1. Aristotle on the educated mind

“It is the mark of an educated mind to be able to entertain a thought without accepting it.” – Aristotle

If everyone was capable of doing this, the world would be a far better place. Too many people immediately discard an idea either because they already hold one on the same issue or because they don’t want to listen to the source.

2. Peter Singer on effective altruism

If you’re going to help others, it makes sense to choose ways to do it that maximize the effectiveness of that help.

3. Groucho Marx on mistakes

“Learn from the mistakes of others. You can never live long enough to make them all yourself.” – Groucho Marx

The only thought worth thinking about the mistake of someone else is what you can learn from that mistake.

4. Judy MacDonald Johnston on preparing for a joyful end of life

This is the best way I’ve ever heard of to approach end of life issues.

5. Zach Sobiech on the meaning of life

“It’s really simple actually. It’s just, try and make people happy. Maybe you have to learn with time. Maybe you have to learn it the hard way. But as long as you learn it, you’re going to make the world a better place.” – Zach Sobiech

If you focus on making others happy, things, in the long run, are going to be a positive for you.

6. Bernard Baruch on speaking your mind

“Be who you are and say what you feel because those who mind don’t matter and those who matter don’t mind.” – Bernard Baruch

The people who are worth having in your life won’t respond to your curiosity and opinions with negativity.

7. Handwritten letters

Few things seem more wonderful to me than a handwritten letter. Thanks to Liz West for this great image.

8. Erica Jong on blame

“No one to blame! That was why most people led lives they hated, with people they hated. How wonderful to have someone to blame! How wonderful to live with one’s nemesis! You may be miserable, but you feel forever in the right. You may be fragmented, but you feel absolved of all the blame for it. Take your life in your own hands, and what happens? A terrible thing: no one to blame.” – Erica Jong

Blame is the crutch of people who are unwilling to change.

9. Farmers

In a world where it’s so easy to get food, it’s vital to remember where that food comes from. Largely, it comes from the labor of farmers in the fields. Never forget their honorable work.

Thanks to upyernoz for the photo.

10. Mary Catherine Bateson on learning

“We are not what we know but what we are willing to learn.” – Mary Catherine Bateson

When you stop learning, you accept that you will never be more than you are today.

The post Ten Pieces of Inspiration #127 appeared first on The Simple Dollar.

At the start of 2006, my life was in financial disarray. I’ve described many times what I did to turn it around. I clamped down hard on my spending. I started saving for the future. I learned a ton about personal finance. I changed careers. I bought a home – and paid for it in full. I achieved total debt freedom.

It was a great turnaround, one that completely changed my life.

But it wasn’t just an internal change. The people in my life saw the changes, too.

At first, they mostly saw the spending changes. I didn’t suggest the expensive restaurants any more. I bought lower-cost dishes when we did go out. I didn’t always have the latest gadget any more. I’d often suggest low-cost activities instead of expensive ones.

Then, gradually, they began to see bigger ones. They saw us buy a house. They saw me make a radical career shift. They saw our stress level drop through the floor, even with the addition of children into our lives.

These changes didn’t just affect me. They also had a strong indirect effect on the other people in my life.

If I think about the five adults that I’m closest to, that list has largely remained the same since about 2002 or so. I don’t like to name names on this site, but the very core of my personal life has remained very consistent.

What’s changed about them?

Sometime in the last ten years, all of us have had a mortgage to our name. In that same time period, all of us have paid off our mortgages.

Sometime in the last ten years, most of us have had significant student loan debt. In that same time period, all of us have paid it off.

Sometime in the last ten years, all of us have purchased replacement cars. In that same time period, all of us have paid them off in full and all of us are saving for their replacement.

As far as I can tell, at this point, all of us are debt free.

There are two things I really want to point out here.

First, the financial turnaround and improvement of the people in my life has been an inspiration to me. I’ve drawn upon their examples and ideas countless times to improve my own situation.

In the same breath, most of them have told me that my own financial turnaround has pushed them, too. It’s made them do the same thing – they’ve pulled examples from Sarah and myself and used them as tools and as motivation to improve their own state.

It’s mutually beneficial once the pattern starts going. Your friends and family reflect your changes, and you reflect their changes, too. It becomes an upward spiral of self-improvement, much like negative friendships can become a downward spiral.

Here’s the challenge, though. Are you ready and willing to take that first step? If you take a step or two and then give it some time, you’ll be surprised how your inner circle will often begin to come around.

The post When You Change Yourself, You Change Those Around You appeared first on The Simple Dollar.

Usually, my comparisons end up looking at the cost of the item at our local warehouse club versus the cost of the item when it’s on sale at our local grocery stores. Usually, the warehouse club is cheaper on most household goods, but sometimes a great sale at the grocery store can bump that cost lower.

Lately, though, I’ve been looking at the Subscribe and Save program offered by Amazon. This is a program where you can choose to “subscribe” to household goods and, then, once a month they’ll package them up and ship them to you based on your subscription.

So, let’s say you “subscribe” to diapers on a monthly basis, shampoo every other month, and toothpaste every three months. On the first, fifth, seventh, and eleventh months of the year, you’d just get diapers. On the second, fourth, eighth, and tenth months of the year, you’d get diapers and shampoo. On the third and ninth months of the year, you’d get diapers and toothpaste, and on the sixth and twelfth month, you’d get all three items. Their system handles all of this scheduling for you – all you have to do is subscribe to the individual item you want.

If you subscribe to just one item, you get a 5% discount off of the price. If you subscribe to five or more items, you’ll get a 15% discount off the price. It’s at that 15% discount rate that the price of these items becomes really comparable to what I can get around here.

So, I started shopping their “Subscribe and Save” section to see what I could pick up that would actually beat my warehouse club at the 15% discount level.

I just moved through our list of household supplies that we buy regularly – shampoo, toothpaste, garbage bags, and so on – and I compared them directly with the price at our local warehouse club. If I couldn’t find an exact match, I’d calculate cost per unit using the calculator.

As I looked, I couldn’t help but notice that most of the items were cheaper at my warehouse club even at the 15% discount level – but not all of them. The problem is that it takes five items to reach that level – and without that 15% discount, I couldn’t find any items that I couldn’t get at a lower price locally.

Another challenge is the need for refills. What if you run out of something in the middle of the month? You can request that they ship the item early, but then you have to pay for shipping on that faster item. To avoid that, the best route is to simply get them a bit more frequently than you’d use them, but then you build up a bit as they arrive faster than your consumption rate, meaning eventually you’ll have to de-subscribe.

Still, after a long period of searching, I did find five items that we use regularly that are less expensive on Amazon with the Subscribe and Save discount than I could find locally, so I subscribed.

Once the subscription was in place, it was really convenient. The items arrived like clockwork, so I had no need to pick them up at the grocery store. I did end up building a backlog of some of the items, so I had to change the delivery schedule, but that was easy enough.

Overall, I saved money, but on occasion, I would see local sales that would trump the value of the “schedule and save” system. I would have saved money waiting for those sales. On the other hand, watching for those sales takes time, as you have to watch flyers every week to catch those sales.

So, what’s a person to do? The most time-effective route (while still bringing down your bills) is to just do a big comparison of prices between “Subscribe and Save” and your local warehouse club or grocery store, then subscribe to anything that’s cheaper than the regular price and not sweat the sales. However, you can certainly invest more time into the plan by comparing weekly flyers – you will absolutely save more money, but it won’t be a lot of money and it will require some time (the amount of which is really up to you).

In the end, I think “Subscribe and Save” really comes down to time. It’s an extremely fast way to get a pretty good price on household items and just have them show up on your doorstep. However, the prices are generally trumped by a warehouse club and, sometimes, by sales at your local grocery store.

The post Do Amazon Mail Order Subscriptions Save Money? appeared first on The Simple Dollar.

My big dream is to reach true financial independence. By that, I mean that I have enough money socked away in relatively stable investments so that the income from those investments provides me with enough for my family to live on regardless of whether I’m actually earning income.

Why is that my goal? It’s not so that I can sit idle. It’s so that I have the freedom to take giant personal risks, like spending several months doing nothing but perfecting a novel or spending a bunch of time laying the groundwork for a charity or campaigning full-time for a political position without having to worry about the downside of failure.

There are moments – and those moments are surprisingly frequent – where that goal simply seems impossible. It feels like an absolute pipe dream. I tell myself that it’s something that I will never, ever achieve.

I feel overwhelmed. I feel overwhelmed by the enormity of the goal. I feel overwhelmed by the sheer number of little steps that it will take to get there.

In those moments, I’m sorely tempted to just toss the goal aside, forget about it, and live solely for today. It is very, very, very easy to just believe that “future me” will take care of my future and that I have no responsibility for it.

I felt that way today. As positive as my financial progress has been over the last several years, I sat here running through the numbers on my spreadsheet and I felt almost hopeless. The path to where I want to be is a very long one, even beyond the successes I’ve already had in terms of turning my financial life around.

It feels enormous, and I almost feel overwhelmed.

For me, the way out of this is to go back to the very basics.

First of all, I look at what I already have achieved. I can achieve things – big things. I built The Simple Dollar out of nothing at all. I turned my financial life around, moving from being scared to open the mailbox to debt freedom and mortgage-free home ownership. We have a healthy amount of money in the bank and in various investments. We’re in very good shape.

Second, I look at why I want more. Why do I want more than this? I think about Sarah. I think about my children. I think about the things I want to leave behind that will continue to improve the lives of others, even after I’m gone. All that I want to achieve in life centers around those things.

Finally, I look at today. Nothing matters more than today. Can I finish off today with a run of good choices? Doing that makes my financial situation at the end of today better than it was at the start of the day.

It’s hard to do that sometimes, especially when everything feels overwhelming, but it’s the key. If you can go to bed that night knowing you did everything right today, you’re going to go to bed happy. Do it again the next day, and the day after that, and you’ll really have something.

If you feel overwhelmed by your goals, look at what you’ve already achieved. Look at why you’re striving for something more. Then, just focus on today. Get that momentum back and, before long, that sense of being overwhelmed will fall away.

The post Overwhelmed appeared first on The Simple Dollar.

I enjoy listening to new music, but when I’m working, I often spend most of my time listening to albums I’ve heard a thousand times. It’s almost like they fit like an old glove. I can tune them out effortlessly because of their familiarity if I need to. On the other hand, when I actually pay attention to them, I simply feel good, even if the music is downbeat.

I have albums that are approaching 1,000 plays on iTunes. That’s a lot of playthroughs.

Q1: Checking account buffer
Does the “buffer” that I carry in my chequing account count toward an emergency fund?

To be more precise, we always have $3000 in our chequing account at the end of each month when we’re done paying bills and transferring the excess into various savings account. I find that this gives me peace of mind so that the automatic withdrawals that occur early on in the month are covered even if the first paycheques do not come until the second week of the month.

That buffer ($3000) is pretty much one month’s worth of spending for my husband and I (no kids), and we also have one month’s worth as an emergency fund in a savings account (working to build that up to three months’ worth of expenses).

So does that buffer count towards my emergency fund? If it does, then I’m 2/3 of the way to having your recommended emergency fund for a couple without kids or a mortgage, but if it doesn’t, we still have a lot of work ahead! We’re waiting to have that full 3-month emergency fund before we start saving more aggressively to buy a house (we’re okay renting for a few more years yet).
- Eric

It’s really up to you whether to count it.

Personally, since it’s serving a non-emergency purpose, I probably would not count it. You can’t just tap it without adding to your life concerns, which is part of the reason for an emergency fund.

Still, as long as you have several months of cash on hand, you’re in better shape than the majority of Americans anyway.

Q2: Insuring collectibles
I have a number of sports cards and other trading cards that are all professionally graded and would have a value, if I sold them on eBay, measuring well into the six figures. Currently, I keep most of them (the most valuable ones) in a safe deposit box at the bank and a few are framed in my home.

It occurs to me that I might want to insure them, but I’m not sure how to do that. Any suggestions?
- David

My first step would be to talk to my home insurer about that collection. Depending on the policy, you may be able to cover these collectibles under your disaster and/or theft insurance as part of your homeowners insurance.

If that doesn’t work out, you can shop around for collectibles insurance. Many insurance houses offer policies like these that, depending on the policy, are comparable to adding them onto your homeowners insurance.

The safe deposit box is probably the best place to keep the items, but you should still consider theft insurance on them. A bank vault, while very secure, isn’t inpenetrable. Most insurers will insure the contents of a safe deposit box at a pittance because the risk of payoff is so very low, but it’s not zero.

Q3: School now or later?
I’m a 24 years old girl living alone working full time and I live in Montreal, Canada. I decided to apply to university for the next fall semester and I have some worries regarding living cost and loans. Basicly, we have a grants and loans program from the governement which is pretty decent, the thing is, the lower your income, the more you receive in grants and the less you receive in loans. After calculations, I realised that it’s more advantageous for me to get a part time job and reduce my income, since this amount will be given back to me as a grant when I start school.

I’ve already made plans to move with room mates and live more frugally and such, so everything is making sense, except for one thing. I currently have a 5000$ debt with my bank, paying it back is gonna be near impossible once I get into this process, and since the school grant calculates the prevous year, I can’t really pospone school because my full time income is going to penalize me at some point.

Any ideas on how to deal with the debt? Or make extra income that’s not declared to the governement?
- Nina

If I were you, I’d keep working for now, eliminate that debt as fast as possible, then switch to the part-time job to prepare for school.

You do want to sit down and run the numbers to make sure that working part-time is actually the most cost-effective route for you. You might be surprisingly money ahead by working full time and saving a healthy portion of your income rather than working part-time.

An aside: this is really a poor way to decide who gets aid for education. Any situation that encourages people to “game” the system in this way is not a well-conceived system. I’m very much in favor of merit-based aid, but need-based aid is a much trickier proposition.

Q4: Traveling for music
My son is sixteen years old. He’s been in a band for the last four years and they’re very good. They’ve won a few contests in the area and are signed to a small record label.

Anyway, they plan on spending the whole summer traveling, which I’m fine with. The problem is that it’s unclear to me how they’ll be splitting up the earnings and what my son should do with the extra that he earns because they make more per band member per gig than his food and lodging would cost.

Any suggestions?
- Marvin

He’s sixteen and in a traveling band. I would consider anything that he saves to be a positive.

If he’s being really responsible, he should simply get a savings and checking account at your local bank and deposit extra money whenever he can at whatever ATM he’s near. Then, at the end of the summer, he can address what to do with that money.

If he does that – at age sixteen in a traveling band – he’s doing far better than I would have expected from a sixteen year old in that situation.

Q5: Parents helping with home purchase
Currently I am in a very good financial situation. I’m 29, unmarried and am maxing out employer retirement and Roth IRA, with a very healthy savings account. I have a very stable job, but will likely move to another state in 5-7 years with the same company. I have $40k down payment saved for a $200,000 house. That’s the high end of my budget. However, the location I want to buy a house is very desirable (lots of professionals) so you get less house for the money (2bd/2ba, 1000SF). I could move to a less popular area to get a larger house (3bd/2ba 1300SF), but I don’t feel like I need that with where I am (no kids or husband likely for a long time). However, my parents are willing to pitch in some money towards the down payment to help me buy a bigger house (3bd/2ba 1300 SF for $250k) in the location I want because they say it is a better investment and likely easier to resell when I choose to move. It’s possible I might stay permanently but very unlikely; who knows the future though? I can afford the additional monthly payment in any case witha 30yr conventional mortgage, but I want to avoid PMI. Is it worth going for the better future resale?
- Monica

I’d still be wary about this. Let’s say that you buy the smaller house for $200K. You put your own 40K into the mix and get a mortgage for $160,000. Over a 30 year mortgage at 4%, that’s $763.86 per month for the mortgage payment. You’ll also need homeowners insurance, property taxes, utilities, and maintenance.

Let’s say you borrow $10,000 from your parents to buy the more expensive house. In that situation, you owe a $200,000 mortgage. If you get a 30 year mortgage at 4%, that’s $954.83 per month for the mortgage payment. On top of that, your costs for homeowners insurance, property taxes, utilities, and maintenance will all be between 10% and 30% more in this house, plus you’ll owe your parents $10,000.

If everything goes perfectly, the second option will probably be better. That perfect plan involves waiting several years for the housing growth to push your equity up more than you’re losing in extra interest, extra utilities, and extra property taxes, and it involves you not losing your job or having a career shift in that time frame. If that doesn’t happen perfectly, the first house is better as the overhead is lower and the money lost to interest/taxes/insurance/utilities is smaller.

Q6: Piano lessons
We have a piano in our front room because my wife plays it (every once in a while). Lately, our five year old has started experimenting with it constantly and wants to learn how to play it. My wife doesn’t feel equipped to teach her, so we’re looking for lessons. How do we determine what’s a fair price for private music lessons?
- Alvin

Shop around. Ask for quotes from the people in your community that offer lessons. Ask your local social network for recommendations and suggestions.

Different areas have different prices for lessons. In our area, prices are higher than where we grew up for music lessons, but they’re far lower than a friend of mine is paying where they live.

You just have to shop around and see what the market looks like. There’s no national standard for this type of service.

Q7: A messy divorce
My husband and I divorced after 23 years of marriage a year and a half ago. I was blindsided. Without going into too much detail, before I knew what hit me, my husband had an affair. During the divorce, I learned he had cleaned out our home equity and hidden most of the assets we may have had. He makes Around !35,000 a year.

I have moved on emotionally done my best to recover financially. I am debt free other than my mortgage and car. Our divorce took 3 years and during that time, I saved every penny I could save. I bought a small house and this took most of my savings.

In our divorce decree, I signed a quit claim deed (big mistake I now learn) and he has sole financial LEGAL responsibility for the house. As a result my credit has been destroyed. The house was too big and the the mortgage was too large for me to keep up with on my own.

In July of 2012, I learned he quit paying on the mortgage and the house has gone into foreclosure. I went to see a bankruptcy/foreclosure attorney and was advised to try use any savings I might have to make repairs and purchases in case I was faced with bankruptcy. This brought me to almost zero savings.

I have been through Dave Ramsey’s financial peace, read his books and I read your blog daily. I scour the internet and try to learn everything I can about finances. My learning curve has spiked through the roof since the divorce. I knew nothing about taxes, retirement or budget planning pre-divorce. I am very conservative with my money and have always believed being debt free and having an emergency fund are the best security I can have.

I have around $7000 in savings right now…or so I thought. Last year, I went to an accountant to have my taxes done and ask questions about tax planning. She also did estimated taxes for 2012 taxes which I paid. In doing my taxes this year, I found she made a mistake and I will owe around $7500.00. I will also need to PLAN for next year to catch up so I won’t have the same tax bill again next year.

So, here is my question. I’m 52. I have $92,000 left on mortgage. I have about $80,000 in roth IRA, 403b, 457 and ex husband’s 401K. I will also have around $3200 per month in pension (so far).

I make $46,000 per year as a teacher and have $30,000 per year in alimony until I am 62.

I’m comfortable. I am completely satisfied with my income. It is more than enough to live on and pay bills, but I’m scared and worried. I don’t know whether it would be best to pay the tax bill and completely have NO EMERGENCY FUND or set up payments with the IRS or split and do some of both with a large payment to the IRS. I’ve never been in a situation where I don’t have money to fall back on.

My second question is how do I plan a strategy to shelter taxes and plan for future taxes? If I max out my retirement, along with other withholdings (FLEX and health insurance, etc.) I will have almost nothing beyond that and my current living expenses (monthly nut). (This doesn’t include anything for future savings, extra house payments, clothing, entertainment or travel).

You may not be able to help, but I would greatly appreciate advice for where to turn.
- Mindy

For your taxes, you should talk to the IRS and set up a payment plan. This is not an emergency worth emptying out your e-fund for.

As for planning for future taxes, I’m guessing this is the result of the alimony income. You should ask a good tax person what you should be doing to prepare for it.

I’m uncertain about the $92,000 mortgage. Is it on the house that has been foreclosed on or did you buy another house? If that mortgage is on a home that isn’t your primary residence, you should be selling it as quickly as possible.

There’s nothing here that says your situation is desperate. It just needs a little focus and planning.

Q8: Hiding a credit card
I recently found out that my wife has been hiding a credit card from me. I found an entry for it on her credit report when I was pulling them up. At first, I thought it was identity theft, but then she left her wallet out on the table and I saw the card in there. I’m now kind of annoyed when I see money being taken out of our checking to cover the bills on that credit card and I feel like I can’t trust her as much. Any thoughts on our way forward from here?
- Andy

You need to sit down and talk about the credit card.

Most of the time, people get credit cards in situations like these because there’s something about the spending situation at home that they’re having a problem with, whether they feel they can say so or not. Their response is to just get that card rather than having a hard discussion.

You need to have that hard discussion. There’s really no way around this. This is a trust issue, and it’s also an issue of your shared finances.

You might want to look at the book Difficult Conversations, which can really help in situations like these.

Q9: Target Retirement Funds still good?
I just read your post from 2007 about Vanguard’s Target Retirement Funds. A lot has changed in the financial world and economy since then. Do you still feel this is a good choice for your retirement savings? I am considering the 2030 fund for myself.
- Roger

Target Retirement Funds are still a great choice for retirement savings within a Roth IRA, a Traditional IRA, or a 401(k)/403(b). I wouldn’t invest in them outside of those retirement accounts.

Essentially, those funds just constantly rebalance themselves so that earnings are high well in advance of the target date, but that the money is more secure as the date arrives. It’s a good philosophy that eliminates headaches for individual investors, usually at little cost.

If you invest in one, choose the one with the target date closest to when you expect to retire. I’m assuming you plan on retiring close to 2030, so Target Retirement 2030 would be a good choice.

Q10: Replacing TV with reading
Just wanted to share with you that my husband and I decided to give up television for a whole month and replace our hours of evening television with reading and personal projects and some board games. It has been a wonderful month and we are now seriously considering cancelling the satellite subscription and just getting rid of the television. Thanks for encouraging us to try it!
- Jenny

We don’t quite do this, but we’re pretty close to it. We spend most evenings either reading or playing games. I watch perhaps one or two television programs a week, while Sarah watches maybe one or two more (usually as background noise when she’s working at home).

Books are less expensive than television, especially when you utilize the library. You don’t need a subscription service for programming. You don’t need an expensive device to watch them on. You don’t need lots of energy to power a book, either – an LED clip light will give you all you need.

The average American spends 34 hours a week watching television. If you can shave just ten of that, you have enough time to read a ton of books or learn a musical instrument or take care of countless projects that you’ve left for “someday.”

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Favorite Albums appeared first on The Simple Dollar.

There was a time when I dreaded seeing these statements. They were evidence of how poorly I was managing my finances. I’d glance at them, try not to think about them, and toss the envelopes into a storage box “to look at later” – meaning “to forget about… or at least try to.”

As I began my financial turnaround, these statements turned into a source of pride. I loved seeing my ending balance on my checking account, comparing it to my starting balance, and feeling good about that increase. I loved looking at my credit card statements and seeing the opposite – a lower ending balance than a starting one.

Today, I see those statements as a tool – one that I’ve turned into a game of sorts. Those statements are among the best helpers I have in keeping my spending in shape and helping me to avoid repeating spending mistakes.

The process is simple.

Whenever I get a statement in the mail – a bank statement or a credit card statement – I walk through it line by line. I try to identify every single item that exists on that statement. What did I buy with this $28.92? What is this $9.96 on here for?

What I’m trying to do is identify all of the purchases I made that gave me little or no lasting value. If I spent money on something that wasn’t a life essential and didn’t give me lasting value, I probably spent that money for a pretty dumb reason.

I didn’t need to spend that $6.42 at the gas station to buy beverages. Why did I do that? Why didn’t I just fill up some water bottles or juice bottles before we left?

What on earth did I even buy when I spent $18.92 at Books-A-Million? It was probably a book… but I am not even sure which book I bought. That’s a pretty dumb purchase. I could have just checked out a random book at the library and received the same value.

I spent $49.95 to renew that magazine for another two years? I have seven back issues of it sitting on the end table unread! I need to cancel that subscription… and if I can’t, I need to set up a reminder to poke me in about twenty months to cancel it then.

The goal of this isn’t to beat yourself up. It’s to identify the purchasing mistakes you made and think about them so that you don’t repeat them.

No one is perfect. We all sometimes buy things that we really didn’t need to buy. I’m a sucker for books, for example, as well as board games.

The thing is, I know I’m a big sucker for those things because I constantly bear witness to my spending mistakes. I know to be wary in any situation where I might be buying a book or a board game.

I also know lots of things that I simply shouldn’t ever spend my money on. It’s a waste of my money to buy gas station beverages when I could just spend two minutes before we leave to fill up some bottles for everyone. It’s a waste of my money to ever purchase a Bluray disc, because I’ll probably only watch it once and, if that’s the case, I can just rent it via Redbox for $1.50.

Seeing those mistakes on that statement provides a simple way to reinforce the good decisions and knock down the bad ones. That way, each statement is a little better than the last one. Over time, they contain more and more decisions I don’t regret and fewer and fewer decisions that I lament. That’s progress, one little step at a time.

The post The Statement Game appeared first on The Simple Dollar.

Prayers and condolences don’t go very far, though, if they’re not followed with action. You can give to the American Red Cross either out of your pocket or with your time or with a blood donation. If you really want to help, there’s a simple step to take.

How to Simplify Your Life to Make It Better Simplification is only useful if it brings about a net positive in your life. Often, simplification achieves that, but not always. (@ prairie eco thrifter)

The Seduction of Spending The pattern of pleasure can be a tough one to escape from. Spending without care can put us into that pattern. (@ the canadian personal finance blog)

Advertising Tricks: How Being Afraid Is Profitable Fear sells. It sells very well, in fact. (@ cents and sensibility)

The Obstacle Is the Path The best path forward in your life usually involves removing whatever the biggest obstacle is in your life. (@ zen habits)

The post The Simple Dollar Weekly Roundup: Tornado Edition appeared first on The Simple Dollar.

The problem is that it’s often hard to create a real picture of the future, especially when you’re extending out a few years or more. Life is full of unexpected twists and turns and sometimes we find ourselves marching down a much different path than we ever expected.

If you had told me ten years ago that I would wind up being a freelance writer so that I could spend lots of time with my three children, I would have looked at you like you were out of your mind.

These two things seem at odds. There’s incredible benefit in working toward a big goal, yet the bigger the goal, the more likely it is that life will sweep it aside for reasons you can’t yet fathom.

So why work for a big goal?

The reason is that the real value of a big goal is in the journey. Any journey you take toward a big goal is going to add positive things to your life. It’s going to bring you positive value in ways you can’t even imagine yet. It’s going to teach you skills. It’s going to build relationships. It’s going to put money in your bank account.

All it takes is a commitment to move toward that goal.

If something happens and the goal becomes unrealistic for some reason, it’s not all for nothing. You’re left with relationships, with money, with skills, with achievements. All of those things provide a strong foundation for whatever it is that you’re going to do next.

Don’t think of your big goals as things that are set in stone. Think of them as a wish list – things you’d like to achieve if your life contines down this same path.

My wish list involves raising three intellectually curious and self-sufficient children. Now, many things could happen that would prevent this, most of which I’d rather not think about. The fact that there is no guarantee that I’ll reach the goal doesn’t mean it’s not a goal worth working towards.

Another item on my wish list involves finishing and publishing a few novels. Again, many things can happen that will brush that goal to the side, but, again, the fact that there’s no guarantee doesn’t mean that it’s not worth moving toward that goal.

I can list many goals like this: building a marriage that’s strong for life, launching a community initiative I’ve been thinking about for a long time, moving to a new home – the list goes on and on. None of these are guaranteed goals.

What they all have in common is this: every step I take toward those goals will improve my life’s situation no matter whether I actually achieve that goal or not.

The goal just gives me something to look forward to. It’s a possible future – one that I want quite a lot and one that I’m willing to work today to achieve.

Yes, life might not lead me to those things on my wish list, but I get value out of every moment I spend working toward those goals.

So will you. What’s on your wish list? Every step you take toward those things will help your life, regardless of whether or not you actually make it there.

The only sure way to fail is to never start.

The post Your Wish List appeared first on The Simple Dollar.

To keep things straightforward, we divided up the shared monthly bills. We were each responsible for our own bills – the loan on the car we individually drove to work, our own student loans, and so on. The rest were divided between us based on our income level.

We stuck with this format through our years of overspending as well as through the first few years of our financial turnaround. In fact, we only merged our accounts in 2008, well after our financial situation had strongly rebounded.

During the period where we overspent, it was good that we had separate accounts. If our accounts were combined, I am confident we would have overdrafted regularly, something we managed to avoid with separate accounts. Our mistakes were related to not having shared goals and spending for today.

However, when we started to get our financial house in order, we combined our accounts.

The reason is simple. It became really clear to both of us that we are both affected by every financial move either one of us makes. If Sarah spends $20, then that’s $20 less available to me over the long run. I might not see the impact of that $20 spent immediately, but I will see it eventually in some fashion, either in terms of having less in our shared savings or having to cover a bill or an expense. The reverse is true – if I spend $20, then that’s $20 less that Sarah has.

In fact, this is the approach I would suggest for any couple trying to figure out their finances.

If you’re in a position where you both overspend and you’re both individually struggling to keep the bills paid, a shared account can be a real problem. It just gives you both a tool with which to blame the other for the financial problems without taking them upon your own shoulders.

If you can look at your account statement and see all of the withdrawals your partner made, it becomes very easy to just blame your partner for everything. It gives you a crutch with which you can avoid taking on personal responsibility for the situation.

Keeping your accounts separate means that you have to take responsibility for your own mistakes. You can’t blame anyone else for not having enough money in your account. You made the choices.

When you’ve reached the point where you can both admit that you have a problem and are working to correct it and you can begin to see those changes reflected in your checking account, merging accounts makes a great deal of sense.

When accounts are merged, the responsibility is shared. Your spending decisions affect your partner more directly than ever, so you have to be more responsible than ever before. If you’re in a position where you’re spending more than you should out of your own individual account, you’re not ready yet. You’re still not responsible for your own decisions, let alone those of your partner.

How will you know when that time comes? The best sign is when you’re taking care of your own business successfully. Is your balance growing each month, rather than persisting in a paycheck-to-paycheck state? If your partner’s money is tight, are you willing and able to help your partner out?

What about individual spending freedom? Our method of doing this is to simply have an informal “allowance” of free spending for both of us each month. Sarah buys things and I don’t really question it because I know she keeps a cap on the spending.

Sharing a checking account is a vital step in becoming more responsible for the financial well-being of your partner. If you’re not ready for that responsibility – and we weren’t when we were first married – then you shouldn’t have a merged account. It will end up causing many more financial panics and much more conflict with your partner and if you’re not ready to take charge of your money, all it will cause is fighting. Wait until you’re both ready to take responsibility not just for your own spending, but for your shared spending.

The post One Checking Account – or Two? appeared first on The Simple Dollar.

Before you even begin talking about how much you’re saving in terms of increased fuel efficiency, you have to determine some of the numbers you’re working with.

First off, how much does a gallon of gas cost? Right now, the gas station nearest to my home charges $3.999 for a non-premium gallon. So, we’ll go with that – $4 per gallon.

You also need to know how many miles you expect to get out of your car after you buy it. It really depends on the age of the car that you buy. If you buy a new or nearly new car, you might get as many as 150,000 miles out of it. For an old car, you might be lucky to get 50,000 more miles out of it. Let’s go with a happy medium – 100,000 miles.

So, what is fuel efficiency actually worth when you’re buying gas at $4 per gallon and intend to cover 100,000 miles in that car? Let’s look at some different fuel efficiency numbers.

If the car you buy gets 15 miles per gallon, that means it’s going to slurp down 6667 gallons over the time you drive that car. At $4 per gallon, that adds up to $26,668 in fuel costs.

If you bump that up to 20 miles per gallon, that means it’s only going to use 5,000 gallons over the period that you own the car. At $4 per gallon, the total fuel cost is $20,000.

Let’s say your vehicle gets 25 miles per gallon. In that case, it only uses 4,000 gallons over that 100,000 mile life span. At $4 per gallon, that adds up to $16,000.

What about 30 miles per gallon? If you’re looking at 30 miles per gallon, the vehicle consumes only 3,333 gallons of gas. At $4 per gallon, that adds up to $13,334 in fuel costs.

What about 40 miles per gallon? In that situation, you’re looking at a consumption of 2,500 gallons over the life span, which, at $4 a gallon, adds up to only $10,000 in fuel costs.

Fuel efficiency is a tremendous savings. If you choose a 40 mpg car over a 15 mpg car, you’re saving $16,668 in fuel costs over the next 100,000 miles (assuming fuel stays at $4 per gallon). That’s enough to buy your next replacement car.

A good rule of thumb to use, assuming you are going to be driving the car for a long while and assuming that fuel prices continue to inch upwards, is that for every single mpg that one car has higher than another car, you’re saving $1,000 in fuel over the lifetime of that car. It’s not a perfect rule and it particularly breaks down for comparing cars well above 25 miles per gallon, but it’s a good one for giving yourself an estimate of the value of fuel efficiency when shopping around.

Fuel efficiency is simply an enormous financial consideration when buying a car. Buying a car that is 10 miles per gallon more efficient in terms of fuel consumption than the other option can easily save you $10,000 over the lifetime that you own the car. Keep that in mind when you shop around.

The post What Is Fuel Efficiency Really Worth? appeared first on The Simple Dollar.

For us, May often means graduations, which means going to a ceremony and watching young people celebrate the end of one chapter in their life and the start of another, one that will often go in a very different direction than they expect.

Most of the time, when lives reach a crossroads, we don’t see the opportunity to shift paths until the opportunity is gone. Graduation is one of those chances to shift directions where the opportunity sits right there in front of us.

There are moments when I wish I could find myself at that kind of crossroads in life again, with that many open highways in front of me. There are so many different directions to choose from.

Q1: Difficulty estimating freelance income
I have a full time job but I also do some freelancing gigs on the side. They’re kind of consistent – I probably do fifteen a year – but they’re really unpredictable in terms of pay and in terms of frequency. I might do five in a month and then do nothing for half a year. Anyway, I’m supposed to pay estimated taxes on this income but I have a hard time estimating how much I’m making a year. How can I do this?
- Roger

It’s pretty easy. Just figure out how much you’d owe in income taxes on the amount you’ve earned in the last three months, then pay that. Just repeat that pattern each time you have to pay estimated taxes.

It’s pretty much impossible to do this perfectly because of uncertainty in your income for the rest of the year, but the IRS actually gives quite a bit of leeway in doing this provided you’re making a reasonable attempt at doing so.

Not paying those quarterly estimates will do nothing more than ensure that you have to pay extra fees and interest when you do file your taxes, so your best approach is to just give it your best possible shot.

Q2: Graduation gift
It seems so meaningless to put $20 inside of a card and give it to a graduate. What does that $20 even mean? They forget about it before the ink is dry on the thank you note.
- Barry

If you don’t feel as though your gift has meaning, seek out something that does have meaning. There are many, many things you can give as a graduation gift. It does not have to be cash.

If you want a gift to have meaning, the best route is to put some serious thought into the gift, pick something that would actually mean something to the recipient, and include a handwritten note explaining it.

Virtually anyone with a thoughtful bone in their body would appreciate that type of thoughtful gift. The challenge is that it doesn’t come ready-made. It requires thought and effort on your part, which is what creates the meaningfulness of the gift.

Q3: Never wanting retirement
I love my job and I fully intend to keep doing it until I can no longer do it. If I am not functionally capable of doing anything of value, I don’t want to live. I know enough of myself to know that I would quickly become massively depressed and would probably not live much longer beyond that point as my motivation to thrive would be gone.

I don’t know why I would ever save for retirement. Why should I be socking away money for that situation?
- Adam

Picture this scenario: you’re sixty eight and your company decides that they no longer require your services. They give you a retirement party and a golden watch. What do you do then? You’re still of able body and mind but your employment window is likely closed. How do you make it?

If you save for retirement now, all you’re doing is creating a nice insurance policy against that. If it turns out you don’t need it, use your retirement savings for travel or whatever else you might want to do in your sixties and seventies and beyond when you’re not in the office.

It is never a bad idea to have money in the bank to protect you against the unknown.

Q4: Why buy a premium car?
Most of the time, when you pay extra money for a high-end version of something, I understand what you’re getting for it. When you buy a high-end car, though, I don’t really understand what you get. The reliability data on many of the most expensive cars is pretty bad, as is the fuel economy (except for something like a Tesla I suppose). The interiors are really nice but still it’s just something that takes you where you want to go. Why does someone pay $100,000 or more for a car?
- Edward

For some, driving a car with a certain label on it can make them feel more empowered and confident, and there are some people who are quite wowed by an expensive car. The interior is usually pretty nice. Many expensive cars really accelerate beautifully when you’re driving them.

But is that worth an $80,000 premium? For me, it’s not worth it at all.

I think it has a lot to do with what you value about a car. If it’s just something to convey you from one place to another, then a lot of those elements are pretty secondary and not worth paying a lot for.

In my eyes, it’s no different than asking someone why they wear a necklace with a bunch of precious gems in it. There’s a lot of money invested into an object that looks good and potentially boosts the confidence of the wearer, but what value is actually there? How does that necklace improve your day to day life?

Q5: Prenupital agreement
I am about to marry someone who has a net worth of roughly fifty times my own. When I discovered it, I was shocked because he didn’t seem rich at all. He has asked me to sign a prenupital agreement that states exactly what I would receive in the event of the end of our marriage. I am fine with the terms of it but I feel almost insulted by it, as though he expects the marriage to end down the road and as though I’m just a passing fancy. What do you think?
- Darcy

A prenupital agreement is kind of a “worst case scenario” protection, not too different than an insurance policy, really. My perception of such an agreement is that it’s usually just protection against a marriage turning bad, but that doesn’t mean that anyone involved wants the marriage to become bad.

Reverse the situation here. Let’s say you had worked very hard to build a net worth that was fifty times the person you were about to marry. Although you deeply love this person and want to spend the rest of your life with that person, the reality is that a lot of marriages that begin with the best of intentions end in divorce. Do you want to lose a significant chunk of that net worth you had worked so hard to build in that scenario?

If you’re fine with the terms, sign it and forget about it. You might want to have a lawyer check it over, just to be sure. If you’re troubled by it, ask yourself this: do you consider someone who buys life insurance to be a person with a death wish?

Q6: Road trip dining
I really enjoyed your recent post about saving money on commutes and I wanted your thoughts on saving money on another driving cost.

About once a month, I make a five hour road trip with my two children. I usually pick them up after school and we get to our destination about 10 PM or so and then we drive back in a few days. On the trip, we usually eat a meal and also usually eat another snack, too.

This cost really adds up over the course of a year. What can I do to trim this back?
- Adrienne

Sarah and I actually do something similar to this pretty often, as our children’s grandparents all live about four hours away from us. When we visit them for a weekend, it goes a lot like the trip you describe.

Our best solution is to just pack a cooler in advance of leaving with our meals in it. In the morning before our trip, we’ll prepare a picnic – sandwiches, finger-friendly sides, and so on – and put everything that needs to be chilled in the refrigerator in one place and put everything else in a canvas bag. When we get home and do our final packing, we dump some ice in a cooler along with the things that need to be chilled. Along the way, that’s our dinner.

Q7: Low interest and minimum payments
How low should an interest rate be before I’m happy just making minimum payments on it? I have a 0.0% debt that will never adjust along with a 2.9% interest debt that will never adjust. Should I be paying anything beyond the minimum on these?
- Walt

With the 0.0% interest debt, I wouldn’t pay anything more than the minimum. Instead, what I would do is set up an interest-bearing checking account at an online bank. I’d then set up a monthly recurring transfer from your current checking into that new checking account that’s equal to just a bit more than your monthly payment – probably rounded up to the nearest $10. Then, I’d set up an automatic bill payment from that new account to your lender that recurs each month for your minimum payment. When your loan is paid off, you’ll have some cash built up in that account.

As for the 2.9% debt, it really depends on what kinds of interest rates and investment returns you can easily get with your money. Five years ago, I would have told you to put your money in a high-interest savings account and do much the same thing as above, because such accounts were earning much more than 2.9%. Today, that’s not the case.

Even so, with ultra-low interest rates below 3%, I would probably lean toward paying the minimum payment provided you were also saving and investing elsewhere. If you’re just making minimum payments and then also struggling to save anything at all, any extra payment you made on that debt would be a positive.

Q8: Does college choice matter?
My daughter is just finishing her junior year in high school and we’re working through the process of figuring out which school to attend. The question I have that no one ever seems to give us a straight answer on is how important the undergraduate school is. Does it matter that much whether someone goes to a state university or a private school or even a community college? How much does it matter?
- Joan

My honest take is that it matters some, but what matters more is getting strong grades and filling out your resume with other achievements, internships, and so on.

Obviously, I think an employer is going to pay more attention to an undergraduate from an Ivy League school than someone who went to a community college, but I think the differences between the institutions in the middle of that sandwich really aren’t all that big. If you’re comparing one state university to another and neither of them are really exceptional ones, it’s probably not going to make much difference at all.

Your daughter’s focus should be on seeking out any and all extra opportunities related to her major and to leadership and personal growth opportunities. Those types of resume boosters do make a difference when hiring. It shows that the person is in this for more than just a degree and is willing to work very hard.

Q9: Interest rate first?
I have two loans outstanding. One is a $1,000 loan with a 8.9% interest rate. The other one is a $22,000 loan with a 9.9% interest rate. Which one should I pay off first?
- Jenny

You can make a good argument either way.

If the goal is to minimize the total amont you’re going to pay over the course of the next several years, you should start on the $22,000 loan. Making extra payments on the highest interest loan is always the best route to minimizing the total interest you’ll pay. In this case, the difference isn’t going to be too much, but it will be measurable.

If the goal is to minimize your monthly bills as fast as you can, you should start on the small loan. You’ll eliminate it pretty quickly and find yourself with one less monthly bill to worry about, which might be very helpful if you have uncertain income and employment in the future.

Given the very small size of the smaller loan and the very small difference in interest rates, I’d probably pay off the small one first to improve my monthly cash flow. If it were much larger or the interest rate were much lower, I wouldn’t bother.

Q10: Student loan question
How much extra should a college student take out on their student loans in order to cover living expenses and books? The student loan I have lets us take out a lot more than our tuition to cover those extra expenses, but doing that makes for a very big student loan after graduation.
- Jeff

The answer to this isn’t the same for everyone. It really depends on what your own expenses are and whether you’re earning any income to cover those expenses.

Ideally, as a college student, you should be doing everything in your power to minimize your expenses at the very least. Many students work to earn additional income.

If I were you, I’d probably live in the dorms for the first year and take out just enough in loans to cover all of it. If you want spending money beyond that, I’d find a job (preferably an on-campus one).

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Graduation Season appeared first on The Simple Dollar.

The problem is that when I go into a retailer without a specific purchase in mind but with an intent to buy something, I’ll usually end up buying something on the spur of the moment – or two or three things.

The last time I was in that store, for example, I wound up buying three books. When I walked in there, I didn’t actually have a title in mind that I wanted to buy. Instead, I was influenced by the store itself when I made those purchases.

(Thankfully, I had budgeted for this. I was anticipating some “spontaneous buying” on that day, so I budgeted that much cash in my wallet for just that purpose.)

Shopping costs you money. Shopping without a very specific purpose really costs you money.

If you want to save money on every single situation where you’re opening your wallet for an item, there’s a very simple rule to follow. Make your buying decision before you ever enter the store.

If you’re buying food, make a grocery list with as much detail as possible before you go there. Use the store flyer to make your grocery list so that it accounts for the sales. That way, you’re making as few decisions as possible when you’re actually in the store.

If you’re buying a car, do your homework on car models before you ever go on the lot. Know what features you want. Use websites to figure out what cars they have on the lot and research those models. Again, that way, you’re not making decisions while on the lot.

If you’re buying a book at Amazon.com, know what book you’re shopping for before you ever go on the site. Don’t use a shopping site as a recommendation tool – instead, only go there when the only decision left to make is whether to click the “Add to cart” button.

Why should you do things this way? Whenever you allow yourself to make decisions on the retailer’s home turf, you’re allowing that retailer to add extra information to your decision-making process. That information that they give you is going to be engineered almost entirely to convince you to buy the item that the retailer wants you to buy, which is usually the one that makes them the most money.

For example, if you go to an electronics store with the vague notion that you want to buy a camera, you’re going to be inundated with options. You’ll be facing a ton of information without context and, to some extent, without reliability. Are these features you really care about? Are you able to actually evaluate things like image quality or battery life or reliability? Unfortunately, no, you’re not.

Instead, you’re going to get information about the features that the store wants you to know about. A salesman will probably “help” you, in that the “help” mostly involves convincing you to buy now rather than later.

Walking into a retailer or visiting a retail website without your decision already made means that you are going to be basing your decision on a set of information that the retailer gives to you. This is usually not the same set of information that will help you actually make the best purchase. If you base the decision-making process on the information provided by the retailer, you’re using a subset of information that’s not going to push you toward the best option for you.

I use one of two options whenever I visit a store of any kind.

One, I have a very specific item or list of items that I want and have already decided on. I’ve already researched the items in advance and made up my mind what I want to buy before I ever set foot in the store. That way, when I’m in the store, I am not making decisions, thus the decision-making process isn’t being influenced by the retailer.

Two, I have a strict spending allowance before I ever go in the door. That money is usually money I intended to spend frivolously and it comes out of my personal allowance for hobby spending. In this case, I’m basically saying that it’s fine for a retailer to influence my spending choices.

Control your decision-making process and you control your money.

The post The Buying Decision appeared first on The Simple Dollar.

One of the big challenges, particularly for people first starting out, is to see the connection between frugality and wealth. Frugality as a sustained and natural habit leads directly to wealth, but that path is sometimes hard to see.

So, let’s walk through this, step by step. Let’s look at three pretty typical frugal changes a person might make.

First, you make the choice to eat one more meal at home per week. You replace a $10 meal eaten at a restaurant with a $2 meal prepared at home and you stick with that forever – let’s say, fifty weeks a year. This is a pretty big change.

Second, you replace all of the light bulbs in your home with energy efficient ones over the next month or so. You have 30 light sockets in your home, the average socket is on for four hours a day, and you’ve switched from 75 watt bulbs to 15 watt bulbs, saving you 60 watts. This is also a reasonably big change.

Third, you join a free ultimate Frisbee league in your town that’s sponsored by the parks and recreation association, which eats up two weeknights with free activities. On those nights, you would have been staying at home with 10 light bulbs on and watching television for two hours, but instead you walk to the park after turning all of that stuff off. This is a pretty small change, but we want one of those for comparison’s sake.

The first step is to calculate what you actually save per month and per year by these changes.

With the choice to eat a meal at home each week, you’re saving $8 per week over 50 weeks, which adds up to $400 per year. Per month, you simply divide that by twelve, giving you $33.33 per month.

With the choice to replace your light bulbs in a typical usage situation, we know that energy companies charge $0.12 per kilowatt hour on average. You’re saving sixty watts times thirty sockets times four hours, giving you 7,200 watt-hours per day in energy savings, or 7.2 kilowatt hours. At $0.12 per kilowatt hour, that’s a daily savings of $0.864, which adds up to $26.28 per month and $315.36 per year.

With the free ultimate Frisbee league, you’re turning off your lights, your television, and your cable box for two additional hours per day. Let’s say your television uses 80 watts, your cable box uses 45 watts, and your light bulbs are using fifteen watts each, as described above. That’s 140 watts, times two hours, times twice a week, times 50 weeks a year, giving you 28,000 watts per year. At a rate of $0.12 per kilowatt hour, that adds up to $3.36 per year, or $0.28 per month.

So, with just these three changes, we save $59.89 per month – or $718.68 annually.

If you’re astute enough, you can put that $718.68 into an investment account each year so that it will earn a 7% return each year. You start doing this at age 25. At age 65, you have $81,100.66.

Yes, switching light bulbs, eating one meal at home a week, and finding a free outside activity to do a couple nights a week – if you take the savings from these things and invest it – will eventually save you over $80,000.

There are two big tricks to really making this work.

First, find frugal tactics that are actually sustainable in your life. For me, these are either one-off things such as changing light bulbs or things that I try out and find that they integrate smoothly into my life. If something is a hassle or produces results I don’t like, I abandon that idea and shrug it off as something I tried that just didn’t work out.

Second, figure out what they’re saving you over your previous choices and save that difference. If you find you made a shift that saves you $5 a month but it’s completely sustainable, then have your bank automatically move $5 each month from your checking to your savings account. One good way to do this is to just have one weekly transfer that’s about a quarter of what you think you’re saving each month thanks to your frugal choices. Keep track of all of the changes on a list somewhere along with how much they’re saving you. Remember, even the little ones really add up over time.

Then, once a year or so, move that saved money into some form of investment. What you choose to do with that is up to you, but you should figure out what your goal is in relation to that money and invest accordingly.

The post How Does Frugality Translate Into Wealth? appeared first on The Simple Dollar.

Like many people in that situation, we went out and bought a larger home – a four bedroom affair. It gave us a lot more room for our family to grow – at least in theory.

What’s actually happened? Our three children enjoy sharing a single bedroom. One of the bedrooms sits largely empty as a guest bedroom. Our ample closet space mostly just stores stuff that we don’t really need to keep and we could sell off. We have a living room and a family room without any real reason to have two separate rooms for that.

While our original apartment might have been slightly on the small side, we really didn’t need a house nearly as big as the one we have. We have a lot of excess space that’s mostly used either to store stuff or to sit empty until the rare occasion comes when we might use it.

In our day to day lives, we mostly just use two bedrooms, the combination kitchen and dining room, and the living room. We use the family room a bit, but we don’t do anything in there that wouldn’t work just fine in the living room. One of the bedrooms is unused, and the other is an office that could work in the corner of the living room. We have a bedroom we basically never use and two bathrooms that are rarely used, too.

We could easily be very happy with 60% of our square footage.

That doesn’t mean I want to downgrade. After all, our house is fully paid for and it’s in an area where property values are inching up steadily even through the housing collapse. What it does mean is that our perception of what kind of house we needed was drastically overinflated before we actually made the purchase.

Here’s the truth: a big house seems like a great idea, particularly when you have a family, but an awful lot of it just winds up being storage space for stuff you rarely use. It’s effectively an overpriced storage unit.

So, what would I do if I had it to do all over again?

For starters, I’d buy a home substantially smaller than what I thought we needed. We did not need to triple the square footage of our apartment. We needed to perhaps increase it by 50% or maybe, on the outside edge, double it. Everything beyond that has essentially become storage space.

Why do it this way? A smaller home means a smaller mortgage, which means smaller payments and much smaller professional stress to maintain a certain income level.

How can you assess what you actually need? Rolling back the clock, I should have simply made a list of our needs and not our wants.

It can be hard to distinguish between the two. A technique that really works well for me is listing every reason I can possibly think of for the move, giving the list some time to rest, then going through it and eliminating those that are clearly “wants.”

That doesn’t mean you should buy a house because it has attributes that you want, but if you focus instead on houses that just meet the things you need, you’ll be paying far less and still likely getting some of the things that you want.

The result? You’re happy and your wallet is definitely happy, too, as is your stress level.

The post The House That Is Too Small appeared first on The Simple Dollar.

1. Keith Ferrazzi on poverty

“Poverty, I realized, wasn’t only a lack of financial resources; it was isolation from the kind of people that could help you make more of yourself.” – Keith Ferrazzi

This is one of society’s greatest challenges. It takes someone really exceptional to escape an impoverished childhood.

2. Maria Bezaitis on the surprising need for strangeness

It isn’t the ordinary and mundane that shapes our lives. It’s the unusual.

3. Cornelia Funke on fear

“Fear kills everything. Your mind, your heart, your imagination.” – Cornelia Funke

It is a true individual triumph to overcome something you’re afraid of and see it for what it truly is.

4. Sir Ken Robinson on changing educational paradigms

Education today was designed for an industrial economy. Today, we have an information economy. How do we cross that bridge?

5. Thomas Carlyle on idleness

“In idleness there is a perpetual despair.” – Thomas Carlyle

One of the few things I fear is sitting still.

6. Beth Fantaskey on fear

“Fear is the worst kind of grave, because it buries one alive.” – Beth Fantaskey

The problem with fear is that it bends so many of the choices you make in life. When you’re afraid of something, it bends all choices you make related to that fear, altering your life profoundly.

7. John Perkins on economic hitmen

It’s an economic model that keeps the rich rich and keeps the poor poor.

8. Thomas Harms on answers

“Saying ‘I don’t know’ doesn’t mean you stop searching for an answer. A lot of people misunderstand that bit. Accepting your own bounds without shame or guilt allows you to see more clearly when your first urge may be to deny your ignorance to yourself or others, and instead admit your limitations and seek the solution from someone or somewhere.” – Thomas Harms

We are all limited. Saying that you don’t know something isn’t a sign of weakness. It is a sign of being a human.

9. Tony Robbins on why we do what we do

He really is the master of motivational speaking, and this is a prime example.

10. Aldo Leopold on the land around us

“We abuse land because we regard it as a commodity belonging to us. When we see land as a community to which we belong, we may begin to use it with love and respect.” – Aldo Leopold

What right do I have to say I truly own the land that I hold a deed for? It was here long before humans appeared on this planet.

The post Ten Pieces of Inspiration #126 appeared first on The Simple Dollar.

That perception is a complete myth. Yes, you will be paying more in taxes if you make more and, yes, you’ll likely be paying a higher percentage of your income in taxes. However, your income will go up far faster than your tax bill will.

In order to keep the picture as clear as possible, I’m going to stick with federal income tax in this example. I’m going to use this calculator to run through a few scenarios.

Let’s say that you’re married filing jointly and your gross income is $40,000 per year. You have no investment income, no IRA contributions, two personal exemptions, no dependent children, and you’re taking the standard deduction – in other words, a pretty typical situation for a newly married couple living in an apartment without children.

In that situation, the estimated federal income tax liability will be approximately $2,108. Your average tax rate is 5.3% and your marginal tax rate is 15.0%. You’ll have $37,892 left over.

Now, what happens if you double that income? We can imagine that one person in the family had a job making $40,000 a year, but then the other person gets a $40,000 a year job. What happens then.

Now, you’re married filing jointly and your gross income is $80,000 per year. You have no investment income, no IRA contributions, two personal exemptions, no dependent children, and you’re taking the standard deduction – in other words, the same situation as before, just with more income.

In this situation, the estimated federal income tax liability will be approximately $8,108. Your average tax rate is 10.1% and your marginal tax rate is 15.0%. You’ll have $71,892 left over. That $40,000 bump in income only increases your federal taxes by $6,000.

Of course, I’m leaving out other expenses, such as FICA taxes and state taxes, but the story remains the same – more income means more money for you.

What happens if both people in the marriage find better jobs and double their income? They’ve got to be paying a lot more in taxes now, right?

Now, you’re married filing jointly and your gross income is $160,000 per year. You have no investment income, no IRA contributions, two personal exemptions, no dependent children, and you’re taking the standard deduction – in other words, the same situation as before, just with even more income.

In this situation, the estimated federal income tax liability will be approximately $26,858. Your average tax rate is 16.8% and your marginal tax rate is 25.0%. You’ll have $133,142 left over. That $80,000 bump in income only increases your federal taxes by $18,750.

What if we double it yet again? Surely, the rich must be getting eaten alive by this!

If you’re making $320,000 a year in the scenario described above, your estimated federal income tax liability will be approximately $75,725. Your average tax rate is 23.7% and your marginal tax rate is 33.0%. You’ll have $244,275 left over. That $160,000 bump in income only increases your federal taxes by $48,867.

Here’s the truth: the idea that making more money is pointless because Uncle Sam will take it all is absolutely false. It’s a fantasy that people use as a crutch to excuse themselves from working hard to earn more money.

The post The Fear of Taxes Shouldn’t Keep You from Earning More appeared first on The Simple Dollar.

Now, he has a vocabulary of several thousand sight words, enabling him to read simple chapter books with scarcely a pause. He can read them aloud, of course, but he also is a practitioner of sustained silent reading.

The effort he has put into mastering reading has earned several compliments from both Sarah and myself. We are proud of the effort he has taken in learning to read – the results are just the fruits of that effort. So, we make sure to focus our compliments on the effort he’s taken: the time spent working on sheets full of sight words and the time spent practicing his reading by reading aloud whether anyone’s listening or not.

Our general rule is that parental compliments and encouragement focus on effort and energy invested in preparing, not on the results. The good feelings that come from results are internal – they’ll feel good anyway. We’d far rather acknowledge and reinforce the path of hard work and effort that it takes to get to that point.

It’s not just for parents, either.

Compliments are like a stack of money that never runs out.
It doesn’t cost you anything to give a compliment to someone else. Almost always, when you give them a compliment, you’ve just made that person’s day better at no cost to yourself.

Also, you’ve usually made them perceive you in a better light, too, as people are attracted to those who seem to like them. It would take a pretty unusual situation for someone to think less of a person issuing them a brief compliment.

Even better, a well-placed compliment reinforces behavior that you consider to be a positive thing. If you give someone a compliment about something they’re doing, they’re more likely to keep along that path because they now know that others see it and value it. It helps them to reinforce a routine, one that’s likely a positive one.

A compliment is something that rewards positive behavior, brings about a distinct positive result, and can be done over and over again. It really is like a bottomless stack of money, one you can use whenever you’re out in public to brighten the lives of everyone.

Compliment the things you want to see in the world.
If your compliments help to reinforce a routine in others, then it makes perfect sense to use your compliments wisely and dole them out when you see things in the world that you’d like to see more of.

If you see someone being kind to someone else, give them a compliment. When you see someone making a smart frugal choice, give them a compliment. When you see someone being a good parent, give them a compliment. When you see someone putting forth an effort to achieve something in their lives, give them a compliment.

The more you compliment the things you want to see in the world, the more those behaviors are reinforced in the lives of people around you, whether it’s a family member or a friend or just someone you happen to bump into in the community.

Save the acid for another day.
Many people seem to enjoy handing out acidic criticisms, but they act in almost the opposite way. They tend to send the other person’s behavior in completely unpredictable directions, plus they cause the person you levy that acidic criticism towards to dislike you.

Virtually nothing is gained by handing out unwanted criticism other than feeding your own internal negativity.

If you feel negative toward someone else’s behavior, shouting out criticism might cause a response, but it’s often not going to be a response you’re pleased with. Avoid it, and save your energy for compliments.

The end result is a better world at no cost to you.
The most amazing thing about a compliment is that it doesn’t cost you a dime, but it brings about real change in the world. One compliment might not change anything, nor a dozen, but a steady stream of well-applied compliments does bring about positive results in the people around you. They feel better about themselves. They work harder in positive directions. They value you more.

If you want a better world to live in, the easiest and least expensive way to start is to compliment the good behaviors you want to see out there – frugal living, kindness to others, hard work – and keep your negative comments to yourself, because negativity often moves in unexpected and usually undesired directions. It costs you nothing other than a moment of your time, but the ramifications often go far beyond what you see in that moment.

The post The Value of Compliments and Positive Reinforcement appeared first on The Simple Dollar.

“Oh, I should be spending less money,” says someone waiting in line for a large coffee and a breakfast pastry at a local coffee shop.

“Oh, I should be spending more time with the kids,” texts someone to their sister while their kids are out in the yard and they’re camped out in a comfortable chair.

“Oh, I should be cleaning the house,” thinks someone as they change the channel.

All of us do this. It’s not a unique phenomenon.

Quite often, the path of least resistance is the one we choose to follow. It’s far easier to snag a convenient meal when we’re hungry than to search for a better option. It’s far easier to camp out in a comfortable chair after a long day at work than to take on another challenge. It’s far easier to just keep watching television than to jump up and take on a personal task.

There’s nothing wrong with doing those things, either. The problem comes in when we pay lip service to those things we know we should be doing, but we don’t bother to actually do them. This fails us in two ways.

One, we don’t actually achieve the thing we think we should be doing. Instead of spending less money, we spend more. Instead of playing with the kids, we vegetate. Instead of cleaning the house, we watch “America’s Next Top Model.”

Two, we reinforce a negative pattern that undermines that thing we “should” be doing. We reinforce a pattern of eating that expensive breakfast. We establish a routine of vegetating after work while the kids play. We begin to accept a messier house and a greater dose of television in our routine.

Lip service is more than just words. Here’s how we break out of it.

When you have a notion of something you ought to be doing, push yourself to go ahead and take care of it. Recognize that you’re trying to put off something genuinely important, then stand up and take care of it. Don’t even give yourself a second to try to talk yourself out of it. Get up and do it.

At the end of the day, reflect on those times you made the “better” choice. When you look back, you’ll feel really good about the things you achieved that day. You’ll tie some strong positive feelings to making that better choice.

The result of that reflection is that the next time that choice comes up, the balance of what seems like the better decision will have shifted a little bit. You’ll feel more inclined to make the “good” choice and not just give it lip service.

Remember, your actions define what you value, not your words. Whenever you find yourself proclaiming one thing with your words but another thing with your actions, you’re betraying yourself in some fashion. Make them match – make your actions live up to your positive words – and you’ll feel incredibly good about the direction your life is taking, not just today, but over the long course of life.

The post Lip Service appeared first on The Simple Dollar.

I’m always amazed how I can go through an entire winter without even having a hint of a cold, but when spring truly blooms, I end up feeling miserable, with a sore throat and a runny nose.

I know that it’s just allergies because it happens every spring on the dot. As soon as the nice weather starts, I can wait about four or five days and I’ll wake up with a sore throat and a runny nose that persists for a couple of weeks and then vanishes.

It’s the price I pay for the beauty of spring.

Q1: Mortgage tax deduction calculator
My fiance and I are buying our first home. We rent in NJ just outside Philadelphia and we’re considering the city or a NJ suburb. I grew up in FL with only federal income tax so all the new taxes are confusing me, making it hard to compare apples to apples. We’re 99% sure to get a 30-yr fixed mortgage around 3.5% (pre-qualified). I know you can deduct mortgage interest (pretty much the first 10 years are interest from what my mortgage broker brother and accountant sister-in-law tell us) and just recently found out we can deduct property taxes! Here are my scenarios:

1. Buy a condo or townhome in Philadelphia. Here we would have state income and city income tax. Property taxes will probably range anywhere from $150 (new construction tax abatement) to just around $2000. Philadelphia is also in the process of reassessing all property and chances are taxes, except for the abatements, will go up about $1000 – $1500. We can look on a website to know the final figure.

2. Buy a single family home in Camden County, NJ, known for having some of the highest property taxes in the country. Taxes could range anywhere from $7000-$11,000, on average. Here we would have state income tax but no city tax, unless I get a job in Philadelphia, then I would have to pay the Philly tax regardless.

My question is: How do you go about estimating how the deductions will impact your taxes? Fiance makes about $56k a year and for now he’s taking the standard deduction. We plan to marry this year but I don’t know how that affects taxes. I could secure a job making anywhere from $35k to $55k.
- Emily

You have several different layers of taxes to worry about here. First, of course, there’s income tax deductions on a federal and state level. You can calculate your federal tax deduction here. For state and local taxes, you’ll have to seek forms in the specific areas where you’re considering moving to.

The same goes for property taxes. You’d have to check with the various tax assessment websites to try to get a bead on the property taxes for the specific properties you’re looking at.

Your best route is to assemble a spreadsheet for all of these things. Have a column for each property you’re considering and a row for each different kind of tax. Almost always, property taxes and mortgage interest are deductible from your federal taxes, and they’re often deductible from your state income tax as well. However, it’s not just pure savings – in order to get the interest deduction, you’ll usually have to forego your standard deduction.

Q2: Private school worth it?
My wife and I live in an area with poor public schooling. We are trying to figure out if private school is a worthwhile investment for us or whether things will work with after school supplements which are far less expensive. Do you have any insights? Is this something you’ve thought about for your own children?
- Brenda

I’m lucky to live in an area with a very good public school system, so I haven’t had to worry about this.

If I were in your shoes, it would really come down to my financial situation above all else. Would the cost of private school put my family in a genuinely precarious financial position? Or is it something that will work if we cut back on some of the non-essentials in life?

You would also want to make sure that the private school you’re looking at actually reflected your values. One private school in our area revolves around a curriculum that Sarah and I would be uncomfortable with, for example.

Q3: Advice on inexpensive business clothes
I worked for years as a prof in [a well-known university]. This is a group of very well dressed people, mostly suits, even for women. It took me a while to figure out what I can modify to add funk to my wardrobe. Now, it’s not a problem at all anymore. Here is some advice:

- Learn to do small sewing repairs: buttons, hems, fixing an undone seam. When you get better, you can take in pants at the waist (I have a shape that needs this). This gives you a much larger choice of clothing.
- Sandra

Sometimes, a reader will drop a great email full of good tips on me. Although it’s not a question, I certainly feel like it deserves to be shared.

Sandra’s email is exactly that. If you’re struggling to maintain a business wardrobe because of the cost, those techniques will save you some serious coin.

The techniques work pretty well for men, too (other than the suggestion for pumps).

Q4: Is home ownership necessary?
My family is pushing us to buy a home, but we really don’t think it’s the best move for us right now. We’ve looked at a few in our area and they all seem very expensive. We pay less in rent each month than the mortgage payments would be and we aren’t paying for property taxes or insurance or anything. Are we right here?
- Andrew

You are, with a few assumptions.

The big question is whether you are actually saving money each month. Yes, your rent might be lower than the monthly cost of home ownership, but it makes no difference if you’re just spending that money on unnecessary stuff. If the money you’re saving from renting is just going to pay for eating out every night, you’re not really ahead.

For renting to actually beat out home ownership, you should be saving/investing the difference between your monthly rent and the total monthly cost of owning a similar home. That way, you’re actually gaining far more in the bank each month than you would ever be gaining in home equity.

Q5: Fantasy writing progress
A while back you mentioned that as an experiment that you’d create a blog that would oultine your experiences writing a fantasy novel (except you’re not going to mention it on TSD). Is this something you still work on a regular basis? If so, how is that doing, do you have a following?
- Sean

I am working on a fantasy novel. I have a first draft I’m happy with that’s largely complete. I have shared large portions of it with test readers. Portions of it are out there anonymously on the internet.

I am currently searching for a literary agent to help me sell the thing to publishers. If I am unsuccessful in that search, I’ll consider self-publishing it.

If I do reach a publishing arrangement, The Simple Dollar will be one of the first places I talk about it.

Q6: Learning about neighbors
My wife and I are looking at several houses that we like. For us, the big deciding factor is the neighborhoods. What will the neighbors be like? What kind of place is the neighborhood? How do we figure that out?
- Adam

We were in this same boat when we were shopping for houses. Our solution was to simply talk to the neighbors of the houses we were interested in. If we saw neighbors around when we looked at a house, we introduced ourselves, chatted, and asked about the neighborhood.

We drove around the neighborhoods at different times of the day, even at night, to assess what levels of activity and noise we could see. Were people out doing yard work? Were there children playing? Was everyone in their homes? Was it noisy at night?

Also, we took into consideration how well kept all of the properties were. Were the properties all reasonably well maintained? Or were there a lot of messy properties?

Those clues helped us figure out which areas were better for families and which ones weren’t.

Q7: Expatriate estate worries
I am from the US but I’ve lived in both Europe and Hong Kong in the past couple of years. I figured that I needed to compile an estate plan due to the number of bank/pension accounts I have in these different countries. I went to HSBC in Hong Kong yesterday and they said that my accounts would have to go through a 6 month probate process if I didn’t have a will but things could be shortened to a few months if I had a will and/or trust. I’m trying to determine the best way for my loved ones to control my assets if I were to pass away prematurely. I could just provide them with a sheet with all of my login information/passwords and then they could transfer funds online to the US after I’m gone to mitigate the hassle of dealing with the Hong Kong or UK governments. If I go down this route I wouldn’t want them to know the amounts in each account or the login information until I pass away. I could also get a trust drawn up but I’m not sure if I would need separate trusts drawn up in each country where I have assets. What is your suggestion for dealing with a situation such as mine?
- Angie

Giving them all a sheet with your login information would get them the money the fastest but would also result in the messiest legal situation for them. I would probably skip that unless you want to also hand them all a legal headache.

If I were you, I’d probably keep all of my funds in the country that I anticipate living in for the longest time over the next several years. I would also probably contact an estate lawyer who can help you get all of this set up the right way.

Regardless, it will probably be most convenient for you to have all of your funds in one place or at least one country, then transfer those funds to other countries as needed. This is assuming, of course, that you’re not wealthy enough to have your own full-time money manager who can handle all of this for you.

Q8: College summers
My oldest child has an unpaid internship for this summer. It’s not entirely unpaid as they are providing living quarters and food. It seems to be related to his career path and he’s excited. My concern is that he’s earning nothing this summer, as I figured he’d work this summer to earn tuition.
- Donald

It really depends on the internship. Some unpaid internships look great on a resume when a person graduates, while other internships are largely useless.

If this is truly an internship that matches his chosen career path, it’s probably worth it in terms of making himself marketable in his field upon graduating.

If I were you, I’d research the details of this internship and figure out whether it’s actually a valuable thing or not. It’s really hard to tell from the bit you’ve written here. I had what amounted to internships in college and those were usually paid via a tiny stipend.

Q9: Big changes needed
My problem is personal change. I agree with everything you say, but I don’t even know where to begin. Every day I think ok, tomorrow I will make changes; stop wasting money on $5 lattes, stop buying items I don’t need and so forth. I have been pretty good about talking myself out of items, and I’ve cut back from a daily $5 drink to a weekly. But there’s still so much waste.

We made $164k last year combined and saved only 2% of my husbands earnings in a 401k. No other money was saved! We spent $50k traveling, took a second honeymoon to Bora Bora, took the kids to California 6 times, went to Ohio and splurged on my husbands “poor” family, went to Vegas for some shows. We did a lot of traveling.

But it makes me sick we don’t have the $7000 for the IRS. We live paycheck to paycheck and as I read your articles, it occurs to me, we make a lot more than the “average” American family. We have a modest house based on our income, we owe $178k. Only my Honda Pilot is financed at 1.9% but it’s still $507 a mo. Our house bills aren’t bad. I could see our dish network bill of $90mo is a waste since all we watch is reruns or nonsense and now I wish we hadn’t committed to 2 years. We got it in Dec, prior to that we honestly hadn’t paid for cable in over 5yrs. But my husband and I had an insane impulse shop at Costco in December and bought not one, but 2 amazing giant flat screens, one for our family room and one for our room. We were always teased by friends for “doing so well” but having 1 older clunky TV set. So once we upgraded, well obviously we needed cable right? Wrong! The cancellation fee is insane so it seems like keeping it now would make more sense. Idk.

Anyway our only other big expense that could be cut is a $440 mo Kumon bill for our 2 kids tutoring. We feel public schools don’t provide enough and though this money isn’t tax deductible, it’s worth it. They’re much smarter, well I should say faster and more fluent, than their peers, and maybe even us, when it comes to math. But our monthly “bills” are only about $3500 and Idk where the rest goes? It seems there’s always a birthday party, baby shower, bridal shower etc; heck there were 5 total just this month! But even spending between $30-50 each, that doesn’t account for the thousands that disappear.

When it comes to food I think we waste a lot of money. We eat out way too much, buy expensive meats & other foods; I spend an average of $400 a week at Costco then make a few trips to Frys or Whole Foods for specialty items midweek. There are 5 of us, my mom lives with us to nanny, saving us on childcare. A friend of mine recently hit by hard times found herself on food stamps and her family of 5 gets $605 from the state of AZ. It makes me wonder how I would manage on such a small amount but she’s doing fine. So I know not everyone must spend $1600 a month on food.

I would like to add aside from the Amex we have no credit card debt. We pay cash for everything. But we are major over-consumers. Obviously. I need serious help and just don’t know HOW to fix myself. My husband leaves it all up to me. He actually spends an allowance while at work and I kill the rest so it really is “all my fault.” 17 years of me deciding everything (yes since high school) and he still just hands over the paychecks and I do as I see fit. So I need the help!

Two weeks ago we was told that this fall he is to expect a major promotion which is salaried at $315k a year. I just took a full time position at $72,000 a year. We will be in a horrific tax bracket. But the scariest part is knowing that we could be living the same way! How can successful people be so stupid when it comes to money?

Just tell me exactly what to do, please! From day 1 tomorrow until I can be like you and Sarah. I’d appreciate ANYTHING you can offer, and I will continue to read your emails as financial gospel….it’s applying the knowledge that’s tricky.

Oh, and how do I explain it to my kids, ages 11 and 14? We just took our family, plus my mom, and a real nanny (to give my mom a break) to Hawaii for 9 days to celebrate our 14yr olds bday last month and spent $10k. So now our 11yr old expects that in June for his bday. He keeps talking about Costa Rica. How do I explain we are making changes meaning “Hey son, we love you as much as your sister, but here’s a playstation 3 instead?” How do I put a positive spin on that?
- Rebecca

It’s pretty easy for me to tell where the money goes each month. You spend $400 a week at Costco, then make another expensive grocery stop mid-week, likely jacking it up another $100. That’s at least $2,000 a month on food alone. You state that you also have $3,500 per month in additional bills – that, I assume, includes your mortgage, your child’s tutoring, and your utilities. So, between just those bills, you’re looking at $5,500 a month, which adds up to $66,000 per year. What about property taxes? What about income taxes? You just took a trip to Hawaii that cost $10,000 for your child’s birthday. You’re adding up very quickly to your pre-tax income here.

You need to sit down right now and figure out what it is you actually want. What is your goal here? You seem to realize that spending so much isn’t a good thing, but what would you do with the extra if you were spending, say, half as much each month? What would you do with $5,000 unspent each month? What kind of goals do you have?

At the very least, you should both be putting 10% of your income into retirement. That’s an immediate thing. Beyond that, you should strive to have no debt, because with that income level, you shouldn’t have any. You should also have a pretty good cash reserve in the bank in case of emergency.

Aside from that, it’s really all about what you want out of life. What I want, more than anything, is to simply leave behind the need to work for income as early in my life as possible. I do not want to be working until I’m 70. What is it that you want? Security? Children that are successful in adulthood? Your money should be working toward whatever it is that you most want from your life. It may be that you most want travel and other such amenities. If so, your financial planning should be all about making them as stable as possible.

Once you have a goal, it becomes much easier to attack the areas in your life where you’re overspending because then you have a focus.

Q10: Door-to-door salespeople
How do you handle door-to-door salespeople or religious people? I feel really rude just closing the door on them, but if you just let them talk they’re usually convincing.
- Adrienne

If I don’t recognize the person, I’ll usually just say, “Thank you, but I’m not interested,” and then I just close the door and walk away. I do that for pretty much everyone who might be considered a salesperson, and I don’t feel guilty about it in the least. They’re on my property without invitation, after all. If you wish, you can put up a “no solicitors” sign.

Sometimes, I’ll end up debating religion with missionaries. I have some knowledge of the teachings of some of the groups that go door-to-door for missionary work and I actually enjoy discussing things with them, though they have zero chance of recruiting me. I just enjoy the discussion.

If I know the person, I’ll listen. If it’s a child from the neighborhood trying to sell something on behalf of their youth group, I’ll usually buy an item.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Spring Allergies appeared first on The Simple Dollar.

They’ll serve a homemade meal that someone turns their nose up at because it’s not a prime cut. They’ll bring a thoughtful gift to a party only to find that everyone else paid out the nose for their shiny gifts. You’ll show up to an event and feel seriously under-dressed.

This actually happened to me recently. I was at a community dinner that accepted a freewill offering for a charity. There was a bucket at the start of the meal line. Since I wasn’t eating much, I felt perfectly fine putting in just a few dollars (most of the food was meat-oriented and I’m vegetarian). As I kept chatting with the person behind me, though, I noticed that he threw in a $20 bill, as did the person behind him… and the person behind him.

I felt cheap. In fact, I felt so bad about it that after the meal, I went and tossed another $10 in the freewill bucket.

Later on, though, I got rather upset with myself over feeling “cheap” and responding emotionally by throwing money at the problem. Going back and putting $10 more in the bucket was only necessary if I felt that helping that charity was a really worthwhile cause – and, honestly, I was more or less indifferent to the charity. I put in my initial $5 out of politeness.

Not too long ago, I felt cheap when we showed up to a potluck event and just brought a pretty ordinary salad. Other people brought amazing finger foods and other dishes, making our rather inexpensive side salad seem pretty ordinary. I felt bad about it during the event.

You know what? On the way home, I didn’t feel nearly as bad. Why? The host gave me back the bowl at the end of the event… and it was empty.

Whenever a social situation makes you feel “cheap” or “poor,” here are a few things to keep in mind.

First, the aspect that you’re fretting about is usually something that others don’t even notice – or, if they do, they don’t really care. Looking back on it, I don’t think anyone cared in the least how much I put into that charity bucket. I don’t think anyone at the party thought I was “cheap” or “poor” because of the dish we brought. What mattered in both cases is that I gave something and was actively participating.

If you think someone judges you as “poor” or “cheap” because of the dish you brought or the clothes you’re wearing or the car you’re driving, you’re putting your own thoughts into their heads. Almost always, those thoughts don’t even exist, and even if they do, they have relatively little impact on most of the people who would think them. Your stress is tied to a hypothetical bully that rarely shows his or her face.

Second, the reaction others have to what you consider to be a blunder might be positive. Our “cheap” salad was loved by the crowd, for example. Every bite of it vanished over the course of the evening.

Another example: I showed up to an event not too long ago woefully underdressed. Another person walked over to me not a minute after I arrived and said, “Whew, I wish I had worn something more like that. This suit is hot.” He then took off his jacket and held it over his arm, making us appear similarly dressed. Now, he might have simply been putting me at ease, but the situation did directly downplay my sense of having made a “cheap” social mistake.

Third, it doesn’t really matter what a random person on the street thinks of you. Does it matter what some guy on the street thinks of your old car? No. Does it matter what some bitter person thinks about the shirt you’re wearing? No.

The opinions that matter are the ones that are built out of things beyond dollars and cents. They’re built out of the person you are and the acts that you do, not the clothes you wear or the cars you buy or the salad you bring to a party.

Finally, it doesn’t take much extra effort to make inexpensive things seem quite classy. An ordinary salad looks amazing if presented well and made with fresh ingredients. An ordinary shirt works great in most situations if it fits you well and is ironed. An old car looks perfectly fine if it’s clean and well kept.

Respect the things that you have and those around you will respect them, too.

A sense of being “poor” or being “cheap” is just a state of mind. It comes from being self-conscious and worrying too much about what others think of you. Focus on doing good deeds and being friendly and any sense of being “cheap” fades quickly into the background.

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