Since then, Tim Ferriss has become a good friend of mine and we’ve traded strategies on writing, testing, and automation.

The updated & expanded edition of his book, The Four Hour Workweek, comes out today. I convinced him to run the preface here — where he explains what’s new, including detailed case studies and updated resources for virtual assistants and automation. This is the first time you’ll see it anywhere.

If you haven’t already read the book — or even if you have — this version contains all-new material to help you focus on the things that matter, and ruthlessly eliminate the unnecessary obligations from your life. I’ve read the new edition and it’s very good.

Below, see an invitation to get a private hour with Tim and me to answer any question you want – about virtual assistants, international traveling, automating your finances, marketing, or your own career questions.

Tim, take it away.

Tim Ferriss: Preface to the Updated and Expanded Edition

The 4-Hour Workweek was turned down by 26 out of 27 publishers.

After it was sold, the president of one potential marketing partner, a large bookseller, e-mailed me historical bestseller statistics to make it clear—this wouldn’t be a mainstream success.

So I did all I knew how to do. I wrote it with two of my closest friends in mind, speaking directly to them and their problems – problems I long had – and I focused on the unusual options that had worked for me around the world.

I certainly tried to set the conditions for making a sleeper hit possible, but I knew it wasn’t likely. I hoped for the best and planned for the worst.

May 2nd, 2007, I receive a call on my cell phone from my editor.

“Tim, you hit the list.”

It was just past 5pm in NYC, and I was exhausted. The book had launched 5 days before, and I had just finished a series of more than 20 radio interviews in succession, beginning at 6am that morning. I never planned a book tour, preferring instead to “batch” radio satellite tours into 48 hours.

“Heather, I love you, but please don’t $#%* with me.”

“No, you really hit the list. Congratulations, Mr. New York Times bestselling author!”

I leaned against the wall and slid down until I was sitting on the floor. I closed my eyes, smiled, and took a deep breath. Things were about to change.

Everything was about to change.

Lifestyle Design from Dubai to Berlin

The 4-Hour Workweek has now been sold into 35 languages. It’s been on the bestseller lists for more than two years, and every month brings a new story and a new discovery.

From The Economist to the cover of the New York Times Style section, from the streets of Dubai to the cafes of Berlin, “lifestyle design” has cut across cultures to become a worldwide movement. The original ideas of the book have been broken apart, improved, and tested in environments and ways I never could have imagined.

So why the new edition if things are working so well? Because I knew it could be better, and there was a missing ingredient: you.

This expanded and updated edition contains more than 60 pages of new content, including the latest cutting-edge technologies, field-tested resources, and—most important—real-world success stories chosen from more than 400 pages of case studies submitted by readers.

Families and students? CEOs and professional vagabonds? Take your pick. There should be someone whose results you can duplicate. Need a template to negotiate remote work, a paid year in Argentina, perhaps? This time, it’s in here.

The Experiments in Lifestyle Design blog (www.fourhourblog.com) was launched alongside the book, and within 6 months, it became one of top 1000 blogs in the world, out of more than 120 million. Thousands of readers began to share their own amazing tools and tricks, producing phenomenal and unexpected results. The blog became the laboratory I’d always wanted, and I encourage you to join us there.

The new “Best of the Blog” section includes several of the most popular posts from the Experiments in Lifestyle Design blog. On the blog itself, you can also find recommendations from everyone from Warren Buffett (seriously, I tracked him down and show you how I did it) to Mike Shinoda of Linkin Park and chess prodigy Josh Waitzkin. It’s a experimental playground for those who want better results is less time.

Not “Revised”

This is not a “revised” edition in the sense that the original no longer works. The typos and small mistakes have been fixed over more than 40 printings in the US. This is the first major overhaul, but not for the reason you’d expect.

Things have changed dramatically since April 2007. Banks are failing, retirement and pension funds are evaporating, and jobs are being lost at record rates. Readers and skeptics alike have asked: can the principles and techniques in the book really still work in an economic recession or depression?

Yes and yes.

In fact, questions I posed during pre-crash lectures, including “how would your priorities and decisions change if you could never retire?”, are no longer hypothetical. Millions of people have seen their savings portfolios fall as much as 40% or more in value and are now looking for options C and D. Can they redistribute retirement throughout life to make it more affordable? Can they relocate a few months per year to a place like Costa Rica or Thailand to multiply the lifestyle output of their decreased savings? Sell their services to companies in the UK to earn in a stronger currency? The answer to all of them is, more than ever, yes.

The concept of lifestyle design as a replacement for multi-staged career planning is sound. It’s more flexible and allows you to test different lifestyles without committing to a 10- or 20-year retirement plan that can fail due to market fluctuations outside of your control. People are open to exploring alternatives (and more forgiving of others who do the same), as many of the other options –- the once “safe” options — have failed.

When everything and everyone is failing, what is the resume cost of a little experimentation outside of the norm? Most often, nothing. Flash forward to 2011; is a job interviewer asking about that unusual gap year? “Everyone was getting laid off and I had a once-in-a-lifetime chance to travel around the world. It was incredible.” If anything, they’ll ask you how to do the same. The scripts in this book still work.

Facebook and LinkedIn launched in the post-2000 dot-com “depression”. Other recession-born babies include Monopoly, Apple, Facebook, Clif Bar, Scrabble, KFC, Domino’s Pizza, FedEx, and Microsoft. This is no coincidence, as economic downturns produce discounted infrastructure, outstanding freelancers at bargain prices, and rock-bottom advertising deals—all impossible when everyone is optimistic.

Whether a year-long sabbatical, a new business idea, re-engineering your life within the corporate beast, or dreams you’ve postponed for “some day”, there has never been a better time for testing the uncommon.

What’s the worst that could happen?

I encourage you to remember this often-neglected question as you begin to see the infinite possibilities outside of your current comfort zone. This period of collective panic is your big chance to dabble.

It’s been an honor to share the last two years with incredible readers around the world, and I hope you enjoy this new edition as much as I enjoyed putting it together.

I am, and will continue to be, a humble student of you all.

Un abrazo fuerte,

Tim

April 21th, 2009

San Francisco, California

Get a free, private hour with Tim Ferriss and Ramit Sethi.

Buy the new edition in the next 24 hours and you’ll get access to a special live 1-hour webcast where Tim and I will answer any question you can throw at us, including questions about finances, starting a business, writing a book, using virtual assistants, optimizing lifestyle design…or whatever you can come up with.

1. Buy The Four Hour Workweek expanded & updated edition today, December 15th, 2009
2. Forward your receipt to 4hww@iwillteachyoutoberich.com and I’ll send you instructions on attending the private webcast

Below are 7 stories, straight from readers just like you, who have saved and earned thousands of dollars using I Will Teach You To Be Rich techniques. The stories include details on how they got out of debt, saved more, and earned more so they could travel, buy a house, and live a richer life.

Remember — tomorrow I launch the I Will Teach You To Be Rich Boot Camp (early details), where I’ll unveil a 6-week course and curriculum to force you to take ACTION and automate, invest, and start thinking about entrepreneurship.

Jason Demant saved $50,000 in 2 years and is now taking a 1-year vacation

“The reason I’m writing is to thank you for your help in automating my money, getting my 401K properly allocated, and pushing me to sell my crap to make some cash. Using your step-by-step instructions and advice, my girlfriend and I have been able to save over $50,000 the past couple of years and now, in a couple weeks, we will be quitting our Silicon Valley jobs and traveling around Asia on an extremely extended vacation (1-year minimum)! I’ve been reading your site for a few years now and I’ve never properly thanked you for the help, so I decided it was time. Thank you!”

Terry Martin got off his ass and paid off thousands in debt — and earned more

“I’m writing you to let you know how much your blog has helped my wife and I take charge of our finances. I’m actually embarrassed to say this, but we were some of the people you mentioned in tip #25 of the save $1000 in a month challenge. We would complain about our financial situation, but did nothing to change it.

After I realized this, I got to work. I read all your tips and made a game plan. I saved $100 a month on cable, $20 on our cell phone bill, created several ING savings accounts, my wife got serious about cutting coupons (she has a 3 ring binder!), I sold an old camcorder on craigslist, and cut off my Sirius account (but when I called to cancel it, they gave me 3 more months free with the option to cancel it for good afterwards—who would have thought?). We cut back on eating out except we each get twice a month at lunch time. My wife got overtime at work along with a raise, I started a side job, and I will start teaching night classes soon. Not only did we cut our spending drastically, we also have more money coming in. Our debt will be cut in half by the end of the year and eliminated by the end of the next!

Update: “Right now we are just over 18,500 in debt not counting my wife’s newly added student loan which would add about another $8000 . By the end of the year, we will have paid about $14,000 off while putting at least $500 a month in savings for a down payment on a house and 50 a month into another savings. This is, of course, things keep going as planned.

But not only are we saving money, we are increasing how much we make too! I have started a side business, while its not bringing in a lot of extra money now, things are starting to pick up. I also talked my company into paying for training classes for a certification that will greatly increase my value $15 to $20K a year in the workplace. Especially helpful during these tough times. My wife is also getting her company to pay for most of her classes to get her bachelor’s degree so she can move up to a new, higher paying position. During this whole process, we have been saving for a down payment on a house and I’m happy to say we are closing on our first home July 20th.

I would personally like to thank you for website and your book. The tips were inspiration to get up and do more than just complain about our financial situation. Although we are not rich money wise, we love where we are at and what the future holds. You have truly taught us how to be rich. Thank you.”

Christopher P. is saving hundreds of dollars and earning more

“I would say i have saved: $320 from cutting my cable bill by 40 dollars last 8 months (they raised it again 2 months ago. I just called right back and got it lowered . I put $30 a week into savings accounts (960 total saved 8/months)

8 months ago i decided that i would earn more money. First I asked for a 5% raise at work and got it. (This was scary because we had just had 3 rounds of firings.) Then i sat down and figured out what interested me and I could make money doing. I was in love with the iPhone but too poor to buy one. But I taught myself to program for the iPhone anyways and just 2 months ago finally purchased one. It was slow going at first and the amount i was putting away seemed pretty insignificant. But 8 months later looking back i am really seeing the transformation that took place.

Two weeks ago I finally finished and started selling my first app. It has been such a great experience and your website gave me the kick in the pants i needed. (Thank You) I haven’t done any advertising and on my first day i sold 17 copies! Not enough to quit my job but extra income. Since then the amount of units I have sold has been slowly but steadily increasing. (It’s been rated 5 stars)

People all over the wold have purchased my app now. (Japan, Canada, Great Britain, Australia, Netherlands and United States so far) In the first two weeks after Apple’s cut i made $200. October looks like it will be a much better month!”

Brian Drolet is saving $2,880/year

“Big wins =

• Dropping cable $40/month
• $1 raise at work = $240/month extra
• Closed checkings account = $13/month extra
• Automated my cell phone bill = $7/month

I’m saving $720/year just from those 3 things and earning $2880/year extra.”

Misha has turned her savings around

“I wanted to write to you and say thank you. After reading your book I was able to get a good handle on my finances. I think the most helpful was the chart you use to show the movement of the money and the automation. Check out a snapshot of my my mint NET INCOME.”

Josh G has saved $14,000 in a few months

“I have saved 14k so far since I started May 2008 and I’m on track for 20k by the end of the year!
Fear kept me from automating my savings previously. I had bills and it seems that was all I thought about every month.

There was a blog post that you did which you mentioned using ING Direct to create sub accounts. It was in that post I decided to try the full automated savings because I could do sub accounts for future purposes.”

Michael Hagan saved hundreds from March to July of this year

“I’ve saved: $900 in savings since March, $700 towards Roth IRA since March. I started the whole thing around February/March

I would say that the things that held me back the most was a) not knowing what to do in the first place b) getting out of college saddled with massive credit card and student loan debt (working a full-time, unpaid internship in LA was expensive!) c) messing around in high school just enough to where I couldn’t qualify for scholarships and being just too middle class to get gov’t $$ for college, and finally d) trying to keep up with all my friends that had good jobs and nice things. A fool’s game!”

The difference between these people and others is they took ACTION. It’s easy to read blog post after blog post, but when you decide to take action — and you have a clear plan of which Big Wins to attack — the results can come quickly.

The Boot Camp will include a step-by-step plan to take action on your finances, automate, create a plan to pay off debt, and more. I’m including psychological techniques to use against yourself to lock the behavioral changes in. Plus, live video webcasts from me each week (where I’ll answer your questions), as well as guest speakers to cover entrepreneurship topics like marketing, pricing, and critical business mistakes to avoid.

Check back tomorrow, when I’ll open up Boot Camp registration.

I recorded a 30-minute interview with Flexo and Tom over at the Consumerism Commentary podcast with extensive notes below. It’s called Stupid Financial Advice + The 5 Myths of Personal Finance.

Notes:
[00:00] Introduction from Flexo
[00:50] Interview with Ramit Sethi about stupid financial advice
[01:50] — The Reddit community
[03:27] — Frugality
[05:09] — Big wins
[08:03] — Knee-jerk behavioral change
[09:41] — The “buy and hold” strategy
[13:10] — Financial magazines leading up to the recession
[16:48] — Finding decent financial advice
[19:01] Ramit’s five myths of personal finance
[20:01] — Myth #1: Personal finance advice is only about spending less than you earn

– Sort of meaningless pablum that lets people feel better about themselves but get nothing done
– And you can just see that’s true by asking a few questions: Are you happy with your finances? How much do you spend on eating out and loans? What’s your system for getting ahead? What are your goals?
– Just knowing a fact doesn’t make it implementable. As we say in persuasion, “informational influence is one of the least persuasive methods available”
– Make it tactical: How do you get the right accounts? Dominate your credit card? Automate your money? Pick the right investments? Handle money and relationships?

[21:33] — Myth #2: Personal finance is about more will power

– If I just try harder…
– Reminds me of weight: If I just try harder to diet…
– Every choice has a cost. Trying to save on 50 things vs. 5 things…
– How has that worked for you over the last 1-2 years? 10 years? Most of us are fat and in debt
– It’s about building systems that handle your weaknesses so you can exploit your strengths. Automate, earn more, cut costs

[22:55] — Myth #3: You can’t save any more money

– Yes you can
– We under-report how much we eat, just as we under-report how much we spend
– You can’t out-frugal your way to rich
– Saving: CEO
– Tracking is #1
– Setting goals is #2
– Automation is #3
– Earning more is #4

[25:18] — Myth #4: Everyone is like you

– MSN readers criticizing my frugality tips, saying frugality is about a lifestyle choice
– “Ridiculous to spend $28k on weddings”
– Silo effect: Sites like Reddit make you surround yourself with people who (1) don’t know anything, (2) act like they do, and (3) they ALL have the similarly kooky opinions!
– Solution is to read multiple CREDIBLE sources

[27:43] — Myth #5: Frugality will make you rich

Myth: “I can save $10 by not buying that book! Ha Ha!”
– Pay for value
– Not just sticker price, but value
– Why it’s crazy for people to try to find these extreme deals on books. If you implement even 1 tip, you’ll save/earn 1000x the money
– Same people who don’t pay end up spinning their wheels
– Would it be worth it to buy a $10 book that has saved people thousands? Scrooge for a few bucks/month if it helps you earn $300/month? Or to buy a course at a community college for $500?
– Focus on value, not cost

[30:26] End

Random notes

BUY AND HOLD

- Unprecedented what’s happened, lot of people to blame (including ourselves)
- But there’s a knee-jerk reaction: BUY AND HOLD DOESN’T WORK!
1. Ok, so what does?
2. The people who pull out of the market now are going to face another, more serious phantom risk: Running out of $. (SEE BELOW)

AVAILABILITY HEURISTIC

- We tend to overvalue what’s easily remembered — so you might say, “VWs are terrible cars” when in fact Consumers’ Reports prove otherwise (I do this)
- People are freaking out and removing their money from the market — driven by fear, not educated moves
- Change asset allocation. Change regular contribution amounts. Diversify. Earn more. But PULLING YOUR $ OUT? Worst thing you could do
- And people will face another fear they don’t know today: Running out of money. Not as obvious as losing 40%, but you can’t do much when you’re 82 and out of $
- Focus on the most important things and work, step-by-step, to hit them

BUY AND HOLD 2

- Compare equity returns to any other measure and you’ll see over the last 70 years have shown equities to return the best. PAST PERFORMANCE IS NO GUARANTEE…
- But I prefer to use data unlike the other handwavy arguments that involve the gold standard, doom and gloom, and tin cans

Stop reading and start doing. Thousands of people have already bought my book and dominated their personal finances. If you haven’t already bought my book for about $10 (Amazon), take 10 seconds to do it and learn how to turn all this information into a 6-week plan to dominate your personal finances. If not now, when?

(Make sure you forward your receipt to iboughtthebook@iwillteachyoutoberich.com for a bunch of bonuses, including something new coming up soon.)

Any time you make a major purchase, there is a huge amount of money to optimize. And buying a house is the best example of this.

Even though buying a house is usually not a good investment, once you have a mortgage, you can optimize the hell out of it.

Today, Andy Jolls from videocreditscore.com is going to show you one way to save $71,000+ on your mortgage.

Dominate Your 30 Year Mortgage in 25 Years

01:16 — Typical Mortgage Payments
01:36 — Extra Payments
02:07 — $71,000 Savings
02:23 — What if your credit is worse?
03:29 — Scrooge Strategy members can learn more

Today let’s see some real world examples of how you can save money on your biggest-ticket item: housing.

Instead of paying off your mortgage once per month, set up a system to pay it twice per month. I’m not telling you to double your payments. I’m saying that paying every two weeks WILL mean several years less of payments.

Here’s how it works with Bank of America [Countrywide] and I’ll assuming it works this way with others. BofA has a plan (PayPlan/26) which means instead of making 12 payments a year you are paying 26 payments a year. Note the math. It seems like you should be paying 24 payments a year, but that’s not how the calendar works, so you make extra payments. But, that’s a good thing. It’s like you are making 13 payments a year [the way BofA does it, more on this below*] Let’s take a look.

Scenario 1: Typical Mortgage

APR: 6%, $300K, 12 monthly payments of $1798.65, total interest paid over 30 years, $347,514.57

Scenario 2: Making an extra payment each year

APR: 6%, $300K,? 26 bi-weekly payments of $899.38, total interest paid over 25 years, $276,591

You just saved almost $71,000 in interest payments. Wow, that’s like 18,000 lattes or one every day for the next 50 years.

What’s happens if you have bad credit and have higher interest rates than 6%. Moving to every two weeks helps even more. At a 7% interest rate, you will shorten your loan by 6 years instead of 5 years for the 6% rate. Better yet, you save from paying $98,545 in interest.

Scenario 3: Making extra payments each month

Okay, this doesn’t save you a lot more, but you stop payments 5 months sooner and your interest payout is $273,852 for an extra savings of $2739.

The problem with the scenarios above is unless they are automated, most of us will never do it. That’s why the BofA PayPlan/26 plan is great. It’s automatic.

Here’s what sucks about the plan. One, they charge a $4 fee every month. Okay that’s $2600 over the course of the loan. But, the bigger issue is this. They don’t apply your mid month payment right way, rather, they hold your money like a bank and then make a payment with your two payments at the end of the month. Thus, the plan really is a 13 payment plan. This is pretty downright snaky in my book and I think [hope] the regulators jump on this. According the scenarios above I should be saving another $2739, but I’m not.

I’ve seen many posts that complain about the fact that the banks charge for this service in many different ways. I agree with these complaints, but I want to point out that I disagree with the advice most posters give. They say, get a bunch of envelopes and be disciplined about this. I just don’t think “discipline” is realistic for most busy people. (Note from Ramit: See Personal finance is not about more willpower.) Sure, I’m bummed about paying $2600 for something I should be able to remember to do, but that $2600 is saving me $71,000. So, it’s a tradeoff I willingly accept.

But all this said, the upside totally outweighs the downside. It’s an automatic way to save you more money than you could save almost anywhere else and you’ll be paid off 5 years earlier.

###
Andy is an ex-FICO executive and Chief Educator at VideoCreditScore.com. Check out these videos:

• Do apartment evictions impact your credit score?
• Avoid Cell Phone Scams
• Student loan debt vs. credit card debt
• How to translate your credit score into an interest rate.

See the specifics: If you liked this, Andy recorded a more in-depth premium video for Scrooge Strategy members, which shows specific tactics, phone numbers, and an additional tip for saving $117,600 on the lifetime of a typical mortgage. Sample screenshot:

My Scrooge Strategy members get proven, specific tips like this every week — and if the tips aren’t useful for you, you get 100% of your money back. See how to focus on the big wins and save thousands — no risk.

Lots of people have been interested in the section of my book on irregular expenses and income — like entrepreneurs or freelancers –so I thought I’d go into some more detail on how I handle automation.

Brian D. writes:

I’m just wondering when you deposit money into your account does it automatically put 5% into savings, 10% into 401(k) …etc or is this a manual process. Also when the 5% goes into savings do you automatically split that into your savings account sub accounts, or is this manual?

Brian probably read my monster post on The Psychology of Automation: Creating a Bulletproof Personal-Finance System, which included this image:

Here are the answers:

1. It’s automatic (see how to automate it). But in your sub-savings accounts, you have to specify an absolute number, such as “withdraw $150/month from my checking account and put it in my sub-savings account for the new iPhone”)

2. Brian then wrote a followup: “What if you got $500 for your birthday and deposit this into your checking. Does it automatically spread itself out or do you do this manually?” While my bank (and most) require an absolute number, you can still semi-automate this. I deposit the money into my checking account, as usual, and then execute a monthly sweep on the 25th of each month, where I tidy up all loose ends.

You’ll remember my sub-savings account (how to use a sub-savings account):

Here’s how the monthly sweep looks in Google Calendar:

Note that I don’t recommend you sock away 100% of unexpected earnings. In fact, I force myself to spend 25%-50% of any unexpected money within a month, a technique I developed to keep motivating myself to earn unexpected income. (For that, I keep a “tobuy” tag in delicious.)

Just like GTD, the key with your personal finances is to set up structures to catch the wild one-offs and put them aside for a regularly scheduled time, usually once/month.

Once you set this system up, your money will flow from your paycheck to your investment accounts (401(k), Roth IRA, etc), sub-savings accounts (like for the new iPhone), and down to your checking account for guilt-free spending — all automatically.

Read more about automating your money.

Note: The bottom of this post includes a link to the most detailed public description of my own personal-finance system that I’ve ever done, and a chance to meet Tim Ferriss and me for dinner in San Francisco.

How often have you heard this?

• “If I just try harder, I should be able to save more money…”

• “Yeah, I know I should max out my 401(k)…”
• “I know, I spent way too much last month. I’m not going out at all this month”

Each of these makes me want to buy a cartoonishly large magnifying glass, lie under it on a sunny day, and calmly light myself on fire.

If you think personal finance is about trying harder, ask yourself: How has that worked for you in the last month? The last year? Have you really saved more? Invested more?

The idea that personal finance is about willpower is based around the heroic idea that our willpower is the most centrally important driver in our lives. But social psychologists know that the situation around us is at least as important as our personality. For example:

• The Milgram Experiment showed that the situation, not personality, could cause random people to give terminal electric shocks to helpless participants

• The excellent 1973 study by Darley and Batson study constructed a situation in which seminar students, as they walked to give a talk on The Good Samaritan, walked past someone “sitting slumped in doorway, who moaned and coughed twice as they walked by.” In fact, some even walked directly over the person. The situation that the researchers created determined the behavior, not the participants’ personality (although personality does play a role in other research on helping)
• Any of Brian Wansink’s excellent studies on food and psychology. “To a person, people will swear they aren’t influenced by the size of a package or how much variety there is on a buffet or the fancy name on a can of beans, but they are,” Dr. Wansink said. “Every time.” We like to believe we are in control of what we eat and how much eat, but the truth is actually much more complicated — and often related to external factors like the menu engineering, portion size, or your waiter

People don’t like hearing that external factors are often more responsible for their actions than they themselves are. But it’s true, and I’ll write more about investor psychology, social influence, and persuasion in upcoming posts.

So, back to money. We all “know” managing our money is important. We say being financially responsible is a “value” of ours. But knowing and saying doesn’t make it so.

The structures around us matter.

The importance of automation: Do the right thing by default

Here’s an illustration of how you can use psychology against yourself to do the right thing.

You might have seen my recent guest post about passive barriers. The chart above shows how contribution rates to 401(k)s jumped after companies implemented something called “automatic enrollment,” where employees are automatically enrolled in their 401(k)s.

This was vastly more effective than educating people about the advantages of 401(k)s. In fact, in another study, 100% of employees who attended a financial seminar planned to begin contributing to their 401(k). Only 14% did.

First, get the structures right. Then you can work on your willpower, which will be much easier once you see $100/month automatically going into your savings account.

Now, I don’t want to pretend that managing your money won’t take any behavioral change. Of course it will. Even though you’ll be able to still spend extravagantly on the things you love (sometimes, even spending more), you’ll have to cut costs mercilessly on the things you don’t. That takes work, and if you think that automating your money alone is going to make you rich, you are a moron.

But automating your money is a big win, and it sets up an infrastructure for getting rich without forcing yourself to pay attention to the day-to-day minutiae of managing money.

I’ve written a guest post on my friend Tim Ferris’s blog (he’s the author of The Four Hour Workweek), which includes a detailed writeup of how I’ve automated my finances. (At the bottom of the post, there’s a chance to get flown out to have dinner with Tim and me in San Francisco, but that’s only open until tonight, Saturday, at 6pm Pacific.) In any case, check out the automation tips and get your structures set up right.

Automate your finances here: The Psychology of Automation: Building a Bulletproof Personal-Finance System

“The real troubles in your life are apt to be things that never crossed your worried mind, the kind that blindside you at 4 pm on some idle Tuesday.”
– Kurt Vonnegut

I wish we were always smart enough to prepare for flat tires, traffic tickets, coffee spills on our laptops, emergency flights for someone sick in our family, and other unexpected expenses. But we’re not — even though they consistently happen, month after month. Ironically, the expenses themselves may be unexpected, but the occurrence of them is very predictable.

Here’s an example late fee that I just got:

I wish I hadn’t gotten this, but things fell through the cracks with the book launch. After learning this the hard way a few times, I decided to get proactive about unexpected expenses.

I’ve set up a sub-savings account and now save about $150/month for unexpected expenses. At the end of the year, I sweep the account, taking any extra that’s still in it, and move it over to my “general” savings account.

In your savings account
In my ING savings account, I create sub-accounts by logging into my account, clicking “New account,” and following the instructions. It will seem like you’re creating an entirely new savings account, but you’re not — after creating it, it will be a sub-account within your main account. ING Direct works best for me. I haven’t found another savings account that lets you create sub-accounts, but you can always use Excel.

These sub-savings accounts are incredibly useful for focusing your savings. I’ve previously written about using them to hedge fuel costs, but in general, it’s easier to save for specific goals rather than a guilty, “I should save” account.

Sub-accounts in your email
I also have a sub-label set up in Gmail using Folders4Gmail:

I like to add all important emails to various sub-accounts so I can eyeball them and get a sense for how often something is coming in — especially when I can’t easily track something (e.g., how many speaking engagements I’m getting).

Book excerpt: Unexpected income & expenses
From Chapter 4 (”Conscious Spending”) of my new book (#1 Amazon bestseller), where I describe how to handle unexpected income and expenses:

Read the reviews and forward your receipt to iboughtthebook@iwillteachyoutoberich.com to get spreadsheets, a signed nameplate, and bonus content.