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Smart Writers Finish Rich

It’s no secret that writers have a difficult time making a living. Unless you’re independently wealthy, you probably have to piece together an income through writing, editing, teaching, and sometimes other day jobs. Very few strike it rich, but that doesn’t mean you can’t get rich!

investing, writers and money, personal finance

My friends used to tease me about this board game I have called Cashflow, designed by the investment guru Robert Kiyosaki of Rich Dad, Poor Dad fame. “It’s as fun as doing your taxes,” one friend said. But I disagree! You start off being assigned a profession with a salary suitable to that profession and then you buy small investments that earn a small return until you can afford to buy bigger investments that earn a bigger return. Your goal is for your passive income to exceed your expenses, so you can quit your job and still survive. The one time I played it all the way through, I won the game despite being given “teacher” as a profession and playing against someone who had been given “doctor” as a profession. Why? Because I invested my money wisely. (There’s a lot of luck involved in the game, but in real life you’d have to invest wisely.)

The point? That wealth isn’t about how much money you make. It’s about how much money you save and what you do with that savings. (I’m sure you’ve heard about MC Hammer going broke and Johnny Depp’s financial struggles.)

Years ago I read Smart Women Finish Rich by David Bach. It’s a great book. Recently, I read an article about a money advisor who says she’s read that book to tatters. So I decided to read it again. What shocked me is there’s a “quiz” at the beginning of the book asking how well acquainted you are with your finances, and I could hardly answer any of them—despite having read the book before! So I’m starting over again, reviewing our family finances, getting our estate planning guy over here to review our living trust and will, etc. I also found the One Page Financial Plan helpful. It made me realize that investing doesn’t have to be a constant chore. You do your homework, invest your money, and then let it sit there, adding to it on an automatic basis. You should review the allocations now and then, but doing less is better than doing more, which I found heartening.

So if you’re a writer like me, and you’re not making a whole ton of money, take some time to review your finances and make some investments, no matter how small. Below I’ve pasted the “Quiz” from Smart Women Finish Rich. It applies to everyone, so whether you’re male or female, take the quiz and see where you stand! (I copied it into a Word doc so I can do my research and write the answer below each question.) Good luck!

I. Home

I know the current value of my home, including the size of the mortgage and the amount of equity I’ve built.

II. Mortgage

I know the length of the mortgage payment schedule and how much extra it would cost to pay down the mortgage in half the time. I also know the interest rate we’re paying on the mortgate and whether it’s competitive in today’s market.

 

III. Life Insurance

I know how much life insurance I (and my spouse, if applicable) have. I know how much cash value there is in the policy, and I know the rate of return my cash value is earning.

IV. I have reviewed my life insurance in the past 12–24 months to see if the price I’m paying is still competitive in today’s marketplace.

 

V. Other Insurance Policies

I know the details (including amount of coverage, cost, monthly or yearly payment, etc.) of all other insurance policies carried by myself (and my spouse, if applicable). This includes health, disability, term life, and so on.

 

VI. Homeowner’s Insurance/Renter’s Insurance

If I own a home, I know what kind of homeowner’s coverage I have and what the deductibles are. If I rent, I know the amount of renter’s insurance I have and what its deductible is. In either case, in the event of a fire or a catastrophic loss, I know whether my insurance will reimburse me for the actual cash value of my property or the cost of replacing it at today’s current values.

 

VII. Umbrella Insurance

I have attempted to protect my family’s nest egg from lawsuits by carrying an “umbrella” insurance policy that includes liability coverage.

 

VIII. Tax Return

I either prepared my own tax return this year or reviewed my tax situation with the person who prepared my return.

 

IX. Investments

I know the location and amounts of all my and my family’s investments, including:

  • Cash in savings or money market accounts
  • CDs or savings bonds
  • Stocks and bonds
  • Mutual funds
  • 529 college savings plans
  • real estate investments (deeds, mortgages, rental agreements, etc.) collectibles (valuation and where the items are).

X. I know the annualized return generated by each of the above investments.

 

XI. Self-Owned Business

If I or my family owns a business, I know the current valuation of the business, including how much debt it currently carries and the value of its liquid assets.

 

XII. Retirement Accounts

I know the value, location, and performance of all my retirement accounts and those of my spouse, including IRAs, SEP-IRAs, Solo-401(k)s, and company pension plans.

 

XIII. I know the percentage of income I am putting away for retirement and what it’s being invested in (and, if applicable), how much my spouse is putting away and what he is investing in.

 

XIV. I know if I (and my spouse, if applicable) am making the maximum allowable contribution to my retirement plan at work, whether my employer is making matching contributions, and what the vesting schedule is.

 

XV. Social Security

I know how much money I (and my spouse, if applicable) will be getting from Social Security and what my (and his, if applicable) pension benefits will be.

 

XVI. Disability Insurance

I know whether my (and my spouse’s, if applicable) income is protected should I (or my spouse) become disabled because I own disability insurance. In addition, I know what the exact coverage is, when the benefits would start, and whether the benefits would be taxable.

 

XVII. Safety Deposit Box

I (or my family) maintain a safety deposit box, know how to gain access to it, and have reviewed its contents within the past 12 mos. If I have the only key, other family members know where to find it if something should happen to me.

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