Liz Pulliam Weston

The Basics

Confessions of a money guru

I wish I could say that I always follow my own advice. But like everyone else, I go against the best money-management rules at times. Here are some of my foibles.

By Liz Pulliam Weston

Consumers Digest wanted a peek into my investment portfolio recently, and the results were embarrassing.

You see, I'm a passionate believer in passive investing. I'm too busy to monitor individual stocks, and I'm convinced it's impossible to predict in advance which mutual fund will outperform. So instead I advocate index mutual funds and exchange-traded funds that mimic broad market benchmarks. I think this is the simplest, most efficient way to invest.

Except that I still had a bunch of actively managed mutual funds in my portfolio.

They were all leftovers from the days when I still harbored slim hopes that maybe I was the exception to the rule and could spot the outperformer. I couldn't and didn't, but these laggards remained in my portfolio like outgrown clothes cluttering a child's closet.

I'd love to say this is the only example of not walking my talk, but it's not. Since I make my living telling other people what to do with their money, it's only fair that I reveal what I do with mine. So here are a few other confessions.

Confession No. 1: I've carried credit card debt

The best single habit consumers can get into, after saving for the future, is avoiding credit card debt. Disciplining yourself to pay that plastic in full every month will go a long way toward bankruptcy-proofing your life and preventing debt from eroding your wealth.

But sometimes credit card debt can be a helpful money-management tool.

As I explained in my book "Deal With Your Debt," when I left the Los Angeles Times in 2002 to start a business and write for MSN, I had to go three months without any income. Our emergency fund had been depleted by my husband's layoff earlier that year, so we opted to pay just the minimums on our cards for a couple of months until my first check came in.

For someone as debt-averse as I am, it was a painful experience. But I'm so glad we did it. Refusing to carry debt would have meant turning down an incredible opportunity that has resulted in a happier work life -- not to mention a nice boost in our income. And it felt so good to pay off that bill when the time came.

Confession No. 2: I'm not always a paragon of thrift

I grew up in a middle-class home with a mostly stay-at-home mom and a father who worked as an electric journeyman for a power plant. We maintained a garden, canned food, recycled and reused to make Dad's paychecks stretch. Our vacations were usually camping trips and journeys by train to visit relatives.

I lived pretty frugally in college, where I worked two to four part-time jobs each semester, and into my 20s. As my financial circumstances have improved, though, many of the things I used to do to save money I now do for health reasons or to go easy on the environment. Things such as:

  • Cooking one or two meatless meals a week.

  • Walking or biking instead of driving.

  • Shutting off lights, replacing regular bulbs with compact fluorescents and using a programmable thermostat to save energy.

  • Using a clothesline instead of a dryer to save energy (and for that fresh-sheet smell).

  • Avoiding recreational shopping, which just wastes money and brings more junk into our lives.

That last is fairly easy for me, as I've never much liked shopping. But I still spend plenty in other ways I wouldn't have considered when money was tight.

As I wrote in a recent guest post for the Get Rich Slowly blog, the irony of personal-finance pundits is that the more successful we get, the less our lives resemble those of the majority of our readers. So though I might write about saving money on vacations by finding cheap flights and hotels, I'm more likely to be flying first class and staying in a nice suite. It's not that I haven't spent my share of time at Motel 6 and in youth hostels, but I'm also not sad that I don't have to do that anymore.

Continued: A spendthrift? Not me

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