car or not?” instead of “What’s the best way I could spend money to improve my life?” We ask the wrong questions. Narrow framing makes you miss options.
  • Confirmation bias, which occurs when we reach a quick conclusion then seek only the info that supports this belief while ignoring everything else. “When we want something to be true, we will spotlight the things that support it, and then, when we draw conclusions from those spotlighted scenes, we’ll congratulate ourselves on a reasoned decision. Oops.” Confirmation bias leads you to gather self-serving information.
  • Short-term emotion. When making difficult decisions, we get caught up in our feelings. Our minds are so clouded with pros and cons and what-if scenarios that we can’t think straight. We lack perspective. We’re unable to take the long view. Short-term emotion will often lead you to make poor choices.
  • Overconfidence — unfounded belief in our own abilities and in the direction the future will take. “The problem is that we don’t know what we don’t know,” the authors write. They cite some findings that boggle my mind. For instance, once study showed that when doctors said they were “completely certain” in a diagnosis, they were wrong 40% of the time. (There are lots of studies like this.) Overconfidence leads us to make poor predictions — and to overestimate our own abilities.

If these are the four villains of decision making, then how do we defeat them? Again, it comes down to having a process, a formalized strategy to help make better decisions. And that’s what Decisive is all about.

The Heaths suggest that for each of the four villains of the decision making, there’s an effective strategy to defeat it. Taken together, they call their system the “WRAP process”. It works like this:

  • Widen your options to avoid narrow framing.
  • Reality-test your assumptions to avoid confirmation bias.
  • Attain distance before deciding to avoid short-term emotion.
  • Prepare to be wrong to avoid overconfidence.

Let’s look at each of these steps in a bit more detail. [Read more…]

April 2017 by the Numbers

by J.D. Roth on 12 May 2017 20 Comments

Here’s the fourth (and final?) installment of my 2017 project to document my actual spending habits. After returning home from our year-long RV adventure, I wanted to get a feel for how much I spend each month. It doesn’t feel like I spend a lot — but is that feeling accurate? This project is an attempt to document how Kim and I actually live. Once we have some real numbers, then we can start to make changes for the better.

After four months of diligent tracking, it’s likely this will be the final update for 2017. I’ll continue to track all of my data, but I’m pausing the reports for a few months — possibly until early 2018. Why? Because (a) I’ve gathered enough info to know what areas need work and (b) we’re moving.

Clarification: I’m not abandoning my quest to track how much I’m walking, biking, spending, and eating. I’m pausing public reporting temporarily. My goal with this endeavor is to document normal life. For the next few months, life will be abnormal.

Why I’m Pausing This Project

Let’s get the big news out of the way: Kim and I have sold the condo.

We listed the place for $497,000 on Friday, April 28th. Our agent held an open house on Sunday, April 30th. On Tuesday, May 2nd, we received four offers — all over asking price. In the end, we accepted the second-highest offer for $530,000.

The highest offer had an escalation clause that went up to $550,000 in increments of $2500. We could have accepted it at $532,500, but that offer was contingent upon the sale of an expensive home that wasn’t yet on the market. We gave up the $2500 for an offer that seemed much more secure in almost every regard. (We were also swayed by the personal letter from the prospective buyers.)

The inspection period for our home ends this afternoon. Now it’s a matter of tying up loose ends before we close the transaction on June 6th. The buyers are allowing us to do a “rent-back” until the end of June, which is good because that’s when we’re scheduled to close on the home we want to purchase.

With a secure offer in hand for the condo, we felt comfortable pursuing our plans to buy a place with space for us and our animals. Kim and I made a full-price ($449,000) offer that was accepted for the 1948 English cottage I mentioned in my article about our quest for a not-so-big house. Monday morning, I’ll be present for a variety of inspections. That process will reveal whether or not we move forward with the transaction or go back to the drawing board, searching for another smallish home with land in the Portland area.

Now let’s look at the stats for last month. [Read more…]

Your Personal Board of Directors

by J.D. Roth on 28 April 2017 19 Comments

Real life has been a whirlwind recently. It sometimes takes me and Kim a while to make a decision, but once we do decide, we shift into high gear. So, after nine months of discussing the idea and another month of actual planning, we’ve spent the past ten days in a mad rush to prep our home for sale.

This morning, the listing for our condo went live.

View from our condo

Buying and selling real estate can be a complicated process. For one, it’s a major financial move — often the highest-dollar move the average person will make in her lifetime. For another, there are tons of legal considerations. Plus, there are always psychological and emotional issues to consider — even when you’re doing your best to make rational decisions like a money boss.

Fortunately, we have a Portland-area real-estate agent we trust. Andi — a former personal-finance blogger — helped me buy this place in 2013. Since then, Kim and I have become friends with her and her husband. Andi knows us. She drinks beer with us. She reads Money Boss. She understands what we value. She understands our motivations and goals.

Because of this, she’s not only able to help guide our hunt for a not-so-big house, but also to give us good advice about how to sell the condo. With her aid, we set up a series of checklists to guide our preparation. She tells us what to do when. She also does a great job of managing my neurotic tendencies during the process. We feel confident that Andi is “on our team”.

Your Personal Board of Directors

Andi isn’t the only person on my financial team. Over the past 25 years, I’ve built a small group of trusted advisors. If I’m the money boss — both the CEO and the CFO of JD, Inc. — then these folks are like my board of directors. They have specialized knowledge that I don’t. They help me make (and keep) more money.

Here are the other experts who sit on the board of directors for JD, Inc.: [Read more…]

The Quest for the Not-So-Big House

by J.D. Roth on 18 April 2017 51 Comments

The Not So Big House

Kim and I have spent the past couple of weeks hunting for a new house. While it’s true that we love many things about our current place — great neighbors, great neighborhood, great views, great walkability — we’ve come to realize that it no longer fits our lifestyle and goals.

When I bought this condo in 2013, I was newly divorced and newly dating. It seemed like a sweet bachelor pad. When Kim moved in, things weren’t perfect but we made do because the condo still mostly reflected our values. But something happened during our 15-month RV tour of the United States. When we arrived home, we realized that we had changed.

  • After living together so long in a tiny space, our condo seems ginormous.
  • City life, which had once seemed vibrant and exciting, now feels rushed and overwhelming.
  • We both crave the slower country lifestyle in which we were raised. We want space and time to do outdoorsy things.
  • Plus, now we have pets, animals that long to be outside instead of stuck in an apartment all day.

So, we’ve started shopping for a new place to live. Our ideal home is smaller (which, to us, means less than 1500 square feet) and on about an acre of land close to Portland. Finding a place with land isn’t as difficult as we thought it might be, but finding a smaller home is tough.

There are roughly 30 small homes on more than an acre in the Portland area. Of these, 21 are within our budget. There are more than 300 houses over 1500 square feet on large lots. Thirty of these are within our budget. (Overall, there are 604 homes under 1500 square feet available in Portland; there are 2396 homes larger than that for sale.)

The bottom line: Houses are huge nowadays.

Bigger Is NOT Always Better

How big have homes become?

According to the U.S. Census Bureau, the median size for a new home built in 1973 was 1525 square feet. By 2015, that number had jumped to 2467 square feet. During those 44 years, kitchen sizes have doubled, ceilings have risen more than a foot, and bedrooms have grown by more than 50 square feet.

But home sizes are ballooning even as households are shrinking! The average household had 2.9 people in 1973. In 2015, the average household had 2.5 people. Forty years ago, we had 526 square feet of living space per person; today, we have 987 square feet of living space per person — and that’s increasing every year.

This seems crazy. Why do we need such huge houses? What’s the point? And do homeowners truly consider the costs when they choose to buy big? A larger home doesn’t just carry a larger purchase price. It costs more to maintain. It costs more to light, to heat, and to furnish. For too many people, big homes are the destroyer of dreams. (I’m not joking. I truly believe this.)

This year, I’ve been running the numbers for my own life. It’s been surprising to find how much it costs for me to live in what is ostensibly a paid-for condo. With a $570/month HOA payment and a $6282.71 property tax obligation, I’m on the hook for nearly $1100 per month! Before utilities! To live in a place I own outright!

That’s too much.

So, Kim and I are searching for a not-so-big house. [Read more…]

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J.D. Roth

My name is J.D. Roth. Ten years ago, my financial life was a disaster. Instead of waiting for things to get better, I decided to become boss of my own life. The results were remarkable. I'm here to help you master your money — and your life. Read more.

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