Do you sometimes wonder if you’ll ever be financially stable enough to retire? Or maybe it’s not so much about retirement as it is about financial independence. Personally, I don’t want to wait until I’m in my 60s to enjoy financial freedom and extended leisure time!

As a result of one decision, my husband and I took a giant leap toward our “independence day,” as we like to call it. In sharing our story, maybe you, too, will feel inclined to take this unconventional step toward a brighter financial future.

What did we do? We downsized our home. What’s really amazing is that we had just completed building our gorgeous dream home when we made the decision to downsize. Talk about bad timing! And it took us two years to sell because the real estate market had gone south.

Note: It’s usually a good idea to live in a home at least two years anyway, so you don’t have to pay taxes on the profit. Consult your CPA about this.

Could downsizing be for you? In a world where most people tend to live beyond their means, it’s not exactly a popular choice. Here is how my husband and I came to the decision.

1. We discussed what we wanted most in our lives.
The first step is to clearly define what is most important to you. My husband tends to think in terms of how much things cost. I’ll bring up an idea, and he’ll say, “but that will cost such and such.” To which I inevitably reply, “but, if money was no object, what would we want?”

I believe you can’t get to the heart of what’s most important in life unless you first remove the barriers. Unfortunately money can be a roadblock if we let it, so I like to remove it while brainstorming. If we had allowed money to be an obstacle, we never would have achieved our goal because we would have said, “We can’t afford it.”

So take the time to find out what you want, then try and figure out how to get it.

We put our heads together for several months, trying not to get caught up in the”what ifs” or the “we cant’s.” After many heart-to-heart talks, the desire that resonated the loudest for both of us was financial independence.

Oh, great! But how to get there?

2. Once we were clear on our heart’s desire, we started planning.
Without a plan, a goal is only a dream or a wish. Here’s what we noticed almost immediately: if financial independence had just become our number one priority, then what were we doing with a big, shiny new mortgage? I said, “Sell the house!” But my husband resisted at first. We build houses for a living and he thought it looked better for our business if we lived in an amazing house. There’s probably some truth to that, but we had made our decision, so now the focus was how to bring it to fruition.

We talked about it for weeks, mulling over different ideas to achieve our goal. There was always the option to generate extra income, but since extended free time was a close second to our desire for financial independence, neither of us wanted to do that.

Hmmm…now what? We kept circling back to the fact that if we sold our new home and downsized to a more modest house, we could greatly improve our finances and be on a fast track toward early retirement.

3. Implementing the plan and taking action.
Most of our family, neighbors, and friends thought we were crazy. Or at the least, a little weird. I mean who gives up a beautiful new home like that? Especially right after it was built.

But we were ready. We were clear about what we wanted, as well as the course of action to achieve it.

If you think downsizing might be a possibility for you, be sure to also consider all the financial perks it can bring. A smaller mortgage payment (or possibly no mortgage at all) is only one of the many financial benefits. Typically you’ll pay less in taxes and insurance, along with less cost for upkeep and maintenance. It can really add up and make quite a difference in your bottom line.

I’d love to hear your thoughts on this. Is downsizing something you’d consider? If so, what would keep you from doing it?

I question the value and wisdom of retirement for financial reasons, for health reasons, and for “why should we encourage people to sit on their butts all day” reasons. However, in this post, I’ll question retirement from a risk perspective: Can anyone really be sure that their savings and benefits will last for a few decades? Let’s take a closer look.

1. Social Security has “issues.”
I’ve written before that all the talk of people getting nothing from Social Security is overblown; everyone will get something. But there are enough problems to suggest that younger and wealthier people should expect to get much less than their currently projected benefit. Not that the current benefits are enough to buy beachfront property; the average annual Social Security benefit is just $14,172. If that weren’t scary enough, according to the Social Security Administration, more than half of elderly beneficiaries receive 50% or more of their incomes from Social Security; for 22% of married couples and 43% of unmarried beneficiaries, Social Security provides 90% or more of their incomes. The fact is, most Americans do not do a good job of planning for retirement.

2. Some people have pensions, but they have their own problems.
According to the Employee Benefit Research Institute, approximately 20% of the over-50 crowd receives income from a defined-benefit pension, with an average benefit of almost $18,000. However, the percentage of Americans who will receive a pension is shrinking. Plus, many of these plans don’t have enough money to pay future benefits. (In fact, the massive underfunding of pension plans — particularly state and local plans — is one of the most underappreciated risks facing our country.) And when a company goes bankrupt, as retirees from Kodak recently learned, benefits can be reduced or eliminated. Most private plans are insured by the Pension Benefit Guaranty Corporation (PBGC), which has the power to take over underfunded plans or those of bankrupt or distressed companies. However, pensioners may not receive their full benefits. Furthermore, the PBGC is on the hook for $107 billion in payments yet has just $81 billion in assets. Government plans are not insured, but their sponsors can always raise taxes — though that’s generally not very popular.

3. Savings to the rescue…or not.
I won’t trot out all the stats about how people don’t save enough, or how the baby boomers, as a group, are entering their golden years with too little gold (that is, net worth — I’m not suggesting that every retiree hoard the shiny metal). That’s bad enough. My concern is that for these (often-too-meager) savings to last, investment markets have to cooperate, and, as we’ve seen over the past decade or so, they often don’t. I’m not predicting Armageddon or anything like that; most of my longterm savings are in the stock market. But investing can be risky; we just don’t know for sure how much a certain stock or even a bond will be worth a decade or two from now. Yes, you can play it safer with CDs or Treasuries, but only if your money will last as long as you do — and keep up with inflation — while earning 2%.

4. Or maybe my home equity will save me…oh, wait.
Several years ago, homeowners could take consolation in the rising value of their homes. Now, with prices down nationwide an average 30%, it’s much more difficult to turn a nest into a nest egg. Of course, this wasn’t supposed to happen. In 2005, Ben Bernanke, then an adviser to President Bush, said on CNBC, “We’ve never had a decline in housing prices on a nationwide basis. What I think is more likely is that house prices will slow, maybe stabilize…I don’t think it’s going to drive the economy too far from its full-employment path, though.” This just goes to show that even smart, well-connected people can get things very wrong, and that just because something hasn’t happened before doesn’t mean it can’t happen.

5. Health care is unpredictable and expensive.
The big wild card in anyone’s finances is health care — what illnesses or accidents will befall them, and how much of the costs will not be paid by insurance. Yes, most folks age 65 or older are eligible for Medicare, and approximately 25% of retirees also get help from former employers. But basic Medicare, by itself, does not provide comprehensive medical and dental care; that costs extra. Plus, the financial challenges facing the Medicare system dwarf any problems Social Security has. As for employer-provided retiree health care, that — like a pension — is a disappearing perk.

6. If I only knew when I’ll die.
From a financial perspective, retirement is a mathematical equation that answers the question: Will I run out of money before I run out of life? You’ll need a lot more money if you die a centenarian than if you die an octogenarian (which is how long the average person lasts, once she or he has made it to age 65). There are plenty of longevity calculators that will factor in your health, family history, and upholstery-potato habits to come up with an estimate of when you’ll join that Great Spa in the Sky (I sure hope there are massages in heaven.). The standard financial-planning advice is that you should assume you’ll live to 90 or 95. But the truth is, no one really knows their date of death, yet it’s a very important variable in the calculus of retirement.

A caboodle of question marks
The bottom line is, no one can say for certain what their various sources of retirement income will provide a decade or three hence, or whether that income (whatever it is) will be enough to cover the income they’ll need at that point. That said, there are plenty of ways to mitigate all the risks of retirement, which I write about in my newsletter and in my GRS posts. But for now, I’ll just put the question to you: Do you think retirement is too risky? How do you plan to address any potential problems?

Finally, the message of this post is most definitely not “stop saving for retirement.” I continue to max out my 401(k), despite my hope that I’ll be able to work forever. Nevertheless, many people are forced to retire due to bad health or a bad economy. Plus, I’m just 42. By the time I’m 72, I may have changed my mind — or my body has changed it for me — and I’ll actually be ready to sit on my butt all day.

If you want to save money, and I mean really save money, then you’re going to have to stop buying Stuff. You have reduce the amount you consume. Today I want to share the system I’ve been using for the last 15 years to reduce my spending and make sure I don’t get tricked out of my hard-earned cash.

Question 1: Stop! Is this a good decision?
Before you reach for your cash, before you grab your credit card, before you pick up the item up from the sales rack, pause for just a minute. Stop yourself and think about whether or not you are about to make a good or a bad decision. A marketer or salesperson’s job is to make you think you need something that five minutes earlier you didn’t know existed. Find a way to trigger your internal alarm bell, so you can stop for a second and move on to question number two.

Question 2: Are you hungry?
If your belly is empty then your decision making is impaired. Our bodies get confused between the desire for food and inedible objects. So if you are hungry, step away, eat something, then wait for 15 minutes before moving on to question three.

Question 3: Is there something else?
There are so many other things you could buy. Is this item really the one you want to spend your hard-earned money on? There are other things you could achieve with this money. Will you be limiting yourself by making the purchase? If you have decided that this is the only thing you want, go to question four.

Question 4: Is it worth the effort?
Every time you reach for your cash, ask yourself if it is really worth the effort. If every $15 you spend is an hour you’re going to have to work, is it worth the effort? Or should you leave your money in your wallet? (It’s so much easier than having to earn extra money!) Now, if you have decided the purchase is really is worth the bother, move on to the fifth question.

Question 5: What will you gain?
Next, work out what you or your family will gain by buying the item. What are the longterm consequences? Will it improve your health and happiness or genuinely give you more free time? How? If you cannot answer these questions positively, then leave your money in your wallet. It is important that you be really skeptical when you answer this question. Now move to question six.

Question 6: What will you lose?
When you buy an item, you both gain something and lose something. If you are lucky, the only thing you lose is cash and the time it took you to earn that money. But this is not always the case. A great example of this is a computer game. You gain entertainment, but you might lose quality time with your family. Once you are certain you have accounted for everything you could lose, move on to the next question.

Question 7: Is there a better way?
Now it is time to shop around for a better price and work out the smartest way to buy it. How can you get the best value for your dollar in the minimum time possible? Occasionally, working it out for yourself will take more time than you save (when calculating your time as an hourly wage), but you will get satisfaction in knowing that you’ve found a great deal and are doing the best for your family. Once you have researched your purchase and found the best way to buy it, go to question eight.

Question 8: Do you have the cash to spare?
Most of the time, buying things on credit is stupid. So if you don’t have the cash, remain free, walk away, and live happily ever after. Consumer purchases aren’t worth burdening yourself with debt. This means you should avoid credit cards, layaways, interest-free loans, mortgage refinancing facilities, etc. Only buy something if you have the spare cash — and if you don’t, go home and save until you do.

If want to save yourself some money, write down the eight steps and put them in your wallet! Every penny you save is one you don’t have to earn!

I first met Tyler several years ago. He was a GRS reader who dropped me a line to see if I’d meet him for dinner. I said “yes” — as I almost always do. Now, several years later, Tyler runs a successful blog of his own. It was fun to see his readers come out to support him.

After giving us a chance to chat, Tyler asked us to break into small groups, to work together to define the word freedom. “What does freedom mean to you?” he asked.

What is Freedom?
I was sitting with Tammy and Logan (they of the tiny house) and with our friend Michelle, who also lives in a tiny house. We brainstormed ideas. One obvious answer was that, in many ways, money equals freedom. When you have money, you have more options. Or, more precisely, when you have no debt, when you spend less than you earn, then you have more options.

But freedom is more than money, of course.

“To me, freedom means being able to what you want, when you want,” I said. We talked about that for a bit. We talked again about how money makes this more likely.

“But I think to be free,” said Michelle, “you have to somehow be aware of what your options are. You have to be conscious that you’re making choices that reflect your values, choices that allow you to do what you want, when you want.”

“Fair enough,” I said.

After more discussion, we realized that each person at our table already felt very, very free. None of us worries about money: I’ve experienced a windfall; Tammy and Logan and Michelle have intentionally minimized their expenses so that money is no longer a stressor. We each do work we’re passionate about. We have good friends, we have purpose. We’ve adopted lifestyles that give us freedom, or at least a sense of it.

“I think a lot of feeling free comes down to shifting priorities,” Tammy said. “It means choosing to relate to money, and other parts of life, in ways that others don’t.” Tammy wasn’t saying that she thinks we’re better than anyone else — far from it! — but that in order to obtain this feeling of freedom, we’ve each made choices that we like but others might not. Such as living in small spaces. (If I’m doing my math right, the four of us live in three separate spaces that combine to total 985 square feet. My apartment is the bulk of that.)

Conquering Fear
Tyler took some more time to speak with his readers. He talked about his own ideas of freedom. “The core of freedom is conquering fear,” Tyler said. “It can be scary. We want to draw cartoons, or climb mountains, or do whatever makes us happy. But often, people are afraid of freedom because with freedom comes risk. When you choose freedom, you make choices for yourself. Nobody else makes them for you. And when you make choices for yourself, the responsibility — or the blame — for the outcome rests with you.”

At our table, we talked about the relationship between freedom and power.

“In some ways, freedom and power are interchangeable,” Logan said. “When you have freedom, you have power. Not like you have authority or control over other people, but you have power over your own life.”

“Here’s a thought,” I said. “If you’re lucky enough to be free, do you have an obligation to help others who aren’t free? To give them this power too? And there really is an obligation, then doesn’t that mean you’re not actually free?”

“It’s like a paradox!” Tammy said.

The Limits of Self-Determination
But here’s the rub: Even if you’re free, even if you have power over your own life, bad things happen. You might get struck by a car. You might have a stroke. Your country might experience hyperinflation. You’re only free to the extent that you can control life. And beyond a certain point, life is out of your hands. (Though, again, the more money you have, the less impact these events have on you. Another argument for a fat emergency fund!)

What’s more, as free as you might be, you only have that freedom because your environment allows you to have it. If you lived elsewhere, or elsewhen, you might not be able to do what you want to do, when you want to do it. You might not have the freedom you do now.

Because of this, and because I’m fortunate to be very free myself, I’m finally starting to think of other people. I feel called to help others move closer to this ideal, to give them find the power to do what they want, when they want.

Money and Freedom
Money can’t buy happiness, it can’t buy love, and it can’t buy freedom either. But money does make obtaining these goals much, much easier. When you have money, you don’t have to worry about the basics. To re-visit Psychology 101, money helps you build the base of Maslow’s hierarchy of needs.

When you have money, you’re able to take care of your physiological needs, like finding food and water. You’re also able to better take care of your body and your belongings, able to afford a safe place to sleep. Because money makes it easier to have these things, it further grants you the freedom to focus on higher parts of the hierarchy, such as self-esteem, confidence, and achievement. If you worried each day about how you were going to feed yourself and your family, you wouldn’t have time to pursue these higher aims. You wouldn’t have the freedom to do so.

But here’s the thing: I don’t think money does buy freedom if the person with the money becomes obsessed with protecting it or with obtaining more. Money is a tool. It’s useful only insofar as it helps you achieve your goals.

An old friend contacted me by Facebook the other day. We’re going to get together for coffee soon. (Where “coffee” is a euphemism for “any other drink because J.D. doesn’t like coffee”.) During our conversation, my friend asked, “So what do you do now that you sold your web site? Do you not work? Do you just go to the gym and travel the world?”

Ha. I wish. I feel like I’m busier than I’ve ever been. But to tell the truth, I’m busy in a different way. In the past, I was busy, but I was busy doing things that other people wanted. Now, I do things that I want. Most of the time, even my work feels like play.

I’m a happy man. I have a good life. I’m able to do what I want, when I want. This isn’t because I’ve bought my freedom and my happiness, but there’s no question that having savings, eliminating debt, and living below my means has given me peace of mind, has allowed me to take risks that I might have otherwise avoided.

For six years, I lied to my ex-husband about how much money I was making. Some people make up lies trying to build self-esteem. Those people lie “up”. I lied down, hiding how much money I made, and underestimating the work I was doing.

I didn’t do this for some malevolent purpose. In fact, I thought I was doing my ex-husband a favor. I tried to protect his ego and his self-worth. Unfortunately, as we all know no good deed goes unpunished.

Background
I was born far away from the United States. When I met my ex-husband, my homeland was going through some turbulent times. The Soviet Union was in ruins: The job market was unstable, food was expensive and in scarce supply. Our government was changing the national currency on what seemed to be a weekly basis. Stability and financial security were ideas long forgotten.

When we got married, my ex-husband was serving in the military, making good money. By the time I graduated from college, our country had transformed from a socialist state into a free-market, exploring and building capitalism.

It was then that the tables suddenly turned: My ex-husband left the military and ended up laying cement for a private construction firm. As a college graduate, I got an entry-level position with a small firm in the automobile industry. A year later, that small firm grew into one of the biggest wholesale trading firms in the country, propelling my career.

Then the marriage trouble started.

Protecting His Ego
My ex-husband was sincerely happy when I got my first huge promotion and my first salary increase. That first increase put my salary way above his. He seemed excited about more money flowing into the family. That didn’t last long.

First, he started to make snippy comments about my job during conversations with our friends and family. Later, I noticed that every time people asked me what I was doing for a living, he dismissively waved his hands and said something non-essential, trying to undermine my achievements.

I started to suspect that maybe his ego was hurt. Maybe the fact that I was becoming a successful career woman who was working more hours, and ultimately bringing more money home, was somehow diminishing his self-wroth. Maybe he felt that his role as a “breadwinner” was being taken from him.

I thought about it, I dwelled on it, and finally determined that it was all my fault. I decided that I was not going to disgrace my ex-husband’s sense of self-respect by announcing that I made a bonus that would allow us to renovate our small apartment.

It was the beginning of our end.

Easy Come, Easy Go
We were always supporting our relatives from both sides as much as we could. But when I started making more money, I was pressed to help the family of my ex-sister-in-law more than usual. The more I worked, the more I made, the more money was leaving our family and going into her household. Every bonus, every salary increase was viewed by my ex-husband as an additional source of support for his sister.

She was a stay-at-home mom with a stay-at-home alcoholic husband. Both seemed to conveniently live off our (well, my) money. I didn’t mind helping them, but constantly supporting them with every extra penny that we could made me feel that we were encouraging and sustaining her husband’s alcoholism.

Another major concern surfaced about the same time. Between our own expenses and helping their family, we weren’t able to save anything for ourselves. It didn’t matter how much both of us were bringing home. It was all gone by the end of the month. We had no savings, no emergency money, none of the financial security that both of us wanted.

How It All Unraveled
Over the years, I began to keep secret most of my pay increases and bonuses. I stashed away money, and I hid my purchases.

Did I feel guilty? Of course I did. But over time, you get used to lying, and it becomes your second identity. You live a life of lies, and you think that this is the way to live it.

It’s one of the things lies do to you. Everything you lie about works to replace moments, words, events from your life, until you cannot remember why any of it mattered. It takes so much energy to hold on to the lies that you lose your grip on what’s important.

And every lie is a relationship killer. Even a small lie, because eventually that small lie will become a big one.

Lies make you feel empty — and afterward, lonely too.

Why I Would Never Do It Again
You could say that I was young and naïve. I thought I could save a marriage built on lies. I call myself foolish. Foolishness is always best seen in retrospect.

Joint goals make a strong foundation to marriage, along with trust and understanding. Years later, after the divorce, I look back at our marriage and I have to admit that we didn’t have any common goals. We didn’t know where we wanted to go together, what we wanted to build.

Sometimes you have to accept that a notion of a “traditional relationship” is a fluid one. Roles can be reversed any time. Life can change on a dime. It shouldn’t matter who makes more money in the relationship. What should matter is having similar attitudes towards money.

No one should ever equate money to power in marriage. Marriage is a partnership, not a rivalry. If you can’t be happy for your partner’s success, then maybe it’s time to reconsider your relationship.

There’s a lot to be said about the discipline it took to be conscious spender (and saver) even after a windfall. How did you do this?

In a way, conscious spending became easier after the sale of Get Rich Slowly. But it also became more difficult. Let me explain.

When I sold GRS, Kris and I paid off our mortgage. This freed $1000 per month that I could use for whatever I wanted. (That $1000 was my half of the mortgage payment.) My spending on the Needs part of the Balanced Money Formula essentially dropped to zero, leaving me lots of room for Wants and Saving.

Plus, because I followed my own advice about spending a small portion of a windfall on things you really want, I didn’t feel deprived.

That said, it’s easy to become complacent when you have a large nest egg. It’s easy to start spending a little more here and a little more there because you know you have plenty of savings to bail yourself out. Though I never came close to spending more than I was earning, I did begin spending more than I ought to have. That’s why I started preaching the virtues of conscious spending; I needed to remind myself of the concept.

Lately, I’ve become more of a conscious spender. That’s because I don’t allow myself to touch the money from the windfall. Instead, my goal is to live on my current income, which is a little lower than it had been when I was working at the box factory.

I haven’t totaled the numbers for 2011, but leaving aside money related to the sale of the blog, I probably earned about…calculating…$48,000 from all sources, including speaking, magazine articles, book royalties, interest income, and writing for this blog. That’s roughly the median income for an American worker household (albeit I have an enormous nest egg).

Now that I’ve moved out of the house and am renting an apartment, my expenses have increased substantially. Remember that $1000 I freed by paying off the mortgage? Well, I’m now paying that again in rent and utilities. Meanwhile, I still have the other expenses I was carrying before, including gym fees, soccer tickets, and Spanish classes. Unless I find some way to boost my income — and I aim to do so — I’ll have to cut back hard on some things. Most likely travel.

If you had such a major windfall, why did you still feel compelled to give up comic books?

I felt like I was collecting comics out of compulsion. I don’t read everything I buy. I want to, but I don’t. So why buy more? Besides, I haven’t given them up completely; I’ve just reduced my comic spending radically. (As in $0 so far in 2012, though that’ll change soon.)

Also, as I’ve mentioned, I don’t want to touch the nest egg. If I’m going to buy comics, I have to do so within the constraints of my current income. Again, this is the notion of conscious spending that I write about all the time. I would much, much rather spend that comic money on Spanish lessons right now. I love learning Spanish much more than I enjoy reading comics. That may change in the future (and probably will), but for now, the Spanish is a priority, and that’s my focus.

What’s your asset allocation?

I covered this in detail last April when I wrote about rebalancing my investment portfolio. You can see my target asset allocation there. But my current asset allocation looks nothing like that. Because of market movement, and because Kris is receiving some of these funds as part of the divorce settlement, my asset allocation is a mess. It’s very heavily weighted toward broad market index funds (which is a good thing, I suppose) with very little in bonds. If the market were to crash today, I’d be hurting.

One of the challenges I now face is balancing things without incurring tax liability. If I sell stocks to buy bonds, for instance, I’ll owe long-term capital gains tax (15%) on any profits. This is why I have an investment advisor I meet with regularly. He can hold my hand as I try to navigate this. And it’s definitely something I’ll be looking at once tax season is over.

You’ve often talked how you’d like to move into your “dream” apartment and start over, so I’m wondering if you’re now following that wish at your new place? How are you doing with your war on Stuff?

I was wondering how long it’d be until somebody asked this. This is one of those chances for me to practice what I preach. How am I doing? I’d give myself a B-.

In some ways, I’ve done an amazing job of shedding layers and layers of unnecessary Stuff. It’s all sitting in the workshop at the house, waiting to be sold. (Yay! Extra income I can use to save for travel!) That said, I still moved a lot of things.

My closet is full of clothes. Not as many clothes as I used to own (all of these actually get worn), but still too many. I feel like I could benefit by intentionally pruning one quarter of my wardrobe. It’d hurt, but wouldn’t make me feel deprived.

I also own a hell of a lot of computers and gadgets. No man needs this much electronic eqipment! Plus, I keep tonds of paper. I need to get over that obsession.

My biggest battle, though, is against the books. (Surprised?) In the house, I had many many bookshelves devoted to books and comics. Here in the apartment, I have less space, so I have fewer books. But I still have a lot. Plus, there are still more to bring over. Every time I go see Kris (as I will tonight), I bring back at least one box of books (and sometimes several). Again, it might profit me to intentionally purge one quarter of my books.

After your trip to Africa, you talked about how you felt like it was your responsibility to do something to help, to contribute. Afterwards, you and Kris got a ton of school supplies but then decided not to mail them because it was too expensive. Have you changed your mind on that? Are you at least donating some of your money to some groups or charities that could benefit now that you’ve sold your site?

Over the years, the one financial choice that I’ve made that’s brought the most heat from readers is my decision not to contribute to charity. I’ve just never found a cause I want to support. That’s no longer true. Recently, I have discovered a couple of causes I’m passionate about supporting. But I’m going to start by contributing my time, not my money.

Since the start of the year, I’ve been contributing five hours a week to volunteer work. (This morning, for instance, I’ll spend two hours in a second-grade classroom helping kids learn to read and write Spanish.) Plus, I’ve been meeting with representatives from non-profits and charities. Part of this is related to actual work, but part of it is because I’m trying to find causes I believe in.

The causes I’m drawn to are all related to education (both adult and childhood), financial literacy, and immigration. And it looks like I may have found a way to combine all three! At the end of March, I plan to teach a personal finance class (in Spanish) to a group of 35 latina women. If that’s successful, I’ll try to build upon it.

So, I haven’t made any charitable donations…yet. But I’ve begun to contribute my time.

When you started GRS, did you imagine that it might end up making you a lot of money, and ultimately making you financially independent? Do you just think you got lucky, or could someone set up a blog today and emulate your success?

When I started Get Rich Slowly, I had no idea what it would become, financially or otherwise. I’ve always said that my goals were (in this order): to help me get out of debt, to help others get out of debt, and to make a little money in the process. That I’ve been able to exceed all of these goals amazes me.

Did I get lucky? Yes, of course. But luck isn’t the only element involved. I worked very hard to produce quality content. And I stuck with it day after day for years. Some folks don’t appreciate just how difficult this is. At the peak, I was working 80 hours a week on the blog. But as I’ve said in the past, hard work isn’t enough. In order to do what I’ve done, you also need some luck. In my case, I was lucky enough to catch the attention of some influential readers early on. They shared the blog with their friends, and it spread from there.

Could someone achieve the same success with a new blog today? Of course! And there are those who do. But I’m not sure what the right recipe for replicating this success is. There’s so much involved with it, and some of it seems difficult to define. I’ve started many other blogs, but none has caught on like GRS.

The Bottom Line
I make an average income. Because of some big life changes, at the moment I spend less than I earn — but not by much. Until I can find ways to make more money, my travel budget is going to suffer.

That said, I have a great job that gives me lots of flexibility to spend my time and money on the things I love. I also have a fat emergency fund. And, of course, I have a huge retirement nest egg. My aims for the coming months are both to increase my income and to continue exploring charity and volunteer work. In the meantime, I’ll share my progress with the readers of Get Rich Slowly.

For the past two years doing taxes has not been bearable: it’s been terrific! I’ve used an online e-filing service for several years now after many years of taking great pleasure — really! — in filling out the paper forms, just because it gets the money to me far more quickly.

Last January I began to fill out the online forms and, at some point, started glancing at the little status bar on the upper right corner. I’d filled in all my dependents and household income, and the number corresponding to my refund was more than double what I thought I might be able to expect. It ended up more than triple my expectations — about $7,500. It is, I’ve now learned, one of the significant benefits of having a spouse whose income is coming from a war zone, where it’s not taxable. As my own freelance income had decreased, thanks to the extra work of holding down the house and three young children on my own, we were getting an earned income tax credit on top of the child tax credits for our boys.

This year, I’ll get a tad bit less. I made a lot in 2011, but I’m not complaining a bit. I am, instead, working hard not to spend it unwisely by trying to follow the following rules:

1. Don’t spend a single penny before the money arrives in your bank account.
Don’t charge something on credit cards; don’t promise to spend the money; don’t put a deposit down with the rest due the day you expect the refund. Naturally, this one is very difficult in practice. This year, I had a fantastic deal on wool comforters made by a nice family on the outskirts of the city; lots off retail, with a third down in December and the rest due at the end of January. Surely my tax refund would arrive by then! And I really did need new comforters — the feathers coming out of my old one were so thick it looks like some geese are about to lay eggs under the bed. Everything worked out, but I had to juggle, and I felt a little awful using the comforter a few days before I expected the refund to arrive. I’d paid for it, but I’d have to make it up later.

You won’t know what unexpected expense or nasty delay might cause you to be staring down a final payment or contract fulfillment without anything left in your bank account but hope. And then, you could end up using costly credit or financial shenanigans to make good on your promise.

2. Pick a debt that can reasonably be paid off with the tax refund. And do it!
Also, try negotiating the balance due. I’m still, faithfully but slowly, paying off long-ago-closed credit card accounts. Number two was 76% paid as of January 30. I called the day the money hit my account to negotiate a big payment that will satisfy the whole account — and I’m saving $1,000 off the original balance. (I could probably have worked it down further; my negotiation skills are great, until I wear out and let them “win.” You could try harder!) Now I’m planning to spend March working out a payment plan for credit card number three — the last.

3. Put at least a third in a savings account, right away.
Consider it “someone else’s money.” (Your future needy self, of course!) If I leave the money in my regular checking account, I’ll consider it fair game. And it’s the perfect seed for the emergency fund you’ve been wanting to start. It’s important that I separate the concepts of “savings” from “checking account buffer”; I’m far less likely to preserve the buffer, so I have to get it into a separate account. Preferably one that’s harder to withdraw from. So I’m planning to get half of that savings into a Roth IRA. It’s not a ton of money, but it’s better than letting it sit where I can access it for emergencies that… aren’t really.

4. Commit to yourself to buy things that will pay you back in savings.
Note I am not including “wardrobe investments” in this (unless perhaps we’re talking about a wardrobe completely devoid of work boots, or something). I consider things such as upgraded windows (to save you energy costs), a couple of bus passes or other bulk purchase of something you use very frequently (to save you stress, having to make change, and get a bulk discount). Maybe a bike could replace a short commute, or a second car. (My stimulus check in 2008 went to a fancy mama bike that’s saved me so many thousands of dollars I’ve stopped tracking.) Maybe you can buy a half of a cow from a local farmer, saving you tons all year on quality meat — or maybe a chest freezer to make that possible. This concept is served by my wool comforters; they’re so freakishly warm that I’ll be able to turn the furnace down several degrees at night.

5. Spend 5% or so on something nice.
I know, the “windfall” rules say to only spend 1% on splurges. But let’s go crazy! It’s just a tax refund, after all. Go out to eat with your family (once). Buy yourself a pretty raincoat or some new wool underwear (my favorite splurge). Just make sure you feel good about yourself and you stick to the 5%. Which leads me to the most important thing of all…

6. Make your budget before you do anything.
Well, it’s okay to stick that 1/3 in the savings account first. But don’t rush off and spend your splurge and your “investments” before you’ve sat down with a piece of paper or a spreadsheet and all your bills for the month. Go on: put in one column all your regular income and the tax return. Put in the other column all the regular bills (put those first!) and what you’ve hoped to spend your tax refund on. Let’s not put off paying your home equity loan or your power bill because you have so much money, right? Make sure you’ve paid your bills first. I went so far as to forcing myself to record all the money I’d spent, down to the last bus ticket and coffee shop tip, over the month of January before I’d let myself spend any money on treats.

It’s really effective (if you can hold yourself back) to let the debt payments and bill payments clear your bank account before you buy anything fun (even if that “fun” thing is a wool comforter or organic underwear for your kids: one thing on my list!).

7. Don’t let yourself go shopping.
I rarely go shopping, because I rarely have much spare cash. Except for when I have spare cash! Then I love to shop. I shouldn’t. Even when I’m not going crazy with the designer clothes and $300 boots, I’m going crazy with designer insulated coffee bottles. I can’t help myself.

So I’ve found the best thing to do is to make a list of all that stuff I’ve been wanting — “needing” —for the past year, and prioritize. I’ve been waiting for those organic underwear the longest, and my nine-year-old has been complaining his old ones don’t fit. So I need to buy that and not (for now) that cute pair of rain boots I’ve been longing for (but totally not needing). The wireless modem is about to fail, so we’ll get that — but not the new iPod touch to replace the one with the marred screen. It still works and, after I made my list, I learned that it would cut into my savings funds. That’s non-negotiable.

Make your list, do the math, then go shopping.

8. Think about investments in a new way.
Last year I spent part of my tax refund on tickets to two conferences, thinking that they’d be good for my “professional development.” The first, a culinary professional conference (I write about food), turned out to be a bust — it was really fun, but I didn’t meet anyone I couldn’t have met online, and it was terrifically expensive. It’s more of a moneymaker for the conference organizers than for the attendees. The second, a blogging conference, turned out to be amazing; I met a couple of people just by chance with whom I went on to do consulting projects and other writing gigs. I made twice as much in income from people I never would have met otherwise as I spent on the conference. And I made some friends I love dearly.

So I’m being more strategic about conferences this year, and focusing on the ones where I am comfortable my “career” is already established and will give me the opportunity to strengthen relationships with people I really care about. I’m heading to a writing conference a lot of my favorite literary editors will attend; I’ve discovered that connections (when they’re authentic friendships) in literary journals and book publishing are far more important than in food writing. And the ideas I get from literary events turn into even more “output.” I’ll also repeat my visit to the blogging conference, ever more alert to the opportunities to share ideas and meet people with whom I can collaborate — and hopefully turn into more income, in addition to friendships. A happy person is both a better money maker and a person who needs less money, right?

The best part is that I can count all these expenses against my income on next year’s taxes! No time like the present to start planning for next year.

My brother, my best friend, and my girlfriend’s sister are all getting married in the upcoming year, so I’ve heard a lot about wedding registries lately, and there seem to be many pros and cons. Personally, one of my least favorite things in life is going to Crate and Barrel, walking around with my scanner gun, and seeing that the only things that fit into my price range are wooden spatulas and the saucers to espresso cups (the cups already purchased). “Congrats on your everlasting love. Here’s a steamer basket.” I’ve always thought there has to be an alternative.

Here are two numbers I found interesting:

• In 2010, 1.5 million engaged couples, or 88% of all couples with pending nuptials, set up a registry, according to the Knot Market Intelligence annual wedding registry survey.
• According to research by the University of Denver, more than 70% of couples getting married are living together before the wedding.

Okay, so 70% of engaged couples are living together, and 88% of engaged couples are registering. According to the survey, more than 90% of registered items are bakeware and kitchen appliances. Here’s my question: Those couples that are living together, do they not have spatulas, steamer baskets, and toaster ovens yet? Is their apartment filled with mismatched plates and saucers and an uneven fork-to-spoon ratio? Do they not already blend their own smoothies?

The point I’m trying to make is that the majority of couples are living together, and I assume they have a functional household complete with everything they need. As for the couples who aren’t living together, it’s rare to have someone move out of their parents’ house and into the house of their betrothed. According to the U.S. Census Bureau, the median marriage age in 2010 was 28.2 years old for men and 26.1 for women. In the 1960s, it was 22.8 years old for men and 20.3 for women. Compared with our parents’ generation, the 30% of currently engaged couples not living together have an extra six years to accumulate not one, but two sets of IKEA kitchen starter sets and warped cookie sheets.

Apparently, I’m somewhat alone in this thinking.

Things you wouldn’t buy yourself
My brother brought up that he would never buy a $500 blender, but it’d be nice to receive it as a gift. Perhaps then a registry is a collection of things you’d never buy yourself. I know that GRS readers are impossible to generalize, but I can’t help but think that if we’re itching for a Vitamix, most of us would forgo the $599 one from Crate and Barrel and substitute in the $499 one off Amazon listed “like new” (or better yet, chose a different Vitamix then the currently hip 500 professional series and get whatever Vitamix was hip last year, for half the price). We’re conscious about where our money goes, and I’d like to take into account my friends’ money, as well. (I don’t mean that literally…at least, I think I don’t.)

I’m not saying to throw caution to the wind and leave yourself open to getting a bunch of gifts that don’t fit your tastes, but if you’re looking for something that doesn’t come from Macy’s, there are other options for registries. In my continuing conversations about registries with those closest to me, I’ve come up with a list of a few fun suggestions:

• The Honeymoon Registry. Okay, this one has been gaining a lot of steam in recent years. Websites like honeymoonwishes.com or honeyluna.com provide an easy way for guests to help a couple afford a honeymoon. What’s in it for the gift giver? Whether it’s chipping in for the hotel room or scuba equipment for a coral reef adventure, you can be assured that you’ll be investing in memorable experiences, as opposed to another turkey baster.
• Big Ticket Items. My best friend and his fiancée were looking at their 500-square-foot Brooklyn apartment and couldn’t bring themselves to fill it with more Stuff. They decided to register for big-ticket items. I’ve seen couples register for anything from new cars to a new mattress, each attendee pitching in a portion. Sites like My Dream Home Registry make it easy.
• Give to Charities. I’ve talked to couples that want friends and family to simply attend the wedding, not worry about buying the perfect gift. A good alternative is to pick favorite charities for your friends to make donations in your name. Justgive.org has a wedding registry section that’s easy to navigate and not only celebrates love, but generosity. (That’s their line, not mine.)
• Do It All. I have to admit, I love this couple’s wedding site. Cheri and David were getting married and moving to France. The site had all the wedding info and R.S.V.P. forms, but it also had their registry. They decided their tastes didn’t fit into one store (and definitely not into a suitcase). They put together a list of things, some objects (everything from one-of-a-kind antiques to easy-to-find box store items), some services (such as Internet for their first three months in Paris or passes for Velib, Paris’ citywide bike rental system), and some high-ticket items (trip to Japan or a new dining room table.). You could choose to contribute to an item and that item would be marked off the list. What’s even more exciting is that Cheri and David’s idea was so popular that they started their own registry site, Merci Registry, and where couples can create their own blend of small boutique items, handmade artist goodies, and travel desires.

Weddings truly are big business and even creative couples who try to circumvent some of the higher costs of the big day itself often fall short in their creativity for registries. Couples can create registries that are personalized without relying on the mainstream box stores.

And to my brother, I love you bro, but when you move four times in the next five years, I know it’s going to be me carrying that Vitamix up four flights of stairs.

What are your ideas for creative wedding registries? If you’re married, what did you like about your registry process, and what would you do differently?

The more I worked on this site, the more the income increased. I won’t say how much I was making, but if you read Crystal’s guest post from earlier this month, you can make some educated guesses.

As Get Rich Slowly grew, one of the curious side effects was that people began to make offers to buy the site. I always ignored those offers.

Eventually I realized I was being foolish. I wasn’t following my own advice. What would I tell my readers? Well, I’d tell them to try to make more money, so why wasn’t I trying to do the same? At the beginning of 2009, I made a private New Year’s resolution: I decided to field every offer for the site that I received.

The Razor’s Edge
It didn’t take long to get the first offer. At the beginning of January 2009, someone wrote saying he wanted to buy Get Rich Slowly.

“How much will you pay?” I wrote back.

“I’ll give you $5,000,” the guy said.

“No thanks,” I said. That was less than one month of revenue. I’d be foolish to sell.

A week later, I received another offer to buy the site. But I didn’t notice. I was distracted. I’d just received news that my best friend had killed himself. This single event rocked my world. If you want to find a catalyst for all the things that have happened with me over the past few years — the travel, the soul-searching, the sale of this site — look no further than Sparky’s death.

Suddenly, blogging didn’t matter. I had been burned out before this, but now I wanted to leave, to quit cold turkey, to do something else. My wife and I talked things over, and she agreed that it might make sense to sell the site.

When the dust had settled at the end of January, I found the second offer to buy GRS waiting in my inbox. I replied.

“How much will you pay?” I asked.

“We don’t know,” the guy said. “First, you have to sign a non-disclosure agreement. Second, you have to send us all the financial information related to your business. Third, you have to wait.” This was baffling. I contacted my accountant and attorney to ask questions. They said this was standard practice, and to go ahead. I sent the info over and waited. And waited. And waited.

The First Offer
While I waited, Kris and I talked more about the possibility of selling Get Rich Slowly. Could I actually do it? Would I? In general, I loved the work, and I loved the community that was coalescing around the site. Plus, I felt a huge responsibility to the people who had been reading for three years already. I didn’t want to leave them in the lurch. But I was feeling increasingly frustrated, as if I’d said everything I could say about money. I wanted to quit anyhow, so what was the difference? And there was the fact that I wanted to write a book and begin giving community presentations about personal finance. Thinking things through made my head hurt. There was so much to consider.

Eventually, the company (which I’ll call Computer Resources so that I don’t violate the NDA) came back with an offer. How much was the offer? Because of the NDA, I can’t give a number, not even a fake one. But let’s just say Computer Resources offered me a lot of money for the site.

In fact, the offer was so big I couldn’t refuse. At the same time — again, following my own advice on this blog — I figured I had to negotiate. I submitted a counter-offer. Computer Resources went back to the drawing board.

About this time, I started to feel as if this was all way over my head. I did some research on the web and found other sites that had been purchased by Computer Resources. I contacted the site owners and talked by phone or by e-mail. They all had good things to say about Computer Resources except that apparently the company simply purchased sites, slapped ads all over them, and then left them to die. They never updated content. I didn’t really want that to happen to Get Rich Slowly.

One of the fellows I talked to suggested I contact an investment banking firm to help guide me. “They’ll take a commission, but it’ll be worth it,” he told me. “It’s just like using a real estate agent to sell a house.”

The Second Offer
As February 2009 wore on, Computer Resources still hadn’t responded to my counter-offer, so I contacted the investment bankers. They were excited to work with me. “You’ve already done a lot of the work on your own,” they said. “But we think you can get more for your site. We think you should spend a few months sprucing things up and then put it out at auction.”

“That’s a good idea,” I said, “except for two things. First, I’m burned out and I want to sell now. Second, the economy is tanking, and I’m afraid the revenue for personal finance sites will dry up before long. I feel like I’m on the top of a bubble and should sell now.”

I agreed to let the investment bankers contact one other company, a company called QuinStreet.

As the investment bankers were talking with QuinStreet, Computer Resources came back with their counteroffer. It wasn’t much more than before, but they added a bunch of stock options. I had a week to respond. I told them I’d think about it, and meanwhile started talking with QuinStreet.

At first, QuinStreet made me nervous. I was afraid they’d buy Get Rich Slowly and convert it into one big credit card ad. But during our conversations, they explained they had a grander vision, that they were committed to building a collection of sites with solid financial content, sites like Get Rich Slowly. Unlike Computer Resources, they wouldn’t let GRS wither on the vine; they needed to make money, yes, but they wanted to provide content while doing so.

As the deadline approached for a decision on the Computer Resources offer, QuinStreet gave me an offer of their own. If I would remain with the site for three years, QuinStreet would pay me almost twice what Computer Resources was offering. I was floored. Still, I wasn’t willing to commit to three more years at Get Rich Slowly. I was burned out. My best friend had just killed himself. I wanted to do other things. So, I did something strange: I asked for less money.

The Final Offer
Tuesday, 03 March 2009 was a big day for me. While the surface of this blog was calm and normal, there was a flurry of activity behind the scenes. Computer Resources was demanding a decision on their offer. QuinStreet was scrambling to give me a second, lower offer. I was hunkered at my accountant’s office, waiting. My lawyer was at his office, in constant communication with me. At the end of the afternoon, QuinStreet sent over their revised proposal.

They were offering about 33% more than Computer Resources. Plus, I wouldn’t be tied into the site for three years; I could walk away from GRS at any time.

My advisors and I agreed that this was an offer we could accept, and we finally responded to Computer Resources, which was growing impatient. I asked if they could beat the offer from QuinStreet. They thought about it for an hour, and then declined. They were cranky.

During the month of March 2009, I spent much of my time working on the “Asset Purchase Agreement” to sell this site. QuinStreet wanted some things in the contract, and I wanted others. Mostly, though, our visions matched. They wanted a personal finance site with solid content, and the contract we created reflects that.

For instance, QuinStreet offered me editorial independence. What does that mean? It means that QuinStreet won’t (and legally cannot) tell me what to write. It meant that I could continue to share the same sorts of things I’d been sharing at Get Rich Slowly since day one. I couldn’t be forced to write about credit cards or payday loans or other things that went against my better judgment. (Not that QuinStreet would have asked me to write about those things — it just gave me some insurance.)

But I couldn’t write about everything I wanted. As you know, I’m a pretty open guy. I share much of my life on the internet. And I would have shared the sale of the site, too, except that QuinStreet requested a non-disclosure agreement, just as Computer Resources had. I balked at this. “It’s standard operating procedure,” QuinStreet told me. “We don’t want our competitors to know what we’re doing.”

The investment bankers, my accountant, and my lawyer all said the same thing: “It’s standard operating procedure. They don’t want their competitors to know what they’re doing.” I went along with it, even though it meant I wouldn’t be able to share this very important event with GRS readers.

A New Era
On 01 April 2009 — yes, April Fool’s Day — we signed the paperwork. QuinStreet acquired Get Rich Slowly.

At first, I thought I’d stick around for only a few more weeks…or a few more months. I flew to San Francisco to meet with the new owners, and we discussed the direction of the site. They showed me the re-design they’d already begun to implement. (By the way: If this is the only design you’ve ever known for Get Rich Slowly, then you’ve never read it when I owned the site.)

Because I wanted to leave the site, we had to find new contributors. We held auditions for staff writers. Remember that? That was because I wanted to leave, and we needed replacements. Robert Brokamp and Donna Freedman write here because I was going to walk away. The reader story every Sunday started because I was going to walk away.

But you know what? I didn’t walk away. GRS was my baby. Plus, working with QuinStreet took a lot of the pressure off me. Besides, I felt an obligation to you, the readers. I stuck around. In fact, I’ve stuck around for almost three years now, working with QuinStreet to guide the site’s direction. No, it’s not exactly the direction it would have been taken if I’d been completely in control myself. But that was never going to be an option. I was going to leave the site after Sparky’s death. I was going to quit cold turkey. The GRS of the past three years is the best it could possibly have been under the circumstances.

Plus, QuinStreet has been more responsive than I had hoped. When I sold the site, I feared the worst. The worst never came to pass. In fact, the people I work with always listen to my concerns (and to your concerns) and try to balance those with the needs of the business. I think the partnership has been very successful over the past three years, and believe it will continue to be so.

Managing My Money
What did I do with the money I earned for selling the site? I practiced what I preached.

• First, Kris and I paid off the mortgage. If you’ll recall, in early February 2009, we refinanced our home. We’d started that process before we realized that we might sell the site, and we saw it through to completion. But within weeks of re-financing, we paid off the mortgage completely. This has been one of the toughest things not to discuss. I’ve wanted to talk about it many times over the past three years, but have been unable to. Now I can. (And believe me: Not having a mortgage has made the divorce process much, much easier.)
• Second, I paid taxes. Yes, I know that by paying taxes early, I’m letting the government have use of my money instead of earning interest on it myself. I don’t care. This is one area where I still prefer to be irrational with money. I like to pay taxes immediately so that there’s no chance I’ll forget about them or make a mistake. That’s what I did with the money from the sale of the blog: I paid taxes right away.
• Third, I followed my own advice again. I set aside a piece of the windfall to use for things I wanted. I bought season tickets to the Portland Timbers. Kris and I vacationed in South Africa (and still plan to vacation together in South America next month). And so on.
• But most of the money went straight into savings. One GRS reader — Dylan Ross — is a financial planner, and he’s been privy to some of my financial moves. He’s seen that a bulk of the money went into index funds (again, practicing what I preach), while another portion went into municipal bonds. (The economy was rocky at the time, and Kris was nervous, so we put some of the cash somewhere “safe”.) I’ve also loaned some money to the family box company so they could make some capital improvements.

Over the past three years, I’ve strived to not touch any of the money I earned from selling Get Rich Slowly. And that’s my goal for the future too. Instead, I live off my income from writing. QuinStreet pays me a modest salary to manage Get Rich Slowly, and I continue to write for Entrepreneur magazine and other outlets. Though I’m in no danger of falling into debt, I tell myself that touching my savings would be the same thing. My goal is to keep from deficit spending. So far, so good.

The Bottom Line
So, what does all of this mean for the future of Get Rich Slowly? I’m not sure, actually. QuinStreet owns the site, and they can do what they want with it. If they decided that this site would make them more money as a porn site, they could turn it into a porn site. But they’re not going to do that. After working with the company for the past three years, I’m convinced they want to provide quality content so that people can improve their financial lives. Yes, they hope this will lead folks to respond to the advertising — they want to make money — but they understand that content is king.

I know that many folks will be pleased that I’ve followed my own advice and managed to achieve financial prosperity. I also know that some folks will resent this success. And, especially, that I haven’t mentioned it before. Well, I couldn’t mention it for a long time because QuinStreet was trying to keep the news from its competitors. But I can talk about it now.

The bottom line is that for roughly half its life, Get Rich Slowly has been owned by QuinStreet. (March 15th is the actual mid-point date for ownership.) If this site has helped you move toward your own financial goals over the past three years, it’s been under their reign. When I talk about “social media elves” or “marketing elves” or “technical elves” or any other sorts of elves, I’m actually talking about QuinStreet employees. There’s now a whole team of folks who help with this site. It’s not a one-man show, and hasn’t been for a long time.

There have been a number of changes to GRS over the past few years. We’ve brought on staff writers, and my voice has diminished. It’s flattering that some folks find this frustrating, but it was also unavoidable. Lately, though, I feel re-invigorated. Now that I’ve been able to share some background — both in my personal life and my professional life — there’s tons for me to write about. Plus, I’ve been wanting to do more smaller articles like I used to.

I won’t become more prolific this week or next — I’m about to leave for Argentina! — but in March, I intend to increase my output at Get Rich Slowly. It won’t ever reach the “12 article per week” level that I used to produce, but it’ll be more than the “one article per week” level I’m at now. It’ll be fun for me, and I hope that it’ll be fun for you.

A basic burial averages close to $6,600 in the United States. Many people worry about the financial burden this places on their families. There is a way around this besides opting to be cremated and carrying enough life insurance: whole-body donation.

It’s estimated that at least 20,000 bodies are donated each year. I’m considering it myself. The idea of contributing to medical education and research intrigues me — and I also like the idea that it potentially means a no-cost funeral.

That sounds like the lowest form of cheapskatery, but hear me out. I’d planned on cremation, since my personal desire is not to take up any real estate after death. I’d rather leave this mortal coil to the folks who are still alive to enjoy it. But even a bargain-rate cremation runs about $750, and if surviving family wanted a chance to say goodbye first it would cost more. Maybe a lot more.

My estate is fairly small, and I’d like to leave as much of it as possible to my only child, who experiences some disability. And again: I’d like to help future doctors, nurses, and other medical professionals improve their skill sets.

Your religious faith may have strict rules about how a corpse should be treated. Or maybe you just can’t get past the idea that you will be dissected over a period of months in anatomy class, or cut up and divided among different programs (brain to an Alzheimer’s study, joints to an orthopedic surgery training).

If that bothers you, then of course you shouldn’t do it. Keep in mind there won’t be much bodily integrity in that 6-by-3 slot in the soil, either. Your body will decompose. Ashes to ashes and all that.

A caring and gracious act
If I were a wagering woman, I’d bet that 90% of the readers who saw the headline either shuddered or said “eeewww.” Maybe both.

Riddle me this: Why is organ donation lauded while donating a body gives us the heebie-jeebies? They’re both caring, gracious acts. But you probably won’t see a Lifetime movie about the impact of whole-body donation because people generally find the idea deeply creepy. It puts the “gross” in “gross anatomy.”

Here’s another way of thinking about it: Whole-body donation benefits all of us, every day. Any physician trained in the United States worked with cadavers. New medical instruments and new surgical methods are perfected on human tissues, joints, and bones.

Altruism is the usual motive for donation, according to industry spokespeople. (Yep, it’s an industry. More on that in a minute.) People designate their bodies for study to contribute to the greater good.

Not every medical school has a “willed body” program, however. The ones that don’t need to get cadavers from somewhere else. Sometimes that means another medical school, but it usually involves one of the handful of nonprofit and for-profit companies that procure human tissue in this country.

How do those companies obtain bodies? By paying for transport and final disposition, that’s how. Hence the idea of a free funeral.

How much is that body in the window?
Not every medical school pays for preliminary embalming and transportation of cadavers. Posthumous enrollment in gross anatomy class means getting your own ride to school. By contrast, the human-tissue procurement companies pay for all of it, from pickup to cremation.

Here’s how to find out more about both options:

• The University of Florida has compiled a list of body donation programs in the United States.
• For nonprofit and for-profit companies, search online for “whole body donation.”

Maybe the idea of the body as commodity strikes you as just wrong. You’re not alone. Medical ethicists are still trying to figure out the ramifications of the Uniform Anatomical Gift Act, which forbids the sale of human tissue for transplant or therapy. It does permit “reasonable payment” for services such as surgical removal, storage, transportation, etc.  But it doesn’t address whole bodies or the sale of body parts for anything other than transplant or therapy.

So are you breaking the law by arranging for the postmortem sale of your body? No one is quite sure. I look at it this way: If I make this choice I won’t be profiting by it. I’ll be saving my daughter and any other heirs the cost of dealing with my remains.

If you opt for a nonprofit or for-profit group, be aware that each does things differently. For example, some allow for organ donation because they deal in body parts as well as whole cadavers.

You may have the chance to have your ashes mailed back to your heirs. At least one company sends a letter about the kind of research that was furthered by your body (or parts of it).

Certain conditions preclude donation, e.g., contagious diseases such as hepatitis and AIDS. Some programs will not accept extremely obese cadavers.

Timing might make a difference, too, since some organizations specify “no embalming” — in other words, the cadaver must be refrigerated and shipped as soon as one hour after death. If seeing you one last time is important to family members, choose a company that allows enough time for viewings.

It’s important to note that you may not be able to dictate how your body will be used, such as in the following circumstances:

• A whole-body donation company may sell to private-sector researchers or companies that design new medical devices.
• A company may use body parts in on-site physician training facilities.
• Some send cadavers to medical schools in countries where whole-body donation goes against cultural mores.

If these examples trouble you, then you might want to donate only to a medical school. This will likely cost money, although probably still less than a funeral.

Plan your approach
Should you decide to donate, research the options and make the arrangements yourself. A nebulous “please donate my body to science” request isn’t fair to your loved ones. When you die they’ll be shocked and grieving; don’t make them look up the different programs and try to figure out what you would have wanted.

Talk to your family about it now, and don’t be surprised if you encounter objections. Listen to them. It will be easier to answer such concerns if you’ve read the FAQ sections of med school or donation company websites. Remember: Their feelings are valid, even though ultimately it is your decision.

Unless, of course, your next of kin ignores your request and arranges a funeral. If you think this could happen, put your final wishes in writing and get them witnessed and notarized. Store the document with other “in the event of my death” paperwork, and maybe leave copies with a family member you trust to carry out your decision.

Incidentally, this can go the other way: Your next of kin can donate your body to science without your consent. If that skeeves you out, make your wishes known quite emphatically. Myself, I’d put it in writing. I’d also threaten to come back and haunt whoever did the donating.

My name is Christine, and I’m a school teacher. Last year, I set a goal for myself. I’d been renting homes and apartments to live in for eight years, and the last two rentals were particularly bad. The houses themselves were nice, but after one rental foreclosed underneath me and the next was leased by an awful realtor who couldn’t even get me a key to the pool that was 100 feet outside of my door, I knew I needed a change. That’s when I decided to buy a house.

When I made the decision, I started getting all my ducks in a row. About six months before my lease was up, I met with a good friend who was a realtor, and he hooked me up with a lender he trusted. We sat down and both spent half the day getting me pre-approved for my loan and answering every question I had. After crunching some numbers, I knew the price range I could afford for the monthly payment, principal, interest, insurance, and taxes. (This range was well under the maximum I was approved for.) I took notes, and with this new knowledge under my belt, it was time to save.

Actually, therein lay the problem: saving money.

Financial Obstacles
Months before meeting with the realtor and lender, I had begun to stash away money here and there to meet my goal. However, after talking with the both of them I began to feel wholly unprepared to buy the house of my dreams. My meager savings was far from what I needed to make my first home purchase.

Not only that, but I wanted to be sure I was financially sound after buying my first house. I wasn’t going to wipe out my savings to buy a home; I wanted to make sure I still had a cushion of money in the bank in case there was an emergency or some sort of surprise repairs.

At the time, I had almost $5,000 saved to go towards my down payment and closing costs; I needed about $3-4,000 more in order to be able to be able to afford to buy. This meant I needed to save between $500-$1000 a month to be able to purchase and close before my lease was up. I needed help — and fast if I was going to be buying before the end of the year.

That’s when I got lucky.

The Money Fix
Daily Worth — a financial website for women — ran a contest asking readers about their financial problems. If you wrote to describe your situation, you could receive advice from a financial expert and $200 for writing two posts reflecting on your experience.

I wrote in, and one morning I received a phone call telling me I had won, and financial expert J.D. Roth would be getting a hold of me soon to discuss my problem. (FYI, Daily Worth is currently taking applicants for their third season of this contest, so if you have a money problem its probably worth checking out!)

This next part may sound cheesy or cliché, but from the moment I won and began getting advice from J.D., my life changed.

J.D. called me one morning and I laid out my problem: I wanted to buy a house but didn’t know how to save enough money in a short amount of time. I admitted I wasn’t financially perfect, and I probably spent too much on silly things, like going out to eat, when I should be more frugal. I had experienced some financial troubles in the last few months, like paying off medical bills, dental work, and car maintenance, which were putting a dent in the amount I was able to save.

J.D. asked me a lot of questions in order to figure where I could make changes in order to save. When I put down the phone I was not only relieved that I was getting some help, but I also felt like just talking to someone helped me realize what flaws I was making financially. I was ready for a change and awaited J.D.’s advice eagerly.

A few days later, I received J.D.’s financial plan. There were no curveballs or any strange tips; actually all the suggestions he mentioned were things I read before (mainly at Daily Worth or GRS). The difference is that when J.D. laid out his advice for me, I had no more excuses. I couldn’t read the same advice in a blog or website and think, “Oh that’s great advice for someone, but not me,” because the suggestions were tailor-made for me. I had no more excuses for dismissing good financial advice.

What did J.D. recommend?

Save First
In the past, my plan was to save all my leftover money; however that wasn’t working. There was always an extra expense (car repairs, dental work, a pretty pair of shoes, etc.) to take that extra money away. J.D. suggested I automatically transfer about 10% of my paycheck to my savings every pay period, and that I should aim to gradually increase this amount to 20% or more of my take home pay.

This would force me to learn to live on a smaller chunk of my income and stretch my money, because the money that went in my savings wouldn’t be readily accessible to me in my checking account, and I could no longer fall back on the “extra money” that I knew would be there at the end of the month when I wanted to go buy something I could live without

Keep Multiple Savings Accounts
J.D. suggested multiple savings accounts, so I will always have a back up stash of cash to cope with new tires, dental work and other such emergencies. This will also allow me to have a separate account solely for saving for the down payment and closing costs of my future home. He also suggested a third account for other things, like Christmas or birthday gifts or future vacations.

He suggested using an online savings account, as having an account separate from my existing bank would make my money more difficult to access. Multiple accounts for specific purposes would give my money a specific purpose and give me an idea of what I can and cannot afford.

Track Spending
I had been tracking my spending prior to J.D.’s suggestion by keeping a spreadsheet in Excel. I would make two pages for each month: One with all my regular monthly bills and expenses (rent, electricity, my car payment, insurance, etc.) and one page keeping track of the charges I put on my credit card.

I know it seems silly to write down all the charges I put on my credit card, because anyone can just look online and see how much they have spent, but that never worked for me. Writing my charges in Excel gave me an idea where I stood (even if I didn’t always follow the budget I laid out). However, J.D. suggested using Mint or Quicken to get a clearer picture of where my money was going. I could use the software to set targets on how much money I wanted to spend each month on expenses like gas and groceries.

J.D. also suggested I use the Balanced Money Formula to set my spending targets. Using this formula, you aim to spend 50% or less on needs, save more than 20% (including debt repayment), and use the rest, around 30%, to spend on wants.

I liked the idea of using a software to track my spending because keeping the spreadsheet can be a lot of work, and it doesn’t tell me too much about what percent of my spending is on things I need, like food, versus how much of it is on my wants, like going out to eat, makeup, and clothes. The 50-20-30 formula gave me a guideline to use in regards to my spending.

Take a Second Job
This was another thing I was already doing. During the school year, aside from teaching, I also worked as a habilitation provider. The problem with my second job was that I always looked at the extra income as extra spending money, when what I needed to do was think of it as extra saving money. I need to change my viewpoint and think of that income as my primary source of savings, and pick up extra work until I have saved enough for my down payment and closing costs.

Plan into Action
From there I put J.D.’s advice into action. I used Get Rich Slowly: Best Savings Accounts for 2011 to guide my search for an online savings and narrowed my search down to ING Direct, Ally Bank, and Sallie Mae. In the end, I chose Sallie Mae, because not only did it have one of the higher compound interest rates, but it also offered up to a 10% match of your rewards through Upromise, a service that allows you to earn a small percentage of money from your everyday spending.

About a month later, I also opened a Perk Street checking account. I now had four separate accounts for specific purposes: my checking and savings accounts at my brick and mortar bank for regular bills and unforeseen repairs and expenses, my Sallie Mae account to save for my home (which would later turn into my emergency fund after buying my home), and my Perk Street checking for all wants, gifts, and vacations.

I picked up some extra work tutoring and created an Etsy store to bring in some extra income. All surplus income I would not normally have to pay bills was put towards saving for my future home. I also redistributed my regular income, arranging for 10% of my income to automatically deposit into my savings each month.

I switched to Mint to track my finances, and abandoned my former budgeting spreadsheet. Since I am a visual person, I like that Mint shows my spending using graphs, which allows me to see how close I am to the individual budgets I have set up. Mint.com showed me that I was over spending on groceries, and when my Money Fix story ran readers gave me great suggestions to help me slim down this area of my budget, like making a monthly menu to help me plan out what I need to buy at the grocery store. This also means that I am not only going to the store with a list and a plan, but I’m also only going to the grocery store about once a month and filling in with small trips when I need to.

However, Mint didn’t just help me trim my grocery bill; it helped me trim my overall budget. I cut back my restaurant spending and started going out to eat only once a week, instead of 2-3 times. I’ve been going out less on the weekend, and therefore have been spending less on gas. When it was time to get new clothes when I had to go back to work this school year, I resisted the temptation to go to the mall and hosted a clothing swap.

Mission Accomplished
The bottom line is that the plan worked. I was able to cut my overall spending by 30%. I made saving a priority. After putting the plan into action, on November 15th, I closed on my first home.

The journey to saving for my first home has taught me that I need to make saving for my future a priority. Savings shouldn’t be whatever money is leftover, but the money that is taken out first, because there will always be a need to have money in the bank (especially now that I have a home to maintain). My savings now comes first and completely shapes the way that I budget my money.

One of the tenets of personal finance is to pay yourself first. And one of the most sure-fire ways to make sure you do that is to automate your savings: setup your checking account to make an automatic deposit to your saving accounts.

Automation has been incredibly effective for me. I have targeted sub-accounts for property taxes, auto repairs, house savings, and more — a tactic I learned about here. The first year my husband and I had to pay property taxes, however, the billing statement felt like it came out of nowhere — was it really due already? Luckily we had the cash, thanks in part to a very generous wedding gift sent the month before, but that was pure luck. If not for that, we would have had to suspend our debt repayment and possibly dip into our tiny (but growing) emergency fund. When we paid property taxes the next year (and every year since), all I had to do was transfer the money from savings into our checking account, then pay the bill. Much less stressful!

Automation on uncertain income
One of the downsides of being self-employed, however, is that my income is irregular. Irregular income is a reality for most freelancers, as well as people who are paid on commission or on tips, to name a few.

We still have the important expenses — like home insurance, taxes, and retirement contributions — on automation, but a large chunk of our income is being directed toward saving to build our house. Since I’m never sure exactly how much I’ll make each month, I’ve been hesitant to designate a set amount to be automatically withdrawn for that particular savings account. What if a client was late sending payment? And what if that automatic transfer slipped my mind and I forgot to cancel it for the month?

Instead, I’ve waited until bills were paid and automated withdraws cleared, then transferred the remainder (minus some padding that I leave in checking) to our house savings account.

This has worked out okay, but sometimes I forget to make the transfer, and then I’m stuck trying to sort through how much was left at the end of last month, along with whatever expenses we’ve had since then. Also, I like having a system — with automated payments, I can predict how much will be in our account in six months or a year. This is particularly helpful for our house savings account, since we’re paying cash to build our home. Finally, there’s no temptation to spend the money. We’re pretty good about that, but with automation, it’s becomes a certainty.

Found savings
This month our income and expenses had some big changes. In order from smallest to largest, here’s what has changed:

• Yoga membership. I was paying $70 per month for unlimited yoga classes, but cancelled my membership because there were no longer enough classes I liked on the schedule. For now, I’m paying about $44 a month for a per-class pass, and my fellow yoga practitioners and I have set up group practices (free). I also revived my home practice, but cancelled a $15-per-month subscription to online yoga classes. This is a total savings of $41 per month.
• Fuel expenses. I no longer drive to yoga class every day. When I do drive, I make a list of all errands I can run while I’m out to prevent additional trips to the store. And once a week my husband works right around the corner from my yoga studio, so I carpool with him, go to class, then work from a library or cafe until he’s done. After doing this for almost a month, I estimate I’ll save at least $45, which I think is a conservative figure.
• Student loans. My husband’s student loans came due in December, meaning a new $202 payment each month.
• Paid off land. Five years ago we bought an unimproved 2.5 acres where we’re now building our home. We elected for a 5-year loan to force ourselves to pay it off quickly, and guess what? As of January 15, we own the land free and clear! This frees up $710 each month.

With these savings and the new expense, we now have $594 of “found” money. This money used to be tied up in other expenses, and even after I quit my day job a year-and-a-half ago, we never had a problem paying them.

I realized this is a perfect time to automate our house savings. Instead of making the transfer of the extra $600 each month (may as well round up, right?), I set up an automatic transfer of $600 from our checking account to our savings. Of course I’ll still have to transfer anything above that amount, but for now, the $600 inches me closer to automation.

Additional income, snowballed
A little excited about the idea of automating our house savings (I’m kinda nerdy like that), I started to think about other ways to automate more of our savings.

Right now I’m talking with a client about working together on a more regular basis. This client has always paid on time, and I’d be writing for them biweekly. This new income source could be funneled into our automated house savings, since it will be predictable (well, as predictable as an income source or job can be). I can do the same thing with any future, regular work.

I held off on automating our house savings because of my irregular income, but even people with a fluctuating salary can automate a good portion of their savings. Start with found money from paying off debt or cancelling a subscription you haven’t used in months, then increase the amount even more if you have extra, regular income (above what you need to pay the bills). This might be income from a second job, a side business, or overtime you work regularly, as examples.

Finally, remember that even small amounts will start to add up. That’s something I dismiss sometimes because a few dollars doesn’t seem like enough to make a difference. But if we downgrade our Netflix membership, something I’ve been considering based on our rental history, I plan to add the $8 savings to the automatic savings deposit — I guess I’m feeling extra motivated!

If you have an irregular income, what is your savings system? Do you automate your savings, or do you have a hybrid system like mine?

In the meantime, folks like Ashley are hoping they can get some help now. Ashley writes:

I’m a new reader to the blog and just wanted to say thanks for presenting often overwhelming information in a digestible manner. As someone whose former financial philosophy was “ignorance is bliss”, GRS has played an integral part in my transformation from 30 year old faux-dult to real, live adult, at least in the personal finance category.

My question is this: What does a generally healthy personal financial portfolio look like? What are some must-haves for everyone and in what order should I work on getting them? It seems like a simple question, I know, but I’m picking myself up from living paycheck to paycheck and struggling with debt and I want to set some goals: savings, debt, retirement, investments (gulp). I realize it’s hard to generalize, but what do a good adult’s finances look like?

Ashley’s right: It is hard to generalize. Everyone is different, with different strengths, different weaknesses, and different goals. Still, it’s possible to make a few recommendations. There’s a core group of financial structures that I believe are important to everyone. And there are many ways to customize a “personal financial portfolio” (as Ashley calls it) in order address you own personal aims.

Building a Base
When I talk with people about how they should set up their finances, I generally recommend the following:

• Carry no debt — except maybe a mortgage. Though there are a handful of exceptions to this rule, I believe that most of us shouldn’t carry non-mortgage debt. We should avoid credit cards, car loans, and other consumer debt. Sure, that means we have to wait and save. It may mean that we drive used cars. (I drive an eight-year-old Mini Cooper!) But avoiding debt allows us to reach big goals while others are barely getting started with the small stuff.
• Build adequate emergency savings. What is “adequate” savings? That’s tough to say. When you’re just starting out — especially if you’re carrying debt — adequate savings might mean simply that you have $100 in the bank. But as time goes on, you’ll want to build a buffer in the bank. It’s an amazing feeling to know that were your job to vanish, you can still get by for six months before falling into debt.
• Fund your retirement. When you begin saving for retirement, you won’t have much. Plus, retirement will seem as if it’s decades away. Because it is. But just because you have 45 years before you’ll be eligible for retirement benefits, that doesn’t mean you shouldn’t start. The biggest factor in retirement savings is how much you contribute. The second biggest factor is time. If you start socking money away in a Roth IRA or a 401(k) when you’re just 20 years old, you’ll be light years ahead of your peers. (And that’s when you’re 35, not even when you’re 65!)
• Be insured. Some people think they’re above the law of averages, above forces of nature, and they choose not to carry adequate insurance on the important things in their lives — such as their car and their home and their body. But as most of us here can testify, bad things happen. And when they do, costs add up. You can mitigate the expenses by carrying adequate insurance, by which I mean the right insurance (and the right amount of insurance) for your circumstance. What type of insurance (and how much) is that? The answer’s different for everyone, but it’s not difficult to learn.
• Develop a budget — even if it’s just a loose guideline. When you have a budget, you’re telling your money where to go. You’re in control. Without a budget, it’s easy to lose track of what you’re spending where. A proper budget doesn’t have to be super detailed (thought it can be if that works for you). Instead, it simply has to guide your spending in a way that keeps you from losing control.
• Boost your income. There are two camps when it comes to increasing income: Those who think it’s irrelevant (or impossible) for their situation, and those who know it’s difficult but do it anyhow. I’m convinced that those who work to make more money, despite the obstacles in their lives, have more financial success.

These are some of the basics, though not all of them. These core skills and habits can help almost anyone get started on the path to prosperity.

Customizing Your Course
Once you’ve become accustomed to the basics, it’s important to customize your financial habits and structures to reflect your personal skills, goals, and psychology.

For instance, some folks are opposed to debt in all forms. These people avoid credit cards, certainly, and often try to avoid mortgage debt as well. Other GRS readers love credit cards. They never abuse them, never carry a balance, never pay any sorts of fees. And some are eager to carry a low-rate, long-term mortgage because they figure they can put that money to work elsewhere to earn a better return.

Another example is automation. For most people, automation is liberating. By creating a system whereby you make automatic contributions to saving, to your retirement plan, and to your bills, you take the weakest link — you — out of the chain. But for a few people, automation actually creates problems. For these folks, it’s important to do things manually.

So, you see, once you have a solid financial base, you begin to build a customized financial framework based on your personal needs. And these needs are determined by your goals.

Until you have personal financial goals, you can’t really know what’s “healthy” for you. Emergency funds are a great example. Some folks — such as Trent at The Simple Dollar — don’t feel comfortable unless they have sizable emergency fund, such as a year (or more) of monthly income. I, on the other hand, am okay with six months worth of expenses in savings. Based on my psychological make-up and my personal goals, this is plenty.

Reader Response
My own financial profile? Let’s see if I can summarize it quickly:

• I carry no debt, but I do use credit cards. I repay the balance every month and pocket the 1% cash-back rewards.
• I have six months of expenses in emergency savings.
• I fully-fund my retirement plans every year, meaning I fund them to the maximum that the law will allow.
• I invest in low-cost index funds instead of trying to beat the market through guesswork.
• I carry adequate insurance, but employ high deductibles to reduce my costs.
• I use targeted savings to pursue other goals, such as travel. By using multiple savings accounts, I’m able to save for the things I want without losing track of my larger goals.
• I use the balanced money formula to keep my spending on track. This isn’t a strict budget, but it’s a lose framework to guide my financial decisions. I like it.

There’s more to it than this, of course. That’s where you come in. Until I’ve had a chance to compile a beginner’s guide to personal financial mastery, Ashley’s best bet is to listen to the advice of GRS readers.

What do you think? What advice do you have for Ashley? Is there such thing as a one-size-fits-all starter financial portfolio? If so, what does it look like? How does it change with time? If not, then what do you think different people should do (and have) at different stages in life?

As part of that, it’s time to call for another round of reader submissions. I’ve always said that it’s your contributions that make this site great. Get Rich Slowly isn’t about me — it’s about the community, about helping to solve each other’s problems. I’m just the guide.

If you have a reader story or an “ask the readers” topic, please send it in. April and I have been working together (along with the GRS technical elves) to streamline the process. As part of that, there are now dedicated submission pages and email boxes for collecting your contributions.

If you’d like to submit something to Get Rich Slowly, visit one of these pages:

• Submit a reader question
• Submit a reader story
• Submit a guest post

I look forward to reading the latest round of articles!

Also as part of my escape from hibernation, I’ve begun to read other personal finance blogs again. It’s about time! Here, then, are some recent articles I’ve liked from around the web:

First up, here’s a belated goal-setting tool for the new year. Many folks I chat with tell me they have trouble setting goals. They don’t know what they want to do with their lives. Well, Scott at Living Your Legend has created a free goal-setting guide that you can download and print. If you’re having trouble finding direction, this tool may help.

Via Jim at Bargaineering, here’s an article at Wired that seeks to answer the question, “Are name-brand batteries worth the cost?” The short answer? Yes, they are.

In a similar vein, Ed at Five Cent Nickel wonders is travel insurance worth the cost? He, too, concludes that the price is worth it. I’ve always been wary of travel insurance, but was forced to buy it for my trip to Peru. I searched and searched until I discovered a company called World Nomads, which seems to have great rates for reasonable coverage. Kris and I are paying a combined $280 for our upcoming trip to South America, for instance.

Let’s go for the trifecta. Rebecca at Money Crashers has yet another “is it worth it” article. She wonders are discount grocery stores worth the savings? She says that for careful shoppers, they are.

Finally, over at Saving Advice Amy Roseveare, an “image consultant”, shared a great list of how to save money on clothing. As she notes — and as I’ve learned first-hand — losing weight can be costly. (But that doesn’t mean you shouldn’t do it.) My favorite piece of advice? Spend more on the things you wear the most. It took me a long time to learn this, but I’m glad I did. I buy most of my clothing at thrift stores, but I’m happy to pay a premium for nice boots and a nice rain jacket. (I do live in Oregon, after all.)

I don’t know you personally (yet), but my guess is that you own an IRA or employer-sponsored retirement account such as a 401(k) or 403(b). Such accounts are where the majority of Americans hold their longterm savings. However, like anything governed by the Congress and the IRS, there are plenty of rules, exceptions, and quirks. Here are some lesser-known facts about retirement accounts.

1. The deadline for 2011 IRA contributions is April 17, 2012.
It’s too late to make a 2011 contribution to your 401(k), but you have until the tax-filing deadline to contribute to an IRA. That’s usually April 15, but it’s been extended to April 17 this year since April 15 falls on a Sunday, and April 16 is Emancipation Day in the District of Columbia (as well as the birthday of Peter Billingsley, who played Ralphie in A Christmas Story, but I don’t think the IRS cares about that as much).

2. Contribution limits are up for 401(k)s, not for IRAs.
The most you can contribute to an IRA in 2012 is the same as the limits for 2011: $5,000, with an additional $1,000 for those age 50 or older. However, the amount you can contribute to a 401(k) has been increased to $17,000, with an extra $5,500 for the 50-and-older crowd. So if you maxed out your 401(k) in 2011 and want to contribute the max this year, you’ll need to increase your paycheck withholding.

3. If you have a job, or are married to someone who does, you can contribute to an IRA.
There are lots of rules about who can contribute to which kind of IRA, how much can be contributed, and the tax treatment of those contributions. Spelling that out would take a whole other post. But here’s the crucial starting point: You must have earned income — i.e., get paid to do a job — to be able to contribute to an IRA. The only exception is a spouse who is married to someone with a job, who would then be eligible for the so-called “spousal IRA.” This also means that a kid who is earning money can contribute to an IRA (though it’s a bit more complicated, since it might take more work to document something like babysitting income).

However, some people think that if they’re not eligible for a Roth IRA of deductible traditional IRA, then they can’t contribute to an IRA at all. Not true. You can still contribute to a non-deductible traditional IRA, which will grow tax-deferred — i.e., you don’t pay taxes on any investment earnings until you make withdrawals. Just make sure to document how much you contributed because that money will come out tax-free.

(For those who want more information about income and eligibility numbers for IRAs, here are some of the IRA guidelines for 2011, and here are some of the guidelines for 2012.)

4. Improve your investment choices.
The typical employer-sponsored retirement account offers so-so investment choices and charges too much for the privilege. Fortunately, you may not be stuck with those lousy and overpriced investments. Here are some options:

• If you no longer work at the company, transfer the money to a low-cost IRA.
• Many retirement plans offer a brokerage window, which allows employees to buy individual stocks, exchange-traded funds, and other mutual funds.
• Some plans allow for in-service distributions, which allow employees to transfer money to an IRA while still working for the company.

Also, your company may have a benefits committee, or at least a group of folks who occasionally think about the retirement plan (typically, the human resources folks and perhaps the CFO). You can agitate for better investment options, a brokerage option, or even a completely different plan. We went through this process a few years ago at The Motley Fool, and believe me, it’s worth it.

5. You can pay annual IRA fees with non-IRA money.
Many IRA providers charge an annual account fee, which is automatically taken from your account assets. But you can instead send a check to the custodian and leave more money in the IRA to grow through the years. (Contact your provider for details.) Unfortunately, you can’t use non-IRA money to pay other costs, such as commissions and mutual fund expenses.

6. Get the money before age 59 1/2.
Because Uncle Sam wants us to save for retirement, IRAs and employer-sponsored accounts come with several tax advantages. To encourage us to actually use this money for retirement, Uncle Sam will make you pay a 10% penalty if you tap the account before age 59 ½. While leaving the money alone until you retire is definitely the smartest strategy, the truth is that sometimes people need the money before they reach their 60s. Here are several exceptions to the 10% penalty (though, in many cases, the withdrawals will still be taxed).

• Contributions to a Roth IRA (not earnings) can be withdrawn any time, tax- and penalty-free. However, early distributions from a Roth 401(k) are a proportional mix of contributions and earnings, so some of the withdrawal may be taxed and penalized.
• You may be able to make penalty-free withdrawals from your last employer’s plan if you retire at age 55 or older.
• Under rule 72(t), you can make substantially equal periodic payments (SEPPs) at any age by agreeing to take out a certain amount each year until you turn 59 1/2 or for five years, whichever is longer.
• IRA assets used to pay for qualified higher-education expenses — such as tuition, fees, books, and room and board — are exempt from the 10% penalty. Note that this applies to IRAs only, and not employer-sponsored accounts such as 401(k)s and 403(b)s. Also, these distributions are counted as income on the tax return, which could affect financial aid eligibility in the subsequent year.
• You can use your IRA to help put a roof over your head, as long as you’re considered a first-time buyer, which, according to the IRS, includes anyone who hasn’t owned a home in the past two years. There is a $10,000 lifetime limit on what can be withdrawn penalty-free, but that limit is applied per person, so married couples can withdraw up to $20,000.

You also might be able to escape the 10% penalty if withdrawals are used for un-reimbursed medical expenses; health insurance if you’re unemployed; or living expenses if you’re disabled. The rules around these exemptions are more complex, though, so do plenty of research first.

7. You can invest in “alternative investments,” but tread carefully.
Retirement accounts are not limited to stocks, bonds, and mutual funds. You may be able to use your retirement savings to invest in options, real estate, small businesses, and collectibles; I’ve even met someone who works for a 401(k) provider who claims they have a client who has invested in Babe Ruth memorabilia. The trick is to find a custodian that will allow such investments. You’ll have to go beyond the usual brokerages and mutual fund companies and find a company (often a bank) that specializes in such arrangements, which are often referred to as “self-directed IRAs.” That said, many promoters of these arrangements turn out to be frauds. Using your retirement-account money for such arrangements is much more complicated, and risky. Caveat emptor and all that.

8. Use the Roth as an estate-planning tool.
Let’s say you’re still working, but you’ve already saved enough for retirement and would like to help your kids, grandkids, or favorite Get Rich Slowly contributor. One option is to contribute to a Roth IRA and name your relative(s) as beneficiaries. When you retire from this world to the next, your heirs will receive that money income tax-free (although it may be subject to estate taxes).

There are a few reasons a Roth IRA is better than a traditional IRA for this purpose. You can’t contribute to a traditional IRA past age 70, even if you’re still working. In fact, at that point, you must begin taking money out, which is known as a required minimum distribution (RMD). The scenario is a bit different with a Roth; there’s no age limit and no RMDs. Plus, heirs must pay income taxes on inherited traditional IRAs.

9. Protect assets with retirement accounts.
The money in your employer-sponsored retirement account most likely can’t be lost to bankruptcies or lawsuits. In most cases, the same goes for IRAs, up to $1 million.

10. Inherited retirement accounts can get very complicated.
This is another one of those topics that would take several hundred words to explain, and you’d never make it to the end because you’d pass out from boredom and ennui (if you haven’t already). But there are lots of quirks about inherited retirement accounts. Just one example: If you inherit an IRA — even a Roth IRA — you may be required to take annual minimum distributions, even if you’re seven years old (and good for you for reading this post at such a young age).

If you inherit a retirement account, it might be smart to see a qualified professional to get guidance — perhaps from an accountant or financial planner who works by the hour (such as the folks at the Garrett Planning Network). You can also find good information at IRAHelp.com and Fairmark.com.

11. Have Uncle Sam fund your IRA.
Getting a tax refund? You can instruct the IRS to send it directly to your IRA.

It’s Friday night. A few friends and I are debating whether or not to go to the college bars down the street to get a drink when my friend Steve chimes in that his apartment is just up the way, and says, with his chest slightly puffed, “I have a fully stocked liquor cabinet — something for everyone.”

Steve obviously likes to keep his apartment ready for impromptu entertaining. There’s ample seating, surround sound, and yes, a bar separate from the kitchen that’s almost equal in size. Behind the bar he keeps bottles upon bottles of spirits, all lit from underneath. He puts on some Miles Davis and takes his spot behind the bar.

“What are you having?” he asks me.

“What kinds of whiskey do you have?”

“Makers Mark.”

“What else?” I ask, expecting somewhere in the umpteen bottles to be a second choice.

“Nope. That’s the one. That’s my whiskey.”

Steve takes the strategy of stocking his home bar with one of absolutely everything in hopes to appeal to every taste. Just looking over the bottles on the shelf, I don’t doubt that his liquor cabinet (which is less of a cabinet and more of a display rack) must have neared the $1,000 range. I wondered if there wasn’t a more cost-effective way to stock a home liquor cabinet.

Economize and personalize
Jeremy Coffey, sommelier at Sofia Wine Bar in New York City and home mixologist (his fiancée gave him that second title, even though he rarely goes much more intricate than a gin martini, an olive if you’re lucky) says the key is to economize and personalize. “No one likes to be a home mixologist, not even mixologists,” he says. “It’s just too much work.” Jeremy says that your liquor cabinet should be a reflection of your taste — quite simply, what you drink. When company comes over for a cocktail, let them try one of your favorite drinks.

To give you an idea of what I’m talking about, we’ll use Jeremy’s liquor cabinet. He lives with his fiancée and neither of them like vodka drinks, so why have vodka in the house? He divides his purchasing needs into whiskeys and clear spirits. He’ll have a whiskey on hand, a gin, and his fiancée’s favorite tequila. He usually keeps a rye, especially during the winter months and substitutes that out for a more summery liquor when the temperature shifts. He makes his own bitters and likes to sink a drop of port into mixed drinks instead of vermouth. Let’s look at the cost:

• Whiskeys: $48
• Scotch or bourbon : $28. Jeremy recommends Pig’s Nose, which he describes as “very soft and not at all grainy.” For a slightly cheaper option, try the Elijah Craig 12-year, which costs around $24 a bottle.
• Rye: $20. He’s a fan of Rittenhouse 100. Why keep a rye on hand? Manhattans and hot toddies. Rye is a winter crop, and it’s sure to warm you head to toe.
• Clear spirits: $37
• Gin: $22. Jeremy’s gin-of-choice is Bombay Sapphire: — lemony, crisp and many of layers of taste.
• Tequila: $15. Try Sauza 100 Anos Reposado Tequila — 100% agave, organic, delicious, and cheap!

Jeremy gets a cheap bottle of port for around $10 and makes his own bitters. Going from an empty cabinet to fully stocked costs Jeremy about $180. He doesn’t consider the what-ifs or impromptu hellos essential considerations for his liquor purchases.

What about planned events? Instead of putting out a couple of bottles of wine and hoping that people bring more, what can you make for a small gathering without your guests drinking away your last paycheck?

Have them sip on one of the following:

French 79

• 1/3 Canton Ginger Liquor — $26
  1/3 Gin — I have a friend who swears by Gordon’s London Dry Gin, which you can pick up for around $12 a bottle.
• 1/3 Simple syrup — Simple (and basically free) to make yourself
• Champagne topper — Let’s use a cheap bottle of cava instead for around $10.

With that, 10–15 people would be happily in drink for under $50. Have it be your cocktail of the night; let them supply the wine.

Rye Manhattan. Try it with a tawny port. This one is a winter favorite of Jeremy’s and has quickly found its way into my calmer Friday nights.

• 2 parts rye whiskey
• 1 part port
• Dash of homemade bitters

Garnish it with an orange twist, and warm yourself from the inside. After one of these, I can save money by turning the heat off.

Jeremy also recommends any good old-fashioned party drink. He says that not many people complain with a splash of rum in their punch or a decent, well-made sweet and sour mix for margaritas. You can get the store-bought stuff for cheap, but if you have any inclination, a little bit of time and just slightly more cash can yield a better drink. Here’s the punch I had a recent party (and consumed enough vitamin C to keep me scurvy-free for decades):

Homemade fruit punch

• 4 cups frozen strawberries
• 2 fresh peaches, sliced
• 1 cup fresh pineapple chunks
• 1 cup fresh mango, sliced
• 32 ounces 100% juice. (You can pick your poison here. I really like the R.W. Knudsen juices.)
• 4 liters club soda
• Agave syrup to taste
• A pour of rum (or whatever suits your fancy)

As Jeremy advises, remember to stock your liquor cabinet not for breadth of options but for individuality. Try not to fall victim to the thought that you need to please all tastes and get over the marketing that tries to make us think we need to buy the top shelf liquor to shake up a decent cocktail.

What are some of your favorite party drinks either from hosting or attending? How do you economize when it comes to entertaining?

Last Friday, for instance, I invited the neighbors across the hall to join me for a glass of wine. Great! Except that I apparently no longer own a corkscrew. Oops. Something else to add to my ever-growing list of things to acquire. (Other items on the list: slotted spoon, measuring cups, kitchen tongs, pill box, hangers, picture hooks, toilet brush, and so on.)

Some of these things can be obtained frugally. I’m happy to buy kitchen utensils — including a corkscrew — at local thrift stores. I don’t need fancy stuff. But sometimes I end up spending more due to necessity, or because I make a spur-of-the-moment decision.

A Quick Bite to Eat
I’m a creature of habit. Because of this I tend to eat one of two meals for breakfast: chicken sausage or Bob’s Red Mill organic high fiber hot cereal with flaxseed. I cook the chicken sausage on the stove, but I’ve always made the oatmeal in the microwave. I have a little two-minute routine that produces perfect oatmeal and makes me happy.

Well, the new apartment didn’t include a microwave. And I was fine with that. Besides my oatmeal routine, I’m generally anti-microwave. I’m perfectly happy preparing food on the stove or in the oven. (It’s my inner Luddite, I guess.) I resolved that I was going to live without a microwave, which seemed like a frugal choice.

That resolution lasted one week. During that week, I made oatmeal several times, and each time sucked. First of all, it took more than ten minutes to prepare each batch. (The electric range takes much longer to warm up than the gas range in the house.) Second, the quality of the oatmeal produced on the stovetop was awful: gummy, lumpy, and gross. ¡Que triste!

So, when I found myself in a local department store last weekend, I made an impulse purchase. I bought a microwave.

The Calculus of Convenience
The microwave I chose cost me $80. If I’d been in frugal mode, I would have done more research to find the best model at the best price. I probably would have used Consumer Reports as a tool. But I wasn’t in frugal mode. I was in “I have a new apartment and need to buy things” mode. (This is a dangerous thing in and of itself, and a subject for another time.)

On a long walk yesterday, I ran the numbers through my head. Was buying a microwave a poor financial decision? Of course not. Let’s make some rough assumptions:

• It takes ten minutes longer to make oatmeal on the stovetop than it does in the microwave.
• I eat oatmeal for breakfast twice a week — or about 100 times each year.
• Both devices use the same amount of power to make oatmeal. (I have no idea if this is true; this is just my way of saying let’s leave this factor out of the equation for now.)

One way to look at the cost-effectiveness of the microwave is to look at the “price per use”. In this case, if the $80 microwave makes 100 bowls of oatmeal in a year, that’s about 80 cents per bowl. (And the cost per bowl would continue to drop over time.)

Another way to look at this, however — and the way I prefer to look at it — is to see how much time I’m saving, and how that applies to the cost of the microwave. So, if I think I’ll save 1000 minutes during the first year of owning the microwave, that’s nearly 17 hours that I’ve recovered. And $80 divided by 17 gives us $4.71 per hour. If my time is worth more than $4.71 per hour — and it is! — then the microwave is a good deal. (Plus, the hourly cost will decrease the more the machine is used in the future.)

If I could quantify the quality of the oatmeal, I’d have a final way to compare costs. But I can’t. All I know is I much prefer the perfect microwaved oatmeal to the gummy gunk I had been eating. That’s worth a lot right there!

Conclusion
Obviously, I’m not fretting over this purchase. I can afford it, for one. For another, we all know how handy a microwave really is. I’m not about to lapse into “how much is my hot chocolate?” thinking. (I hope.)

There’s a balance to be had. Sure, it’s silly to spend on unnecessary (or unaffordable) appliances and gadgets. I wouldn’t use a KitchenAid upright mixer, so it would be foolish to buy one. Kris, on the other hand, uses hers all the time. It’s a valuable tool in her kitchen. And as much as I covet a $650 blender, that’s outside my budget. (It might be in your budget, but it’s not in mine.)

For me, it’s fun — and motivating — to run the numbers on purchases like this from time to time, just to be sure they make sense. Now that oatmeal will taste even better because I know each batch saves me a little more money…or something like that.

When my husband and I got married nine years ago, we had an audacious dream of paying cash for our first home. At that time, it was very much a far-off dream — we were just trying to survive the rigors and expenses of law school without going in debt. That alone was a seemingly gigantic feat.

But after three years of law school, my husband did graduate without debt, passed the bar, and we started planning for the future. Since we’d been renting for almost four years, my husband had a good job, and our second baby was on the way, pretty much everyone expected that buying a house would be in our immediate future.

I mean, after all, isn’t buying a house the responsible thing for a young couple to do? Well, maybe — or maybe not. We didn’t have much money in savings, and we weren’t sure how long we would be living in the town we were in, so we chose to go against conventional wisdom and continued renting.

Setting a goal
Within the next six months, my husband lost his job, we relocated to another city so he could find work, I had some significant health problems in my pregnancy which resulted in numerous hospital and doctor’s bills, and we had our second baby. Needless to say, we were incredibly thankful that we hadn’t taken out a mortgage and then had to deal with the headache of trying to sell a house at the last minute — especially since the housing market was poor in our area.

It was around this time that we were first introduced to Dave Ramsey. While we didn’t have any debt and had always lived on a strict budget, going through his Financial Peace University Class fired us up to set big financial goals and work hard to accomplish them.

One of the big goals we decided to aim for was paying cash for our first home. We crunched a bunch of numbers and realized that, if we continued to live simply and frugally and worked hard to bring in extra money through side jobs, we could save enough over the course of five years to pay cash for a starter home.

It felt like a mammoth goal and we weren’t sure if we could do it, but we decided to go for it anyway. We figured that, even if we didn’t make our goal in five years, we’d at least be a lot closer to it than if we didn’t try at all! Plus, from our calculations, we’d be in a lot better position to wait to buy — even if it took seven years to save up enough for a house — than if we were to go ahead and get 15-year mortgage and pay it off early.

We knew that we could buy a decent starter home in the area where we were planningto move for around $100,000 to $110,000, so we divided $100,000 by 60 (since there are sixty months in five years) and set a goal to save $1700 every month. Because we didn’t have any debt or school loans, and because we lived simply and frugally, we were able to live on significantly less than we were making, thus freeing up a good chunk of money to put towards our house savings each month.

Gazelle-like intensity
Once we set this goal and I blogged about it publicly, we were incredibly motivated to work as hard as we could and delay every purchase we could in order to put as much as possible into our house savings fund. We used coupons, ate a lot of meatless meals, shopped at thrift stores, cooked from scratch, brown bagged it, continued to use our old and worn-down furniture, didn’t replace anything that wasn’t an absolute necessity, limited our going out to eat, only had one car, stayed home a lot, used gift cards from Swagbucks to buy any non-necessities, bought eye glasses from Zenni optical, learned to be content with what we had, and continued to live on a strict written budget.

Meanwhile, we also looked for ways to increase our income. I blogged, wrote ebooks, and took on freelance writing jobs. My husband did contract work, started his own law firm, and helped me running the blogging business.

That first year, we didn’t always make our monthly savings goals. We had some unexpected medical bills and car problems that ate up a portion of our savings. But we kept plugging away, throwing whatever extra we could squeeze out of our income toward savings.

The few years of long hours and hard work we’d put into blogging started to really pay big dividends and by the second year, we were meeting and exceeding our monthly savings goals every single month. As our house savings fund increased, we began to get so excited that we kind of went overboard and worked long, long hours in order to meet our savings goal even faster. I wouldn’t recommend putting in such long hours, missing so many social events, or sleeping so little, but the effort paid off because, at the end of two and a half years, we paid 100% down on our first home!

Even though I wish we had given ourselves a little more breathing room and margin while saving, it was thrilling, fulfilling, and exciting to achieve this goal — in half the time we had initially planned. And we are thankful we chose to take a counter-cultural route and pay cash for our house. Not having a mortgage payment has freed us to continue to save aggressively toward other goals, increase our spending in areas that really matter to us, and give generously to needs in our community and around the world.

Two and a half years ago, my marriage ended. I left a comfortable financial situation and found myself one step above being eligible for food stamps. Money from our joint accounts paid for the down payment on my rental, but I also needed furniture, household equipment, and beds for me and my two children. The little things add up.

I found the tiniest little house to rent, priced well under market value (perhaps because it’s only about 450 square feet). This little cottage has its charms, but it’s very rough around the edges. Winter winds seem to shoot straight up from the crawl space. Still, it’s cheap. And I have access to a yard and a garden, and the landlords and neighbors are nice.

I took a few things from the house I’d shared with my husband. Virtually everything else was purchased used from yard sales during the months before I left: kitchen knives, pots, lamps, towels, a TV. Even artwork and the shower curtain came from yard sales. The only things I bought new were the beds and the refrigerator. I started life on my own with no money in the bank at all.

Starting with nothing
The divorce was in mediation, which didn’t seem to be going so well for me because I had no idea about my rights to marital assets. My car died, so I took out a car loan, my first debt in many years. My part-time job ended just after I signed my lease, and I couldn’t stay in the house with my husband, so I just kept moving forward.

I found another better-paying, part-time job and made a hasty decision to go to graduate school. I wanted to get a master’s degree since decent jobs were as scarce as hen’s teeth then. I took on student loans to pay my in-state tuition costs and to buy a laptop computer that was absolutely necessary to be a student again (our only computer).

Meanwhile, my kids and I played board games and borrowed books from the library. I bought bikes, scooters, and other toys at yard sales. I was lucky in that my ex-husband was good about paying the spousal and child support, but there sure wasn’t anything to spare.

We lived quite frugally, to say the least. I cut expenses to the bone.

Three years later
Eventually ,I got a raise at my part-time job, found a summer job when I didn’t have classes, starting doing some tutoring, and sold things on-line as well. it was a tough schedule with two kids, graduate school, and everything else. But here I am, almost three years later. And there’s money in the bank (a four-month emergency fund, plus I allocated the car loan money to a car fund account so I have something the next time I need to buy a car).

At first, I lived on $25,000 a year in a high-cost area (and, frankly, it’s not much more than that now), but I still saved money.

• I saved enough to pay a divorce attorney.
• I saved enough to pay off some of my tuition to limit my student loan debt.
• I just retired my car loan. (I still can’t figure out how I paid off that $10,000!)

I had an opportunity to become a graduate assistant; because I had so little debt and such low expenses, I was able to do it. Now my salary is minimal, but I’m getting free tuition and lots of mentoring from many wonderful professors. I will graduate in May and start to look for a full-time career in a couple of months. I’m aware that I may need to take a couple of part-time jobs instead.

Looking to the future
The divorce still isn’t finalized. When it is, I’ll be able to pay off my $16,000 in student-loan debt. Once gain, I’ll be utterly debt free. I was able to leave my share of retirement funds untouched during the divorce, so retirement calculators tell me that I have enough to fund a very frugal retirement at age 67.

My kids and I are healthy and happy and sane. When the divorce is finally settled and I have a full-time job, I am planning to buy a house: a nice, small, affordable house.

It’s been hard. There are nights when I sit with just one light on studying because I need to keep down the electric bill. But we always had enough for our needs, plus enough of our wants to keep from going crazy. I even got a scholarship to the local Y for me and my kids. Because I’ve lived a frugal life for several years, there’s no prior debt at all, which of course makes everything much easier.

I never figured I could live so happily in such a tiny house with so little money. But I’ve learned that this freedom is the gift that frugality gives me.

One of my goals for GRS in 2012 is to write more about earning money.

I quit my job a year-and-a-half ago to become self-employed, but I know that most people are employees, and I’m the last person who would suggest that everyone should quit their jobs and become full-time freelancers. For one thing, it’s not right for everyone. It can be lonely, and it doesn’t come with medical benefits, which some people need, especially those who can’t get individual insurance at a reasonable cost. Depending on your career, it might not even be possible (never heard of a self-employed police officer, for example). And some people want to put in their time and leave work at work at 5 p.m., or just plain enjoy their job.

There are a lot of reasons why it makes more sense to be an employee, which is why I don’t plan to only write about starting a side business or freelancing (although I do plan to cover those topics), but also how employees can earn more at their current job and make savvy career moves.

A history of unsuccessful negotiation
I worked for one company or another from the time I was 17 until 2010. And one thing I never mastered, despite my sad attempts, was the art of negotiating salary. There was the job I took because I desperately wanted to work for this company with great benefits and “just be an editor” (not an editor and secretary and event planner and marketing coordinator and graphic designer…). They called, offered the job, and I said “yes” to all of it without even blinking. There was the job where I tried negotiating — I even researched how to negotiate and prepared facts and figures — but felt strong-armed into taking the amount offered.

In both cases I was scared they’d pass me over. I didn’t know what to say if they said “no”. I wondered if it was even possible to negotiate at either of these companies, or was it more that the common denominator here was me? So when I decided I wanted to write more about career strategy this year, I also knew I would need to bring in some experts. Obviously I’m not the best person to tell anyone how to negotiate their salary!

How the pros negotiate
Recently I spoke with Ramit Sethi of I Will Teach You To Be Rich (the blog and the book). When Ramit was studying at Stanford, he got a group of friends together who, like him, were interviewing at some of the world’s toughest companies — such as McKinsey, Google, and Goldman Sachs — and learned the intricacies of interviewing, negotiation, and writing effective résumés.

I interviewed him about some of the top mistakes people make when it comes to negotiating salary, and how to overcome your fears.

April: What is the biggest mistake people make when it comes to salary negotiations?
Ramit: They don’t negotiate at all. We concoct all kinds of reasons why — “The economy is terrible!” and “I’m just lucky to have a job,” and “They don’t have a budget this year,” but really, we don’t know if it will work because we rarely try. In our research of 20,000+ people, we found that most of us are afraid of negotiating for two reasons: We were never taught how, so we don’t know what to say, and we worry what will happen if they say “no.”

April: There was one job offer where I didn’t negotiate at all! I accepted their offer right away because, like you said, I was scared they’d rescind the offer or think I was being difficult. What’s one thing can we do to assuage our fear of negotiating?
Ramit: Practice relentlessly. I went from closing zero interviews to closing a double-digit percentage of interviews once I practiced — and practiced in the right way. First, practice in front of a mirror. Then, record yourself. Next, have a friend run a practice negotiation and videotape yourself. Most of us find this weird, but I find it weirder to leave literally millions of dollars on the table over your career because we don’t want to take a few hours to negotiate.

April: What are the gender and age differences when it comes to negotiating?
Ramit: The data is clear that women negotiate far less frequently than men, costing them tens of thousands of dollars in the short term and millions over the course of their careers. They also use subtle phrases that cost them thousands, like “I think” or “I’m not sure, but…” There are very subtle gender pressures in a negotiation, so it’s extremely important to practice and deconstruct any self-sabotaging verbal or body language tics that compromise your position. This can work well — my female students negotiate, on average, $10,000 in salary increases.

April: Wow. I use those phrases all of the time! But some negotiating tactics sound like they could be pretty uncomfortable if someone isn’t good at selling themselves. Does successful negotiation involve sales techniques or some kind of Jedi mind tricks?
Ramit: When I was younger, I had to get scholarships to pay my way through college. I ended up applying to 60-70 scholarships, and when I landed my first interviews, I kept losing again and again. I finally decided to videotape myself and I discovered a subtle tic — I wasn’t smiling! In my head, I was a friendly guy. On camera, I wasn’t coming across how I wanted to. Once I started smiling, I started getting scholarship after scholarship. Is that a Jedi mind trick? Or is it simply studying the process systematically? None of this is magic, but it does require some unconventional approaches.

April: At one of my companies, my boss was notorious for putting people off when it came to an answer about raises — is it worth “bugging” my boss? Do a few thousand dollars more make that much of a difference?
Ramit: Even one $5,000 raise — just one — can be worth $1 million over an entire career. And people who tend to negotiate a raise once tend to do so repeatedly.

Well, there you have it. It was me, not them. I was a young female using phrases like “I think” who was too fearful to ask for raises because I was always hearing about budget concerns and how we were lucky to have jobs. I was pretty textbook, and a lot of that could have been remedied if I had videotaped myself. It’s a powerful way to avoid common mistakes — such as not smiling or using weak phrases that undermine your efforts — and to gain confidence before you sit down with your boss.

If you’re interested in more on negotiation, Ramit is offering a free mini-course that includes tips on overcoming fears about negotiating; the three biggest interviewing mistakes; the exact words to use to get a raise; and more. Here’s a preview of what you can expect:



Do you negotiate your salary? If not, what has held you back?

With 2012 still fresh and new, it’s a great time to make a plan to have a better year financially than we did in 2011. But figuring out how to make smart decisions about money can be a frustrating experience. In large part it comes from the sense that it should be easy. After all, it should be a simple math equation, something that fits in a spreadsheet, right?

I think a significant part of our frustration with money comes from the fact that making smart decisions is not as simple as finding the right spreadsheet. Emotion and how we feel about money plays at least as large a role as the calculator.

Given the role that emotion plays in our financial decisions, I’ve found it far more interesting, and frankly more helpful, to focus on asking the right questions, instead of obsessing over one-size-fits-all answers. By learning to ask better, or at least different, questions we can have some hope of having a better experience.

This approach reminds me of the old Stephen Covey lesson about spending our entire lives climbing a ladder only to find out it was leaning against the wrong wall. As we start to ask ourselves different questions about money we can make sure that we’re climbing a ladder leaning against the right wall.

To get started, I suggest asking yourself and/or your partner some of my favorite money questions.

1. What’s important about money to you?
I’ve asked this question in hundreds of interviews over the years, so I’m no longer surprised when the initial answer is silence. We’re not used to thinking about the importance that we place on money and why. This question is not about goals, like saving for education or retirement; it’s about values, like security, freedom, flexibility, and peace.

The goal of this question is to define your financial values and help you get to the “why” of money. Don’t stop with the first answer or even the second. Most often I hear people say things like security. But keep pushing. What’s important about security to you? Think of the answers as a progression of values and your goal is to keep digging until you can say, “There is nothing about money more important to me than XXX.”

One time I had this discussion with a very successful professional couple. The wife was in the prime of her career as a successful emergency room physician. Like many people before her, the first answer to this question related to security. But as we continued to push, the answer became, “I’d like to have more time.” When I asked why time mattered, she got very quiet, and then said, “I finally want to have time to have a child.”

The most important thing about money to this emergency room doctor was getting to the point where she would have the security and the flexibility to have a child. Of course your answer will vary from this doctor, your friends, and your neighbors, but that’s why this is so important. Once you become really clear about what’s important about money to you, then you have the emotional context to talk about goals. To return to the ladder example, it’s about defining the wall you want to lean your ladder against.

2. Where do you want to be financially in three years?
The context for answering this question should be based on what you learned in the first question. Whenever possible, the answers should be specific and measurable. Think in terms of defining and setting goals.

For instance, if one of the most important things about money to me is providing opportunities for my children, I might set a goal to start saving for education. But of course that’s not specific enough. The next step requires that you define exactly how much you want or can afford to save. I found it to be most helpful to make these goals specific in terms of time frame and dollar amount.

They need be no more complicated than, “I will save $100 a month on the 15th of each month into my child’s 529 account.” Picking the specific numbers and even the timing may take some work to figure out for your particular situation, but plenty of online savings calculators exist to help you figure out the best number for you.

It’s important to notice that so far we haven’t talked all about rates of returns or specific investment products. So far this is just about the plan, not the product; it’s about a process of planning. The other thing that’s important during this step is to let go of the need for precision.

While we want the goals to be specific and measurable, you also have to realize that often these are guesses. You don’t really know how much you’ll need to save to meet an educational goal, for instance, because too many assumptions go into it. So what we need to do is avoid getting hung up on the need for precision at the expense of getting started. Realize these are guesses, make the best guess you can, and get to work.

3. What good habits will help me reach my goal?
When it comes to money, behavior plays a massive role in our success. The big problem is most of us behave poorly if left to our own devices. The solution is pretty well documented at this point: we have to find ways to automate good behavior.

If you determine that you should be saving $100 a month towards education, don’t make that decision every month, make it automatic. It’s as simple as signing up for an automatic withdrawal out of your checking account and into your child’s 529. If we make this into a decision that requires action on our part every single month, we will fail. If it’s going to require you take out your checkbook, write a check, address an envelope, put a stamp on it, and put it the mailbox you can tell it’s not going to happen. There will always be other things that we would rather spend $100 on. So take advantage of automation.

Another example of good behavior that we can automate is rebalancing our investment portfolios. This is a pretty simple concept. I believe it’s one of the most important things we can do to avoid the big behavioral mistake of buying high and selling low that we’re also prone to commit.

Here’s the deal: let’s say you determine that the 529 education account should be put 60%into stocks and 40% into bonds. So you setup the account and invest in broad-based index funds to ensure diversification. Now comes the avoiding temptation part.

Perhaps you set up the account in mid-2007 right before the massive declines of 2008 and early 2009. After watching the market go down 20, 30, or 40%, you’d probably feel like selling what you had invested in stocks. But clearly that decision doesn’t match with our goal of rebalancing. The key to investing success is pretty simple: buy low, hold on to it, and sell it for a higher price later. But instead we’re tempted to buy high (when we feel good about things) and sell low (when we feel bad). It’s why the behavior gap exists.

Going back to the earlier example, emotionally we wouldn’t want buy more stocks to get our portfolio back up to a 60/40 value split. Instead, we’d be tempted to liquidate our stock holdings. By adopting rebalancing as part of our investing strategy, we avoid this temptation because it automates behavior.

So if we started in 2007 with 60% of our money in stocks, and the market declined, we would now have something less than 60%, let’s say 50%. However, if you’ve automated the rebalancing process, you’d be taking money (10%) from the bond side of the portfolio that did relatively well (high) and move it into the stock side of the portfolio (low) to restore the 60/40 split.

Avoiding the greed trap
There are a lot of benefits that can come from rebalancing, but none is more important than effectively automating the good behavior — avoiding the big behavioral mistake of getting scared out of our portfolio after a market decline. It also works to prevent us from getting greedy after a market is having huge run.

Warren Buffett said the key to investing success is being greedy when others are fearful and fearful when others are greedy. But unless you see Buffett in your mirror, it’s almost impossible to do unless you automate that type of behavior through disciplined rebalancing. There are plenty of services out there that will actually rebalance for you.

Each of these questions demonstrates my primary goal in writing The Behavior Gap. It wasn’t to provide another step-by-step personal finance book, but to help people think through the questions we need to ask ourselves. By providing a framework, there’s the opportunity to have more meaningful discussions about money.

Plenty of great resources cover the specifics of how to implement financial decisions, including J.D.’s book, and the ongoing discussion on this site. My hope is that we also can take a little time to have some more meaningful, honest conversations about money with the people we love to make sure that the ladders we are climbing are leaning against the right walls.

Have trouble saving money? Time for some mind games.

Hide cash via direct withdrawals. Get free money from banks. Name an account for a goal. Make your savings “one-way,” i.e., really hard to tap.

The unemployed and underemployed may feel — with good reason! — that they can’t afford to save. Even those with decent salaries might feel squeezed by the rising cost of basic needs like food and utilities, especially if they’re repaying student loans.

Here’s a cold, hard fact: You need to save anyway — and not just for an emergency fund, but also to augment your eventual retirement. (And when you’re my age, “eventual” is closer than it may appear in the rear-view mirror.)

Maybe you really do need need every dime to keep creditors at bay. Or maybe a little budget-tweaking could free up some extra bucks for your Someday Fund. Even if it’s just a tiny amount at a time, it’s something.

Easy does it
The simplest way to save is to automate it. Have a small amount siphoned off each payday by your financial institution (I use an online bank for this) and learn to live on what’s left. Increase the amount slowly — an hour’s pay at a time, perhaps? — to give yourself time to adjust your spending.

See if you can get to the 20% mark suggested in the 50-30-20 budget. Since that 20% refers both to savings and debt repayment, get those cards paid off so you can salt away more at a time.

Incidentally, that does not mean exile to the Island of No Fun At All. The “30” in that plan allows for 30% of earnings to go to “wants.”

Some ways to inch closer to the 20% savings mark:

• Save flexible-spending and/or work-related reimbursements. Set up direct deposit if possible. If not, make it a point to deposit the checks rather than cash them. And if you need that money to balance the books? Pledge to keep at least a dollar (preferably $5) of it in the account.
• Save your raises. That is, assuming you’re lucky enough to get them. If you were already managing on what you earned, pretend you didn’t get a raise. (Curse you, short-sighted bean-counters!) Then raise the biweekly (or whatever) automated savings.
• Save your bonus. That is, if you’re super-double-lucky enough to get one. But give yourself permission to spend 10% of it on something you really want. Come on, you know you want to buy Stuff from time to time. Just about everybody does.
• Get symbolic. Want to retire at 50? Start depositing $50 a month, or per week if you can swing it. Make a weekly or monthly deposit equal to your current age; that’s easy to sustain since it goes up just a buck a year.
• Drop a habit. It’s tough to quit smoking or, for that matter, to stop buying so many comic books. But as you taper off, put what you would have spent on coffin nails or anime into long-term savings.
• Round’em up! Not cattle — coins. When you use your debit card or write a check, record it for the next dollar up (e.g., $7.29 becomes $8). At the end of the month, add up the differences and transfer it to savings.
• Challenge yourself. Take the dollar-bill challenge by removing the Washingtons from your wallet every night. Super-flush version: Take the $5 challenge. Super-tight-budget version: Save your coins and wrap them every so often.
• Bank your coupons. You saved $6 on the groceries? It’s not savings unless you save it. Tuck away the amount you saved using manufacturers coupons and your supermarket customer loyalty card.

Every dollar — and every dream — has a name
One financial planner I interviewed sends his clients monthly “invoices” for their long-term goals, e.g., “pay cash for next car” or “comfortable retirement.” Think of your savings account as a line item on your budget, and pay it along with the rest of your bills.

Another planner told me her mom always said, “Every dollar has a name.” Those bucks had some pretty prosaic names: Rent, Utilities, Groceries. But the lesson stuck, and the little girl grew up to include a name in her own monthly budget: “Savings.”

My own experience with naming was not a line item but a targeted account called “Home.” (As in, “a home of my own some day.”) I started it with one of those “free money from banks” deals and beefed up the account with any extra cash I got: manufacturer rebates, a little holiday bonus, wrapped coins, babysitting jobs, pet-sitting gigs, mystery shopping.

Whether you do long-term savings as a budget line item or as a targeted account, you’re giving your dollars a name. You’re sending them to a specific area to do a specific job. You’re being proactive about your financial future rather than just heaving greenbacks toward that amorphous entity called The Bills.

A glimpse of the future
Maybe you need a more tangible reminder of your goal. Some people slip photos of their kids between the cellophane and the cigarette pack to bolster their efforts to stop smoking. I’ve also heard of folks who rubber-band pictures of their dreams (new house, Mini Cooper, whatever) to their credit cards to discourage in-the-moment spending.

I once interviewed a woman who created a computer-drawn design of her dream kitchen. Then she pinned up the picture by her desk as a reminder of why she needed to save. It worked: She paid cash for the remodel.

Another woman I spoke with changed an online shopping account password to the year her kid would start college and the preferred university’s acronym. Retail therapy wasn’t nearly as important when the sign-on became something like “2014UCLA.” It was a sobering reminder that baby needed textbooks much more than mama needed a new pair of shoes.

These same tactics could work when the goal is beefing up savings vs. getting yourself some gorgeous granite countertops. Personally, I recommend solid-surface counters. Some of that counterfeit stone is so good you could take it for granite. (Sorry. I couldn’t resist.)

Hands off!
Make it tough to touch your funds and they’ll remain safe from moments of temporary insanity. (Back away from the comic book store! Hands where we can see ’em!) I’ve got a few suggestions for isolating your dough:

• Opt for inconvenience. Don’t pick the bank or credit union with a branch in your neighborhood. You don’t want it to be easy to get at this money. There’s no need to go there in person because you’re using direct deposit. (Aren’t you?) Again, this is not for liquid funds but rather for the long-term scratch.
• Choose an online bank. That way it takes a couple of days to get the money. You might come to your senses by then and realize that investing in Action Comics futures might not be the best use of your funds. Bonus frugal points for putting the buckage into laddered CDs; there are penalties for early withdrawal but since the CDs mature on a regular schedule you could access some money in a true pinch.
• Don’t get an ATM card. Ever have one of those days when you think, “I don’t care! I’ve been good for too long! I’m gonna get all the Green Lantern books — and maybe a Slurpee, too!” If you had to drive to the financial institution and fill out a withdrawal slip, you might have time to realize that the expense is not strictly necessary.

But don’t save every dime. You need categories like “discretionary spending” or “riotous living” in your budget, too. (Or just cut to the chase and create a line item called “bail bondsman.”) Spend it any way you like — but once it’s gone, that’s it until the next pay period.

If you don’t spend it all, you have the choice of depositing it into savings. While it can be really satisfying to watch that balance increase, I’d caution against banking the surplus every month. Live too close to the bone for too long and you might eventually knock yourself off the wagon. Allow for some wants along with the needs and you’ll find it easier to stay within the budget the rest of the time.

We all need goals
In a perfect world you wouldn’t need a bag of pecuniary tricks. You’d just pay yourself first as a matter of course. Life isn’t perfect, though. Some days it’s not even above-average.

Don’t feel you have to do it all. You won’t get kicked out of the movement if you don’t embrace every frugal hack extant. Sometimes it’s still hard for me to spend money, but I recognize that I need to loosen up lest I reflect the worst attributes of Hetty Green (miserliness) without any of the advantages (shrewd business sense, huge net worth).

Thus I don’t lose any sleep if I neglect to bank my coupon savings or to save every dollar bill that comes my way. In fact, my “Home” account is no more — at least as a private entity. When I got mugged a few months ago I had to redo my bank accounts since my personal information had been compromised. I realized it didn’t really make sense to have a separate account, so I merged it with my regular savings.

Yet it still exists in my mind as the seed money for a smallish house with a decent southern exposure for gardening (mostly things I can eat) and a front porch swing. We all need goals. The possibility of homegrown tomatoes keeps me tucking away the savings. But I make sure to shake loose a few bucks for the bail bondsman fund, too.

Suze Orman is famous for her personal, easy-to-digest, and friendly personal finance advice. Many of us less famous (far less famous, in the case of this writer) finance writers admire her general approach, which boils down to “spend less than you earn.” Who can argue with that? So imagine my amazement at the news this week that Suze will be offering a branded prepaid debit card.

Prepaid debit cards have a star-crossed reputation
You know about branded prepaid debit cards, but they’re usually not connected with individuals known for their sensible finance advice. Think Russell Simmons. Think the Kardashians. See? Sample words and phrases from our collective wisdom on those topics include “skeptical” and “reprehensible” and “urge to scream” and “hit cash-strapped consumers over the head with nickel-and-dime charges.”

The biggest problems with prepaid debit cards are, really, threefold:

• While they are cards that are available to consumers with bad credit, they don’t help consumers build credit, though they are advertised as doing so (any help would be mild at best — the reporting they do is only to smaller credit reporting agencies, not the “big three” that man the velvet rope for most consumer debt in America).
• They’re punishingly expensive and seem more directed toward association with the personality branding the card than any financial benefit. Russell’s “Rush” Card costs between $4 and $15 upfront, with $10 monthly fees and $1 per-transaction fees.
• They’re accused of using celebrities to take advantage of both the hopes and difficult situations of the “unbanked,” mostly-lower-class, often minority consumers whose financial situation is so bad that banks won’t take the risk of giving them checking accounts.

Suze Orman wants to make a difference (but, is it a fool’s errand?)
Orman has a different idea. She, too, wants to convince the unbanked to use her prepaid debit card, but she wants to charge less. Her “Approved Card” is far cheaper than Rush or the K thingy — only $3 to purchase the card and a $3 monthly fee. ATM transactions from the Allpoint network (found in 7-Eleven, Costco, Kroger, CVS, and Walgreens) are $2 per withdrawal, and point of sale transactions, such as purchases at the grocery store or coffee shop or online, are free. Balance inquiries and some declined transactions are $1 , but it’s free to be declined at the register for a regular PIN/signature transaction. Many of these transactions, especially ATM withdrawals, are free for 30 days with a direct deposit or bank transfer into the Approved Card account, making them a great product for customers with some sort of automatically-deposited income (even, for instance, unemployment).

Notably, electronic debit bill paying is free. Many competing products charge for this service, from $1 to $3 per transaction, and it’s the service that customers without a regular bank account need. Often, discounts and special deals are available to customers who allow vendors to debit their account each month.

The great credit score kerfuffle
The concept that sells many prepaid debit cards — the quasi-justification for how expensive they are — is that they might help in the quest to raise a credit score. If a credit score is low enough so that a mainstream bank isn’t part of your personal finance portfolio, can a prepaid debit card even help? Probably not.

The problem that Suze Orman has mentioned in public statements about the Approved Card is that credit bureaus, beyond even knowing about the transactions made by the millions of unbanked consumers, don’t care about sensible use of money. They just care about sensible use of credit. A New York Times piece quotes Orman as saying, “There is something radically wrong here. We are rewarding people for having credit and punishing people who pay in cash. I want to change that paradigm.”

Wanting to change credit score calculation is easy. Changing is hard.
Orman has done the near-impossible and convinced TransUnion, one of the big three credit bureaus, to collect the data about spending habits from her customers. But what that will do to credit scores is another thing entirely. The answer, probably, is nothing.

The problem is that TransUnion has only been persuaded to evaluate the data Orman will collect with her Approved Card; it has not promised to include that in credit reports nor in the calculation of scores. If, after two years, it finds the data meaningful, it’s still unlikely to have much of an effect on the resultant calculations. Responsible use of a prepaid debit card, after all, hasn’t had much impact on the financial institutions that sponsor the card — in this case, Orman’s own company — so the patterns of data don’t have much meaning.

What kind of debit card use could demonstrate the sort of behavior creditors want to see, such as:

• On-time delivery of minimum payments
• A history of purchasing high-value assets and then paying them off quickly
• Regular income and a comfortable ratio of debt-to-income

These all can be shown far more reliably through existing reporting. A consumer who pays rent on time each month in cash won’t differ, to the eyes of TransUnion, from a consumer who pays rent on time each month by automatic debit from her Approved Card. Similarly, failing to overdraw an Approved Card account (that is impossible to overdraw from, except perhaps for a few $1/$2 ATM transaction declined fees) is very different from failing to overdraw a bank account.

Why would you use a prepaid debit card?
There are two groups of people I can see benefiting from using a prepaid debit card, as well as one group I would caution to avoid it. All of them could achieve higher credit scores, but not in the way you think. Let me explain.

1. Those who have very bad credit, especially with recent negative experiences with bank accounts, should use a prepaid debit card. My sister-in-law still owes money to one (or maybe two) financial institutions, after having had several subsequent overdraft fees and never having the several hundred dollars to pay it off and get back the ability to use her account. This is a very common situation, thanks to the unreasonably large fees most banks charge per overdraft (you’ve never been nauseous like the nausea from a few $35 fees for $4 and $5 transactions — or an overdraft fee of $35 for a $30 check).Even the recent consumer protection limits don’t prevent people from getting in these situations (or being in them already), and those consumers may as well use prepaid debit cards, as it won’t be easy to do business with a bank until you pay off those old debts.
2. Those who have had overdrafts recently and who are, or expect to be, living paycheck-to-paycheck for the foreseeable future, should use a prepaid debit card. I know how my sister feels, as I’ve been in exactly the place she is now; husband with scattered temporary work and scattered temporary work herself, juggling a baby and a pile full of student loans. It may be that they have plenty of money to pay the rent. Or, they could be scrambling come February 5. And March 5, and April 5, etc., etc.It makes more sense for people like them to use prepaid debit cards precisely because you can’t get into those nasty credit-killing messes. With a bank account, you’re either tempted to write a check on the 5th and hope you can deposit something on the 6th to cover it; or you’re bracing for the automatically debiting phone bill that you just discovered you won’t be able to cover. Using a prepaid debit card won’t positively impact your credit score, but it will keep you from doing things to worsen it (and could, if you’re like me, save you lots of those stupid fees so you can afford to pay your minimum debt payments).
3. Those who need to increase their credit score fast should not use prepaid debit cards. The best thing you can do to increase your credit score is to use credit. Debit cards are not going to help with this one bit! Most especially these prepaid ones, with reporting almost nil and information only theoretically useful (even to those who preach using cash like it’s divine salvation). Prepaid debit cards will tie up cash that could be used to get a prepaid credit card, or to pay your mortgage on time, or the minimum payment on an installment loan — you get the picture.

About those credit scores…
One last word of admonishment about focusing one’s financial life to better one’s credit score: I think this is largely baloney. You’re far better off arranging your financial life around living more frugally, paying off debt that you do have, and finding ways to avoid incurring new debt — say, buying a beater car until you can afford to save up for a nicer one, or renting a low-cost apartment until you can save up a very large down payment for a house. Ideally, you would be living in a way that makes credit scores worthless.

Naturally, we’re not all living in this paradise. There are very valid reasons to hope for a great credit score, not least of which is that many jobs include a credit check sometime between interview and first paycheck. I get that sometimes you need a good credit score (especially if you want to buy a home). But if you’re like me, and already have both a mortgage and reliable transportation (a fancy bike, in my case) and don’t see applying for a job in your immediate future, just work to improve your financial situation. If this means signing up for Suze’s debit card, you have my blessing.

I won’t be writing about the personal aspects of the divorce at Get Rich Slowly. In fact, other than some brief background at my personal site, I don’t intend to write it about it on the web at all. Kris and I are both emotional wrecks right now; the wounds are fresh and raw for both of us.

That said, I can no longer avoid sharing the truth with GRS readers. Too many of my financial decisions — present and future — are tied to the divorce. I’m hunting for health insurance, for instance, and I’ll have to re-evaluate my asset allocation. And ten days ago, I moved to a new apartment.

Living Small
For the past eight years, Kris and I have lived in an 1800-square-foot house on three-fifths of an acre. The place also includes a large garage, a workshop, and a couple of out-buildings. Plus, I’ve been leasing an office up the street. Despite working to reduce clutter in my life, I have a lot of Stuff. I’ve written a lot about wanting to simplify, about wanting to live in a smaller space, but I’ve been reluctant to take the necessary action.

Now, though, I’m moving. And because I’m moving, I feel obligated to practice what I preach. While part of me wants to find another house (Kris is keeping ours), I know it’s better to find a smaller space and to adjust my life to fit it. Thus, I’ve been looking to see how some of my friends manage to live not-so-big lives.

For instance, last fall Tammy — who writes about simplicity at Rowdy Kittens (and who shared a GRS reader story about the benefits of biking) — moved into a tiny house. The entire home is only 130 square feet! She and her husband had me over for dinner recently, and I shot some video of the space:

I loved Tammy and Logan’s tiny house. The floor plan is well-designed and functional. Still, I’m not ready to live that small just yet.

Instead, I opted to rent an apartment.

The Apartment
While most folks were spending Thanksgiving week, well, giving thanks, I was hunting for apartments. Some might consider going from house to apartment a step backward. I don’t mind. In fact, as I’ve mentioned before, I actually believe renting can be a great choice for the right person. In this case, I think I’m the right person.

While searching for a place to live, I tried to take a lot of things into account. Price was important, obviously, but so was the age of the place, the layout, and, especially, the location. Over the past five years, I’ve come to place a premium on walkable neighborhoods, and I know I wanted an apartment with a high walk score.

I found a place I liked in a good location near downtown Portland — the biggest drawback is that it’s right next to a donut shop (danger! danger!) — and signed a lease. But then I started to worry that I was paying too much. By comparing notes with other people, I’ve since decided that while I’m not getting a bargain, my rent is reasonable.

Best of all, the apartment has a walk score of 88 (very walkable) and a transit score of 73 (excellent transit). And because I’m an avid walker, I can reach neighborhoods that the Walk Score app doesn’t consider. (As a comparison, our house has a walk score of 49, meaning car-dependent, and a transit score of 32, which means it has some transit.)

I’ve been in my new place for ten days now, and I like it — but it doesn’t feel like home. Still, I’m trying to make the most of these 705 square feet. Instead of just talking about how much I want to cut back on clutter, I’ve been faced with tough decisions every day. Which books do I keep? Which comics? How many pairs of shoes? How many jackets? Do I really need (or want) my records and record player?

By making judicious choices (and with the help of some new furniture from Ikea), I think I’ve reached a good balance. My new place contains the things I need — but it’s not filled with a lot of clutter and junk. It’s my hope that this will continue for the foreseeable future.

Fear of the Future
Now that I have a place to live — and now that I’m mostly unpacked — there are other problems to tackle as a result of the divorce.

For one, how do I handle health insurance? For eighteen years, I’ve been on Kris’ policy. Not anymore. After the divorce is final, I have only a few weeks (or maybe even just a few days) before my coverage with her carrier lapses. I’m the sort of guy who might risk going without health insurance for a few months or years, but Kris won’t have it. “We are not getting a divorce until you can prove to me that you have health insurance,” she told me the other day.

Meanwhile, what do I do about my office? Does it make sense to continue to rent that space? Should I find someplace closer? More importantly, what about day-to-day stuff like laundry and groceries. Obviously, I’m capable of handling these chores on my own, but due to the division of labor within our marriage, I’ve always relied on Kris to handle most of these chores. Now I’m going to have to budget for food, plan meals, and buy supplies on my own.

Kris has lots of questions about the future too. She’s still in the house, after all. How will she handle the yard work? Who’s going to take care of her car? And so on. But she too is capable of handling these things on her own. Besides, we both agree that figuring out the chores is inconsequential to figuring out the big stuff, the emotional stuff.

For now, Kris and I are still in constant contact. We had dinner Friday night, I drove by the house yesterday, and we’ll have dinner together tomorrow night. Plus, we still plan to share a vacation to Argentina in a few weeks. If one of us gets into trouble, the other will be there to help. Our marriage may be ending, but our friendship isn’t.

Last time I guest posted here at GRS, it was March 2011 and I still had a day job. And it was a crappy day job. I worked in a customer service cubicle position for a company that seemed to go out of its way to tick its customers off. My 45 hours a week plus commutes earned me $26,500 annually before taxes and benefits when I started in June 2005 and $35,500 by the time I left in July 2011.

You read that correctly — I left. I quit and it felt so good! Here is how I turned my side hustle of blogging into my full time job.

Growing My Blog
I started Budgeting in the Fun Stuff in February 2010. I really just wanted to create an online community of personal finance geeks like me that knew how to have fun too. I’ve been posting daily at BFS ever since and have grown it into a site that gets more than 15,000 visitors a month. I know that isn’t the biggest blog ever, but I am proud of it and am so thankful for all of my supporters.

If you are interested in growing your blog, I highly suggest commenting on other sites in your niche. Most of my readers seem to have found me through comments I have left elsewhere. Also, join a blogging forum that fits your site. I have learned so much from the people I’ve gotten to know through the Yakezie Network. I also think that guest posting truly helps. Not only do you build up links and your reputation online, but readers will start following you if your guest posts are interesting and fun to read.

Creating a Goal
As my blogging hobby grew, I started receiving emails from advertisers. I sold my first sidebar ad within 2 months. I then earned a Google Page Rank and started receiving even more offers. Within a year, I was bringing in about $850 a month from direct ads. I was very excited but knew I’d need at least 3 times that to quit my full time job.

My husband and I sat down and created a goal in March 2011. Specifically, we decided on my blogging target number — $2500 a month from online income on average for 4 months in a row with no less than $2000 in any given month. In short, I needed to make $10,000 in a 4 month period before I could comfortably quit. At the time, I thought I was about a year away from hitting that number. I had no idea what was about to happen.

Starting My Business
In April 2011, Kay Lynn from Bucksome Boomer made a suggestion that has literally changed my life. She knew I enjoyed negotiating with advertisers based on comments I had left in the Yakezie forums. She also knew that she hated it, so she asked if I’d run her advertising for her. We worked out the details and I started nearly immediately. Within a few weeks, I decided to offer my services to others. By the end of May 2011, I had 12 ad clients. I added another 17 in June and it just kept growing by leaps and bounds from there.

Since I make a commission from the deals I close, running the advertising for others meant that my own online income started growing way faster than I ever could have imagined. I also started staff writing like crazy to supplement. I hit $3750 in March thanks to three big ad deals on my own sites. April brought in about $2100 thanks to my new business. Then May brought in about $2050. So I was at $7900 and June came in at more than $5100!!! I was astounded!

Quitting
In July 2011, I hit a wall. I couldn’t grow my online business and work my day job anymore. I was putting in about 45 hours a week at my day job (and sneaking in a ton of blogging time). Then I’d come home and put in another 5 hours each week day and full 8-10 hour days on the weekends in order to keep up with my online work — like writing for my own blogs, running my ad business, and writing and editing the posts for my 11 staff writing positions. I was literally working 85 hours a week on a slow week. So I quit.

I gave my notice in early July and walked out a free woman on July 15th, 2011. I was happy. I was excited. And I was scared.

Self Employment has been Kind
I now run the joint advertising emails for more than 80 bloggers with a total of more than 100 sites. I get to help a ton of bloggers like Kay Lynn. Some of my clients just don’t enjoy dealing with advertising, some don’t have the time, and some want access to more advertising contacts.

I also still staff write for two other sites, continue to post daily at Budgeting in the Fun Stuff, and post weekly on How I Make Money Blogging. I pay myself $1650 every two weeks with $500 of that being diverted into an account for taxes when they are due. My best self employment months so far have been October 2011 and December 2011 when I made more than $18,500 and $25,000 respectively! These two months have proven to be outliers, but $8000-$10,000 a month seems to be the norm. We are saving a third of the extra cash for taxes and using the rest to pay off our mortgage early and to invest more for our future.

Moral of the Story
I am living proof that anyone can achieve whatever they want with the right mixture of ability, persistence, time, and luck. And that mixture is different for everyone. For example, I am finally using my college degree in Marketing to help others and fund myself. I am persistent enough to follow through on all of my obligations. I had the time to put in during those 80-100 hour work weeks earlier this year and continue to put in about 50-60 hour weeks now. I was lucky enough to have a key strength pointed out to me by Kay Lynn in April 2011 and followed through.

Maybe someone will need to substitute some time for ability or add in some persistence in place of luck, but I know there is a right mixture for anyone willing to go for it. Good luck!

Unfortunately, I’m not qualified to answer questions as specific as these. (And I don’t have time to answer them all!) That said, there are often certain themes, such as: “Am I saving enough?”

For instance, Kailey wrote recently with the following question. To me, it’s clear she’s saving plenty — but how should she allocate what she saves? That’s the question. Here’s her e-mail:

I’m 25 and about three years into my professional career. I’m pretty diligent about savings and contributing to my 401(k). Of course, I never feel like I’m saving enough, even though I’m fairly confident that I save much more than many of my peers.

One-third of my income goes directly into my ING account for my emergency fund (which is fully funded for approximately one year of living expenses) and now is being used to accumulate money for a down payment on a house/condo. Unfortunately, I live in Southern California, and in an area where that 20% down payment doesn’t seem to be within reach in the next couple of years. In addition to the 33% of my income being directly saved, I also contribute 8% to my 401(k). This 8% allows me to take full advantage of my employer’s generous matching contribution each year. I also have an automatic annual 1% increase to my 401(k) contribution.

The problem lies in that I never feel like I’m contributing enough to either my savings or my 401(k). How many GRS readers actually max out the federal contribution limit of $16,500? I don’t feel that this even seems realistic or attainable on a decent life style. And is it really a good idea to increase that amount by significantly decreasing the amount going into my savings each month?

Taking advice from GRS, I opened a Roth IRA a few month back with $3000 of the $5000 limit. This definitely increases my percentage of income saved. However, it would still be interesting to hear other readers percentages and/or thoughts on my progress given my age.

First of all: Wow! Kailey is saving almost half of her income. That’s awesome. Although she’s fretting over how to maximize her money, I think she should congratulate herself for what she’s been able to do at such a young age. If she continues down this path, she’ll be in great shape twenty years from now.

So, Kailey’s problem is a good problem to have. But if you were in her position, it’d still be a problem. How much should she save for the near future? How much should she save for retirement? These sorts of decisions can be perplexing, and unfortunately, there are no easy answers. Because we can’t know the future, we can’t know what the best choice is for our individual circumstances. Instead, we have to make best guesses based on who we are and what our goals are.

That last part is important. I always preach the praises of conscious spending — the notion that we should spend lavishly on the things we love while cutting back ruthlessly on everything else — but I think there’s something to be said for conscious saving also. (In a way, this is why I’m a fan of targeted savings accounts.)

When you have specific goals, goals that mean something to you, you’re much more motivated to save. If I have a trip planned, I’m more diligent about saving than if I’m saving for some undefined future, for instance.

In Kailey’s case, it sounds as if buying a house is important to her. That’s a good goal, and it will help keep her motivated to save. If I were her, I’d stay focused on that. She’s already putting 8% of her income into her 401(k), plus $3000 a year into her Roth IRA. That’s a good start, and if she can maintain those contributions as she saves for a home, I think she’ll be fine. Then, once she’s accumulated enough for a down payment, she can attack her retirement saving even more aggressively.

Really, though, I don’t think there’s any one right answer in this case.

What do you think? If you were in Kailey’s position, would you save more for retirement? Would you save more for the down payment on a house? How do you find a balance? And, at the same time, how do you make sure you’re not depriving yourself in the present?

As far as investing goes, 2011 won’t be a particularly memorable year. The Standard & Poor’s 500 began the year at 1,257 and ended the year at the exact same spot. So if you began the year with $10,000 in your 401(k) and invested it in an index fund that seeks to mimic the performance of the S&P 500, you’d just have $10,000 a year later, right?

Probably not. The value of your portfolio depends on a few factors:

1. The increase or decrease in value of your investments. Okay, so that’s obvious. In the case of the S&P 500 in 2011, it ended the year where it started.
2. Contributions or withdrawals from your accounts. If you’re still saving for retirement, you make an investment every time money gets transferred from your paycheck or savings account to your 401(k) or IRA. Each investment has its own purchase price, and thus its own return. During 2011 the S&P 500 increased to 1,363 by the end of April, then dropped to 1,123 by early October, only to then rebound back to 1,257. If you invested in an S&P 500 index fund, some of the purchases you made last spring may be still underwater, but the purchases you made in the fall have so far produced a nice double-digit return.
3. The amount of interest and dividends you receive throughout the year and what you do with that money. I’ve written before about how dividend growth and reinvestment are a powerful — and under-appreciated — way to grow a portfolio; it can produce a decent return even if the price of a stock goes nowhere for decades. That’s because dividends grow, historically at a rate that exceeds inflation. Not every stock pays a dividend, but most of the big names do. In 2011, of the 500 companies in the S&P 500, 394 companies paid a dividend; 320 increased their dividend, 22 started paying a dividend (they weren’t paying one beforehand, or it had been suspended), and only five decreased their dividend. Most investors use those dividends to buy more shares of stocks, which pay more growing dividends, which buy more shares, and so on. The same principle applies if you own bonds or bond funds, though you don’t get the same type of growth in the payments.

Investors who survived the “Great Recession”
So even though the S&P 500 went nowhere in 2011, someone who kept investing in the Vanguard 500 or any other similar index fund — both through additional contributions to retirement accounts and dividend reinvestment — saw her net investment grow in value. This presumes, of course, that she stuck with the investment as it dropped almost 20% from April to October.

To take a slightly longer-term look at sticking with an investment, a recent report from Fidelity Investments illustrates the value of summoning courage in the face of a downturn. The company analyzed the returns of investors with Fidelity retirement accounts from the market decline of 2008 to 2009 through June 2011 and found the following:

• Participants who changed their equity allocations to zero between Oct. 1, 2008, and March 31, 2009, and never jumped back into the market saw their accounts grow a measly 2%.
• Investors who sold all their stocks, but got back into the market at any point before June 2011, enjoyed a 25% larger account balance.
• Those who stuck with their asset allocations saw their account balances skyrocket 50%.

The analysis also compared investors who stopped contributing to their 401(k)s with those who kept on savin’. The account balances of the former grew 26%, while those of the latter ballooned 64%.

These are important lessons, since the world seems pretty scary these days. Of course, investing when everyone else is scared is what we’re supposed to do. But today’s risks — debt problems in Europe, falling home prices, swelling government deficits, increasingly unfunded entitlements, computers accounting for most of the trading volume — are real and unprecedented. Plus, the market isn’t priced to provide extraordinary returns. I don’t know exactly when, but there will be more years like 2011, even those as bad as 2008. During those times, it will be important to remember the conclusions of that Fidelity study: Stick to your allocation (except for occasional rebalancing), and keep on savin’.

Right after we graduated from college, my best friend wanted to buy a real bed. He’d slept on gifted beds, Craigslist-ed beds, found beds, futons, couches, and I even think there was tatami mat in there, but he decided graduating college made him an adult and needed a real, adult bed.

He saved a good amount of money and did research at multiple mattress stores testing for firmness, pocketed coils versus continuous coils, pillow top or memory foam — he tried them all. He finally settled on one that was as adult as a mattress can get. It was a Bonnell coil system king-size mattress with a memory foam pillow top. It had a temperature regulating system to assure neither overheating nor shivering, and he was convinced that this mattress would be the end to his minor-yet-chronic backaches. He waited for a somewhat decent sale, purchased it (with free delivery), and his mattress arrived.

After buying a bed frame that took up most of his Brooklyn apartment, he was ready to live the good life.

The first night, he couldn’t sleep. Second night, same story. He couldn’t tell if it was too firm or not firm enough, if it contoured to the curves of his back perfectly or not all. The seemingly simple act of falling asleep was just confusing. He had a rather sleepless week and then called to exchange it. But since he bought it on sale, they wouldn’t do their normal bed exchange. He kept trying to sleep on it while trying to sell it for a decent price, and when that didn’t happen, he ended up settling for a nearly $2,000 loss. He bought a used IKEA mattress off Craigslist and has slept perfectly since.

Guilt settles in
My friend talked a lot about the financial guilt he felt after saving for so long and then losing so much money. He made the bed a priority and his priority backfired on him. We could break down his researching of the bed, that he should have read the return policy fine print more carefully, or how he could have been more assured of his purchase, but for now, the deed was done and he had nothing but the consequences. I remember hearing him on the phone with his mother who pretty much said get over it. Move on.

Normally, I consider this sound advice. And maybe so does Shakespeare:

“Things without all remedy should be without regard; what’s done is done.”

Taken out of context, Shakespeare is siding with all the live for today, forget regret rhetoric that we often encounter. That said, this quote is by Lady Macbeth, chastising her husband for being such a wimp for feeling bad about murdering people. The inability to experience regret is a diagnostic characteristic of sociopaths. Guilt is a utterly human emotion and should be allowed to be experienced. Quit feeling guilty about the guilt, that’s the first step.

Mistakes happen. Instead of trying to live without any regrets, what if we learned to live with it in a way that serves us?

Overcoming the guilt
I think it’s interesting to see what we regret and feel guilty about. According to a study from the Kellogg School of Management, only 2.5% of the guilt we feel is because of financial reasons.

Decisions (or non-decisions) about education, career, romance, parenting, and self all beat out our decisions about finance in terms of our longterm levels of regret (finance even loses to how we spend our leisure time). And though a 23-year-old may regret the $20,000 she owes after graduating college, it’s more likely that the 35-year-old will regret never having gone. Granted, this isn’t even close to a sure-fire statement, but it demonstrates that we regret decisions about education more than decisions about money, to the tune of almost 30%.

We all know what it’s like to make a large purchase and having that pit-of-the-stomach, sick feeling. Whether it be a necessity or a decadence, that feeling is unavoidable, and it’s not likely that you’ll ever eliminate it completely. I think my stomach will always drop when I make a big withdrawal from my checking account, even if it’s something exciting and purchased responsibly. Tickets to Paris? My bags are packed! Seeing the cascading numbers on my online savings account screen? I could do without that.

What we can change now
American journalist Sydney J. Harris said, “Regret for the things we did can be tempered by time; it is the regret for the things we did not do that is inconsolable.”

Learn from what you regret. Write down your financial regrets, past and present, not only the times that you did spend, but also those that you didn’t. Many of our more profound regrets come not from the things we did, but from the things we were to busy or bullheaded to get around to doing. You still have time to make that next step, whether it be a future investment, that long sought after degree, or just a new skill — regretting what we haven’t done is often easily remedied.

Listen to that pit-in-the-stomach feeling. If you spent months saving for those airline tickets and you’re meeting your other financial goals, the anxiety is probably nothing to worry about. But if you feel guilt every time you buy the pricey olive oil or the new must-have app, that’s worth thinking about. Don’t “move on” or “forget” until you’ve asked yourself why you feel badly. Are you buying out of boredom? Are you charging it to your credit card? Are you spending more than you earn?

We can’t live life without guilt and regret. Every day, we do things. Most of those things will be in the positive column, and as for the rest, chalk them up to experience. What’s done is done, and we should let residual emotions run their course, but we also can learn from the negative experiences, and hopefully not repeat the same mistakes.

What have been some of your larger financial hiccups? How quickly did you recover, and what did you learn from it?

Ever since I was little I’ve been curious about the idea of having one million dollars. My mom told me to marry a rich man (!), but as an eight-year-old who didn’t like boys I said, “I want to do it myself!”

I’m not a millionaire. In fact, I wrote a post for Get Rich Slowly about paying off $70,000 dollars of debt a few years ago, and I’m slowly climbing my way up. During the journey, I also read numerous books about millionaires, but I decided I wanted to learn directly from the millionaires themselves.

Last year I started a podcast series of interviews with millionaires to find out what their pivotal moments were, how they did it, and what advice they had to offer. I concentrate on business building, but I also ask about how they handle their personal finances.

To date, I’ve interviewed more than 50 millionaires. Most of them started with very little money (like $50 in their pocket, or they were living with their mom at age 25) and were able to establish and keep up frugal habits once they learned how to make more money. I’d like to share with you some of their direct stories and advice.

Avoid debt
Millionaire Derek Sivers sold his company, CD Baby for $22 million in 2008. But even when he paid the bills as a professional musician and circus clown, he avoided debt. He says:

“I’ve always been very debt-averse. I don’t like being in debt at all, even on the small level. I never bought anything with a credit card unless I had that much money in the bank. The credit card was just a convenience. I never went into negative debt on a credit card, even as a teenager because I just hated that feeling. They say that there are two ways to be rich: one is getting more money, and the other one is lowering your expectations, lowering your needs.”

Derek says that when he was in his 20s he lived off of $12,000 in savings for a few years. Then he got a job with the circus making about $12,000 a year, and he felt rich.

Derek also gave the proceeds from selling CD Baby to a charitable trust for music education, and he continues to live a frugal lifestyle.

Be value conscious
Todd Tresidder, financial coach and founder of Financial Mentor, made most of his money through smart investments. He got the seed money to make those investments by saving almost 70% of his income. I asked Todd how he saved so much money. Todd said:

“I think…it comes back to values. You just have to not have an interest in buying lots of stuff…I was a single, young man, not too far out of college and my mom would get on me. She’d say, ‘Todd, you’re making all this money, why don’t you go buy yourself a Corvette? Go get yourself a flashy car.’ But I lived in Lake Tahoe. I’m an outdoor recreation buff…I’d play volleyball down on the beach; mountain bike in the hills. I run.”

By holding on to what he valued (time spent outdoors), Todd avoided expenses like a big monthly payment on a car he didn’t need (or want).

Buy used and share (and help the environment, too!)
I asked comedian Dan Nainan for one action tip that you can implement this week to move toward your goal, and Dan said the following:

“…figure out how you can save money. Don’t spend as much. Don’t go to Best Buy — get it off of eBay because sometimes it’s a tenth of the cost of retail. Go to Craigslist. I use Craigslist and eBay a lot. You can save a tremendous amount of money because people buy stuff and they don’t need it anymore, and it’s cheaper than buying retail. You’re not only saving money, but you’re buying something from someone so they’re not throwing it out. That’s helping the environment a lot. I mean there are countless ways you can save a lot of money and not consume a lot…it’s a win-win for everyone.”

Dan also says that folks in neighborhoods or townhouses could a lot of things with neighbors to save money, such as a barbeque grill or even a video camera. He also loves the library, of course!

Do what works for you
Matthew Tuttle, owner of Tuttle Wealth Management, a financial management company, had a lot of great information gleaned from working with clients (and their money). Matthew offered the following advice:

“I’m not a big fan of budgets. I’m not a big fan of trying to impose that discipline on someone who just can’t do it. I also find a lot of times spouses vehemently disagree when it comes to budgeting. What I am much more a fan of is, save as much as you can and if you’re saving as much as you can, as long as you’re not going into debt, then I don’t necessarily care where you’re spending your money.

So if I go to someone who is not saving anything and say, ‘I need you to start putting away 20% of your income every year,’ it’s not going to happen. It’s like the idea of boiling a frog. You dump a frog in boiling water it’s going to jump out. So I like to start slow. ‘This month let’s put away 1%.’ Then next month we’re going to bump it up to 2%. Then we’re going to bump it up to 3%, and we’re going to slowly get you used to living on less and less and less and get to a point where you’re saving as much as you possibly can.”

We’ve heard it over and over a thousand times: spend less than you earn. The millionaires I interview look for ways to increase the earnings and decrease the valueless spending.

For instance, Todd values outdoor recreation. He’s not looking to cut his ski trips, but he is willing to cut in other areas he doesn’t value as highly.

Millionaires invest
Many millionaires became millionaires because they don’t spend, they invest:

• Spending: To pay money for goods and services
• Investing: To spend money with the expectation to gain profitable returns

They look at each purchase, even personal things, as an investment. Of course most personal expenses don’t yield a profitable return in terms of more money in the bank account, but they can offer good value. The self-made millionaires I interview make conscious decisions about what they want and what a purchase will give them in return.

Even though I am fairly frugal I’ve learned a lot from the suggestions of millionaires. I’ve learned a lot from their attitudes about money. One of the reasons I started doing the podcast series was because I used to put millionaires on a pedestal. Now I realize, they are just people like you and me. They have made good and bad decisions in their lives. They learn from their mistakes and try to make better decisions. They even make spelling mistakes, just like me! And these people I have interviewed are also some of the most generous people I’ve ever met. The books I’ve read on millionaires didn’t tell me that.

For more advice from self-made millionaires, download my Top 10 Tips from Millionaires, and check out past GRS articles Five Secrets of Self-Made Millionaires; Nine Lessons in Wealth-Building from The Millionaire Next Door; and The Secrets of Financial Freedom: An Interview with the Millionaire Next Door.

Money is more about mind than it is about math — that’s one of the fundamental precepts of this site. If you improve your self-esteem, if you improve your mental attitude, if you improve your knowledge, you will improve your finances. To this end, it’s important to avoid negative messages about money. It’s difficult to improve your mental attitude when you’re besieged by financial trolls.

What are financial trolls? In a recent article, Steve Pavlina shared five wealth lessons, the last of which was: financial trolls must be shown no mercy. Pavlina writes:

A financial troll is a close cousin to the forum troll, except that financial trolls strive to sabotage your financial pursuits. These trolls can be internal or external. They’re the people who make comments like, “Wealthy people are so greedy. They only care about themselves and will take advantage of anyone to make money.” Financial trolls are also the internal voices that say, “If you make too much money, people will judge you harshly for it. They’ll assume that’s all you care about.”

Coping with external trolls
When I started Get Rich Slowly, I wanted people to like and agree with everything I wrote. Any time I received a negative comment, I took time to exchange e-mail with the person who left it. Here’s an example of an actual criticism I once received: “I would love [this site] if only the privileged would acknowledged how lucky and privileged they are and how their ‘advice’ applies to only other privileged kids.” I tried to carry on a conversation with the commenter, but nothing I could say would satisfy him — in his mind I was a rich jerk and nothing could change that.

I realized that 95% of these people aren’t interested in a rational exchange of ideas. They’re external financial trolls. They have chips on their shoulders, they’re clinging to preconceived notions, or they just want to argue. They’re not worth my time. Other examples of behavior you might see in external trolls include:

• You might have a goal, and have a plan to pursue it despite the risk involved. The troll in your life focuses on the obstacles, on the reasons you can’t achieve it: “You don’t know what you’re doing”, “Think of all the things that might go wrong”, etc.
• Perhaps you admire other successful people. Trolls often resent success: “Warren Buffett go rich on the back of others”, “Bill Gates is a crook”, “Rich people don’t work for their money”
• Some trolls complain all the time. They complain about their jobs, they complain about their lives, they complain that they don’t have money. They complain, but they rarely take action. Complainers are poisonous.

Defeating most external trolls is straightforward. Because they’re not internal, you can usually just remove yourself from the situation. Ignore the troll. Change the conversation. Leave the room. Hang up the phone. Do not argue — as Pavlina notes, any time you argue with a troll, the troll wins. Do not engage the troll.

Coping with internal trolls
Internal trolls are more insidious than their external brethren. Because they are a part of you, eradicating them takes self-discipline. Examples of internal trolls include:

• Self-defeating thoughts and behaviors: “I can’t do this — it’s too difficult”, “I’m not smart enough”, “It’s too much work”, “I don’t deserve to have money”
• Procrastination — “I’ll start next week”, “I’ll worry about this later”, I can start saving next month — this month I’ll buy an XBox.”
• Rationalization — “Buying just one pair of shoes won’t blow my budget”, “I’m out with my friends — I should join the fun”, “I should reward myself for how well I’ve been doing lately”
• Barriers — “I don’t know how to open an IRA”, “It’s too much bother to set up automatic deposits”, “Sure I could call around for lower rates, but I don’t like talking on the phone”

Conquering internal trolls can be non-intuitive. Most are a product of self-doubt, which is best combated through exercise, discipline, positive social interaction, and a healthy diet. Seriously. The following can also help:

• Talk back to yourself! It makes sense to avoid arguments with external trolls, but confronting internal trolls is an excellent tactic.
• Set financial goals. Review them regularly.
• Read success literature: personal finance books, self-development manuals, and biographies of successful people.
• Educate yourself. Learn about money. I resisted investing for a long time until I learned just how easy it was to open an IRA.
• Find a mentor, a coach, or an advisor. Learn from others.

I have much more trouble with internal trolls than I do with external trolls. They’re a constant threat.

Know when to seek help
Some trolls are difficult to defeat. What do you do about a spouse who insists on sabotaging your financial security? How do you deal with your own compulsive shopping? Problems like these may require the assistance of a trained professional: an accountant, a lawyer, or a psychologist. The important thing is to deal with them. Until you defeat them, they’ll only hold you back, preventing you from achieving success.