If you’ve been reading The Simple Dollar for a while, you know that I love the “Little Book” series by Wiley Publishing. It’s a book series of small, relatively short hardbacks with about twenty short chapters. Each book in the series focuses on a specific personal finance or investment topic, striving to spell it out in plain English. Often, it’s written by a leader in the field, particularly by someone who believes deeply in the methodology being described. Almost unanimously, the entries in the series have been well worth reading, particularly if you have even a minimal interest in investing. The books do a fantastic job of breaking down ideas into little, comprehensible nuggets.

The most recent book in the series that I have yet to review (there are actually two more that have been published very recently that I’ve not even laid eyes on yet) is The Little Book of Behavioral Investing by James Montier, a renowned value investor. This entry in the series focuses on how normal human behavior often works against us when it comes to investing, a phenomenon that’s been covered in other personal finance books. Unfortunately, those other books have often been dry ones, often failing to relate the concepts they talk about to your day-to-day behavior.

Does The Little Book of Behavioral Investing succeed where the others fail? Is it a book worth reading? Let’s dig in.

One – In the Heat of the Moment
Poor decisions are made in the heat of the moment. Just think of impulse buying at your local supermarket. Montier proposes, sensibly, that the route to financial success is almost always preparation of and pre-commitment to a detailed, clear plan. Spend some time figuring out exactly what you’re going to do, what your goals are, and what your parameters are before you even dive in. It’s no different than writing a grocery list before you go to the store – you’re curbing impulse buys.

Two – Who’s Afraid of the Big Bad Market?
When people experience financial loss, they often react much in the same way they do when they’re bitten. They retreat. They certainly don’t want to invest more. Yet, quite often, the correct response to a loss in a stock investment is to invest more because you’re essentially paying a sale price on the same exact company that cost quite a bit more just a month ago. If your fundamental gameplan hasn’t changed, don’t react to a downturn by selling – react to it by buying.

Three – Always Look on the Bright Side of Life
On the other hand, when people see a positive trend, they tend to get overoptimistic. They believe that it’ll continue on forever and they dive in like crazy – often when things are hitting their peak. This is why bubbles form – a good investment reaches a reasonable peak, but keeps on going because the blind optimists dive in, driving the price far above what it should be rationally. When the blind optimists then try to sell, there aren’t enough buyers and the price collapses.

Four – Why Does Anyone Listen to These Guys?
Experts are not perfect. Although they might be more knowledgable about the market, they also tend to be overconfident, as they believe that they know more than the other investors. That’s a bad mix that often causes investment experts to do worse than the average person on the street. Overconfidence can completely ruin any advantage that you might have.

Five – The Folly of Forecasting
No one can predict the future, but lots of people certainly try. Unfortunately, past performance is never an indication of future results. The best thing an investor can do is understand where they are right now. Have they met their goals? If you create a plan in advance and stick to it, you don’t have to try to predict the future.

Six – Information Overload
There’s an overabundance of information available for investors. While on one level that can seem like a great thing, the truth is that it can actually be a terrible thing. People can get lost in the data. They can get sucked into “analysis paralysis,” where they won’t take action until they can analyze all the information – and by the time their analysis is done, the situation has changed. The key here is to focus your analysis on very specific elements that you understand.

Seven – Turn Off That Bubblevision
Many people obsess and stress over every little fluctuation in the stock market, and channels like CNBC fuel the obsession. Unfortunately, such obsession often leads to oversensitivity to little fluctuations and thus causes hair-trigger responses that are usually poor. Turn off the bubblevision and seek out real, hard information that matters to you instead.

Eight – See No Evil, Hear No Evil
Most people look for evidence that confirms the ideas they already have (think about talk radio, for example). However, doing that will often be disastrous for your investments. You should instead constantly look for information that disproves your assumptions. If you think a company is successful, for example, you should seek out signs that indicate that it’s not successful.

Nine – In the Land of the Perma-Bear and the Perma-Bull
Some people believe the stock market is always headed in the right direction (”perma-bulls”). Others believe that the stock market is always headed in the wrong direction (”perma-bears”). Obviously, neither one is right and, obviously, neither one of these folks can ever be a truly successful investor. Every market has ups and downs – if you constantly believe one or the other is about to happen regardless of what’s happening now, you’ll always make mistakes.

Ten – The Siren Song of Stories
A good story is incredibly appealing to us because it makes things that seemingly don’t make any sense make, well, sense. We do this all the time – our memories are a perfect example of this. We take random events in our lives and polish them until they make a coherent story. The problem is that with investing, the data rarely tells a simple story like this. When we try to mold it into a simple story, we overlook big parts of the picture and often end up making poor choices. Don’t worry about the story.

Eleven – This Time Is Different
All markets have bubbles – and those bubbles eventually burst. Every time, though, as people are buying in like mad, you hear stories about how this one is different than the rest because of some reason. That’s basically never the case. What happens, inevitably, is that too many people buy in because they believe they’re going to get rich. Suddenly, there are too many people holding the things they’ve bought and no one’s around to buy them. Every time a market begins to seriously diverge from long-established fundamentals, there’s usually a bubble involved and you’re better off avoiding it.

Twelve – Right for the Wrong Reason, or Wrong for the Right Reason
As was mentioned earlier, we tend to gloss over the past to create nice stories about it. That glossing, mixed with our optimism, often results in our blaming others for the mistakes we made in the past. The truth is much harsher: whenever we lose money, we’re at fault, and there are valuable lessons to be learned from figuring out what exactly went wrong.

Thirteen – The Perils of ADHD Investing
If you’re an attentive investor, it’s often tempting to jump in and make changes all the time. We hear some good or bad news and we want to react quickly to it by buying or selling. Unfortunately, our snap decisions are often absorbed right into the market and the only person that makes money is the stockbroker. If you have a plan in place – and you certainly should – stick to that plan. Don’t let a sudden piece of news or a sudden impulse steer you off of that plan.

Fourteen – Inside the Mind of a Lemming
It often can feel very uncomfortable to zig when others are zagging, particularly when we have money at stake. If we see lots of people doing a certain thing, it’s easy to convince ourselves that it must be the right thing to do. The key here is to step back and look at it objectively without the influence of other people. Make your decision based on the information, not on what everyone else is doing.

Fifteen – You Gotta Know When to Fold Them
A big part of your overall plan – remember, the one you decided on before you started investing? – is when to sell. You should decide before you even begin how much volatility you’re willing to accept and how big the losses have to be before you would sell. The decision needs to be made before you even put a dollar in so you can react in accordance with your plan, not in accordance to your nerves.

Sixteen – Process, Process, Process
What does all of this add up to? You need to always be examining the world around you and, most importantly, you need to try to remove the human element from your investing decisions. Come up with a plan, refine the plan, invest, then stick to the plan. Don’t let your nerves or the actions of others get in your way.

Is The Little Book of Behavioral Investing Worth Reading?
For the most part, The Little Book of Behavioral Investing reiterates much of the basic material on behavior and personal finance that can be found in other books. The Little Book of Behavioral Investing works, though, because it’s written in such plain language and, perhaps most importantly of all, it includes a lot of very vivid explanations and illustrations of our behavioral quirks.

A book on behavioral investing should be something that everyone reads before they jump into the investing pool. The Little Book of Behavioral Investing is as good a place as any to pick up that information. It’s approachable, clear, and, dare I say, fun.

If you’re interested in my reviews of earlier books in the “Little Book” series, here’s a list of those reviews. I’ve almost universally enjoyed them.
The Little Book of Bull Moves in Bear Markets
The Little Book of Common Sense Investing
The Little Book of Main Street Money
The Little Book of Safe Money
The Little Book Of Value Investing
The Little Book That Beats The Market
The Little Book That Builds Wealth
The Little Book That Makes You Rich
The Little Book That Saves Your Assets

My wife and I have two children, ages 2 and 1. We’d like to have more; we both think that four would be a great number, although there’s no particular logical reason for that number. The problem is the expense. With daycare costs, adding each additional child will cost another $260 a month. If we stopped paying extra on our student loans and cut our savings per month to $145, we could afford the daycare for the third child, but a fourth would require more painful cuts. We already live frugally: buy used clothes, drive used paid-for cars, make almost all of our food at home, etc. I’ve looked into second jobs, but there’s very little IT work in the area, other than what I already do. And with our county having the highest unemployment rate in the state, I suspect even paper-route jobs and that sort of thing would be hard to find.

My job pays decently and is very secure: her job also pays well and is less secure, but still not much in jeopardy. In Michigan, that’s significant. We can’t sell the house without taking a loss, but it is big enough—barely—for two more kids. If we need to upgrade the car to a mini-van, we’ll have enough in our car fund that we can pay cash, so that’s not an issue.

I hate to make children about mere numbers, but purely by the math it seems like more children is unwise. On the other hand, I constantly hear stories from other families about how they it “somehow just worked out.” Any advice or suggestions?

Much like you, my wife and I have two children – ages four and two – and another one due to arrive within the next few months. The issue of escalating child care costs is one that we’ve dealt with many times throughout our child-rearing process and, through it all, we’ve come to some conclusions about that very occurrence.

First of all, the idea that it “just worked out” is a bit misleading. What often happens in that situation is that people go through a period of re-prioritizing after the child (or children) arrives, and it’s often a shift that happens without a lot of conscious thought. You choose to eat at home more because it’s easier to corral children there. You don’t go out as often as you used to because of the cost of babysitting. Over time, these shifts just seem completely ordinary – parents adopt a new normal along the way and often feel like it “just worked out.” Our memories often work to make things seem smoother than they actually were.

At some point if you continue to have children, the cost of child care will likely eventually meet or exceed the net cash benefit of one of your jobs. If you have three preschool-aged children (as we will soon), your weekly costs are immense. If you, at the same time, figure up the true take-home of one of the people in the household – after taxes, commuting costs, vehicle upkeep, wardrobe upkeep, and son on – you’ll often see that working outside the home is a financial net negative. Add on top of that the financial benefits of not working (even less reason to eat out, more organized grocery shopping, etc.) and you create a compelling case for one partner to leave the employment scene for a period of time.

What if you can’t afford to do this because you’ll be burying your career path? At this point, it’s really a values thing – your career is more valuable to you than more progeny. It’s one of those value comparisons where there is no real right or wrong answer – however, because it’s such an emotional one, people often convince themselves that one answer or the other is absolutely right for them and thus absolutely right for everyone. It’s not. You have to decide for yourself what you value.

If you decide that more children are the real priority here, then plan for it. That may involve selling the house and moving elsewhere – even to another part of the country. It may involve selling a vehicle. It may involve leaving a job. If your children are your priority, then sacrifice those life elements that aren’t directly benefiting the children.

If you decide that your continued career trajectory is the priority for you, take precautions to not have another child.

Your situation – much like our own – is basically asking you to choose between the two paths. Choosing one path doesn’t necessarily mean abandoning the other one, but it does mean postponing it to a later point in your life and it may mean that you’re unable to pick it back up again.

It seems to me from the email that you’re having a hard time choosing between the two. Right now is the time to sit down, talk with each other frankly about it, and make a choice. Is it career maintenance as the top priority or is it more children?

Give the decision time. Also, perhaps most importantly of all, give each other respect here. There is no right or wrong way to feel about the question and if you disagree, that’s okay. You both have reasonable perspectives on the issue.

You don’t have to make a decision tomorrow on this, but whichever way you choose, it doesn’t hurt to take a serious look at your spending and find ways to minimize it now. Build an emergency fund. Learn to live on a little less. No matter which path you end up choosing, doing that now will help you with the ramifications of that choice.

Good luck.

In the past three months, I’ve paid off all but $2,000 of my credit card debt. I feel happier about my money than I have in a long time. The only problem is that my social life seems to be falling apart. I don’t have as much interest in the things my friends are spending their money and time on and I find myself doing other things a lot. What do you suggest?

Bear with me for a second as I go down a bit of a strange road.

I’ll admit it. I’m not a good housekeeper, and neither is my wife.

Yes, we keep our house reasonably clean and we make an extra effort to clean when guests come over, but on a day to day basis, housework is lower on our priority list than it seems to be for many other people that we know. Quite often, we do minimal cleanup during the week and wait until Saturday for a real housecleaning – and, even then, we don’t scrub the walls or things like that on a regular basis.

Our priorities are simply different. There’s no wrong or right about it. Some people value housecleaning more than we do. A few of our closest friends spend literally hours each day on housecleaning because keeping their house sparkling is a very high priority for them.

So what’s a high priority for us? Time with our kids and with each other. Learning new things. Finding ways to have fun without spending a mint.

If we were to simply follow the lead of some of the people in our social circle, we would probably spend more than we do. One of my closest friends is becoming a small-scale land baron. Another one buys lots of Leroy Nieman serigraphs and, on occasion, original art. Yet another close friend really, really values his three automobiles.

Our money goes towards financial stability, because that’s what we value.

Placing that value highly, even if it’s not in line with what our friends seem to value, hasn’t damaged our deepest, most important friendships. You don’t have to value exactly what others value – you just have to respect it.

Instead, our friendships are usually based on the things we do have in common. Almost all of our friends really enjoy hosting and attending evenings full of board games, usually with a potluck meal. Even though there’s a variety of political perspectives, we all value political discussions that don’t turn into insults, so we often discuss politics together in a setting that would often result in arguments and fights. We all value reading and learning new things. None of us, at this point, is in a bad financial state, as we all have our debts under control.

For all of the things we do differently, we have those key things in common. You don’t have to do what your friends do, and you don’t have to value all of the same things that your friends value.

If you value living frugally, that’s fine. You don’t have to spend like your friends do. Instead, find ways to accentuate the things you do have in common. What do you both value? That’s the basis of a strong friendship.

Kelly, it seems to me that you’ve adopted stronger financial practices as a significant value in your life, and that’s great. It’ll help you to stay afloat no matter what the river of life sends your way.

The question is what else there is in your life. What other things do you value? How do you spend your spare time? What do you think about? There’s a good chance that these things still overlap with your friends – and if they do, seek ways to spend time with them that match up with those values.

You might find that your values actually are pretty far away from some of them and that your friendship was really only based on one value, one that you’ve moved away from as you’ve grown as a person. That’s fine – I discovered that myself when I started re-evaluating my life. If that happens, it simply means that it’s time to start socializing in ways that will help you meet people that match up well with your current values.

I firmly believe that if you surround yourself with people who mostly value different things than you do, you will be unhappy. I also firmly believe that if you seek out groups of people with which you share at least some values, you’re likely to build great relationships and friendships. Even better, if you can seek out multiple groups in this way – a group that matches one value you hold dear and another group that matches another value you hold dear – you’ll not only build friendships and relationships, but you’ll be able to make some powerful connections, too.

Good luck!

One Year Ago (March 7 – March 13, 2009)
A Guide to Making Inexpensive and Delicious Homemade Pizza Our homemade pizza makes several meals for our family for a dollar a pop or less. Not only that, it’s delicious and fairly healthy, too.

Frugality and Feeling Deprived Frugality doesn’t have to feel like deprivation at all if you spend some time reflection on what exactly bounty means in your life.

The Frugal Laptop This worked great for about ten months until a separate hardware issue cropped up with the laptop. I’d still advise anyone to try this, though.

A Step-by-Step Guide to Getting Your Credit Card Interest Rates Reduced This tactic works well, but be aware that many credit card companies might also reduce your credit limit at the same time, particularly if you’ve had a history of being late on your bills.

My Worst Job – And What It Taught Me Those simple, menial tasks that you hate are often the perfect opportunity to show the world that you’re a great worker.

Two Years Ago (March 7 – March 13, 2008)
How I Turned That Ship Around: Another Look At My Financial Meltdown … And The Aftermath When things were at their absolute worst for me financially, here’s the game plan that I followed.

The Financial Recovery Toolkit: Ten Tools I Used In My Financial Turnaround Hand in hand with the above article, here are ten tools I used to make that turnaround possible.

Chipping Away at the Paycheck to Paycheck Routine One big challenge that people have is breaking away from the idea that you have to spend what you earn. Financial security comes from freedom from your work and this is the first step.

The Credit Card Holy Wars: There Is No “Right” Answer … But Here’s My Take Should you have a credit card? Shouldn’t you? I think there are reasonable arguments on both sides of the coin.

Ten Ways to Translate Your Passion Into Additional Income If you’re passionate about something, you already have a leg up over a lot of people in that area. People pay for passion.

Three Years Ago (March 7 – March 13, 2007)
Are Your Friends Always Spending Money? Ten Frugal Activities – And Advice On How To Suggest Them When you begin to turn your financial life around, it’s often a struggle to overcome the social barriers. Here are some tips for making it work.

Why Johnny Can Read: Simpson’s Paradox and the Greatly Exaggerated Death of American Public Education The reason for writing this was an ongoing debate with readers about public versus private school. Is private school worth the dollars?

How To Transition From Car Loans To Paying Cash For Automobiles Paying cash for automobiles is a huge money saver because you’re not paying the interest on the car loans. Here’s how to get there.

Love, Marriage, and Money: Should a Couple Combine Their Finances? This isn’t always a straightforward issue, and it’s not just a trust issue either (which is what people often try to break it down to).

Nine Financial Reasons For Getting Involved In Your Local Community Community involvement can really help out your financial life, directly and indirectly. Here’s how.

If you’d like to browse through more of the archives, visit the chronology, where all posts are listed in chronological order.

Nine Ways to Get More out of The Simple Dollar
This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are nine great ways for new readers to dig deeper into The Simple Dollar.

1. Subscribe by email or RSS. Visiting The Simple Dollar’s website is great, but for many people, it’s more convenient to receive the articles in another form. It’s easy to join 60,000 other subscribers and get The Simple Dollar’s content by email or in your RSS feeder (if you’re unfamiliar with RSS, check out Google Reader.

2. Comment. Each article on The Simple Dollar has lively discussion. Just click on the green square in the upper right of each article on the website and join in!

3. Read my story of financial meltdown and recovery. The Simple Dollar isn’t based on what I’ve read in books or learned in school. I’ve made a lifetime of financial mistakes – The Simple Dollar is a record of what works for me during the process of getting my life on a better track.

4. Download my free 49 page e-book. Everything You Ever Really Needed to Know About Personal Finance On Just One Page is completely free. It summarizes all of the key lessons I’ve learned along the way about personal finance in one tidy package – in fact, all of the main principles can be found right on the cover.

5. Follow me on Twitter – or other social networks. I post tons of interesting articles, quotes, follow-up material, commentary, and other material on Twitter. Follow me! If you’re unfamiliar with Twitter, it’s essentially an open discussion forum for people to share ideas and thoughts with other like-minded folks – you just choose the people you want to listen to and their ideas and thoughts are all delivered to you on a single page.

I also participate on several other social networks. Feel free to check me out on del.icio.us (it’s where I collect links, from which I select the ones that appear in my weekly roundups), wakoopa (what software I use), GoodReads (what books I’m reading), Facebook, and FriendFeed (which aggregates everything). I also have an irregularly-updated personal site, TrentHamm.com.

6. Dig through “31 Days to Fix Your Finances.” 31 Days to Fix Your Finances is an article series that outlines how you can get a grip on your finances over the course of a month.

7. Send me your questions and suggestions. Send me an email and let me know what you’re thinking, what you’d like to see, and any questions you might have. I try to respond to as many emails as possible and I read them all. I may even use your question in a future article!

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And I never got around to posting the other five. Today, I’m completing that post.

So, after you’ve perused the art of the slow cooker and five of my favorite recipes, here are five more for you to try. I have no idea where these originally came from, but each was experimented on and modified more than a few times and seem to only exist on my own handwritten cards.

One big tip! If you’re going to leave these on for more than eight hours, add an extra half a cup of water before you go. The biggest danger for cooking things in a crock pot longer than that is having the food dry out.

Let’s go!

Chicken Chili (our current favorite crock pot recipe)

1 1/4 lbs boneless skinless chicken breasts
2 15 oz. cans great northern beans or navy beans (I prefer to soak dry beans myself)
12 oz. frozen sweet corn kernels
1 4 1/2 oz. can chopped green chiles (or you can chop your own)
3 tbsp. chili powder
16 oz. chicken stock or chicken broth
8 oz. half and half (you can use skim milk if you want it healthier)
1/2 tsp. corn starch (if you want it thicker)
1/2 cup sour cream
1/2 cup chopped onion (optional)

Dice the chicken into 1″ cubes and put them in a slow cooker. Add the beans and corn and optional onions. In a bowl, mix the chili powder, the peppers, the half and half, and the chicken broth or stock (and the starch, if you want it thicker). Stir until well-mixed, then add to the chicken. Cover and cook for 8-10 hours on low. Just before serving, stir in sour cream until consistent.

Wild Rice Turkey

1 1/2 cups wild rice
2 cups finely chopped onion
1/4 cup golden raisins
2 apples, chopped
3 cups chicken broth or chicken stock
1 1/4 tsp. thyme
1 tsp. salt
1/4 tsp. marjoram
3/4 tsp. sage
1/2 tsp. pepper
whole turkey brest (4 lbs. or so)

Mix rice, onion, raisins, apples, thyme, salt, pepper, sage, and marjoram until consistent. Put thsi mixture on the bottom of the pot. Cover with chicken broth/stock and make sure all of the rice is covered with at least a quarter of an inch of liquid – if not, supplement with some water or additional stock. Place whole turkey breast (thawed, of course) on top. Cook on low for eight hours and be sure to check the temperature of the turkey before you remove it (it should be 160 degrees F or roughly 75 C).

Stuffed Zucchini

1 medium zucchini or squash, halved lengthwise, with seeds removed
1 cup tomato sauce
1 tbsp. red wine vinegar
1 onion, chopped
1 tsp. minced or powdered garlic
1/4 cup brown rice (uncooked)
1 tbsp. parsley
1 tbsp. basil
1/8 tsp. black pepper
Mozzarella cheese (optional)

Put the zucchini halves in the bottom of the crockpot. Mix the tomato sauce and vinegar together in a small bowl – a cereal bowl works. In another bowl, combine the onions, garlic, rice, parsley, basil, and pepper and mix thoroughly. Add two tablespoons of the tomato-red wine mix to the onion mix and stir thoroughly. Put the onion mix on the zucchini halves, then pour the rest of the tomato-red wine mix on top. Cook on low for 6 hours.

Three Bean Stew

1 cup dried lima beans
1 cup dried great Northern beans
1 cup dried chickpeas / Garbanzo beans
4 cups water
16 oz. carrots (baby or sliced full carrots)
1 1/2 cups chopped onion
2 1/2 cups or 1 14 oz. can diced tomatoes
2 tbsp. tomato paste
3 garlic cloves, minced
1 tbsp. parsley
1 tsp. basil
1/2 tsp. thyme
1/2 tsp. salt
1/8 tsp. pepper
1 bay leaf

Soak the beans together overnight in water by putting the beans in a pan, then adding water until there’s an inch of water on top of the beans. Drain the beans and place in crock pot. Add the water, carrots, oinion, garlic, parsley, basil, thyme, pepper, and the bay leaf to the crock pot. Cook on low for eight to ten hours. Add the tomatoes, the paste, and salt and cook for another hour on low. Remove bay leaf and serve.

Barbecued Ribs (it doesn’t beat slow-cooked on a grill, but it’s very good!)

4 lbs. baby back ribs, lightly peppered and salted
2 cups catsup
1 cup finely diced tomatoes
1/2 cup finely chopped onion
1/8 tsp. cloves
1/4 cup vinegar
2 tbsp. pepper
1/2 cup packed brown sugar
2 tsp. oregano
2 tsp. Worcestershire sauce
hot sauce to taste

Rub the ribs down with salt and pepper. Put them in a shallow baking pan and bake them in the oven for 15 minutes at 400 F / 200 C. Turn the ribs over and brown for another 15 minutes in the oven. While it’s browning, mix the other ingredients in a bowl. Take the ribs from the oven, place in a slow cooker, pour the sauce over the ribs, and flip the ribs around to coat them. Cover and cook on low for eight hours. Delicious!

Good luck!

I don’t understand how you can recommend that people shop in thrift stores for clothes. The stuff there is usually worn out and just looks bad and outdated. I would never wear that stuff to work.

It sounds to me like you’ve made up your mind about thrift stores and secondhand stores before even stepping inside the door. I’ll make the case anyway.

First of all, I won’t buy the vast majority of clothing on sale at such a store. I’m with Monica on this one – most of the stuff there can be pretty worn out. I’ve seen lots of threadbare sweaters, worn out dress pants, and other items that, if they were in my home, would be meeting the rag bag.

Those aren’t the items I’m shopping for. The reason I go is to look through a long rack of clothes and find two or three items that are barely worn. How do quality items of clothing get to the secondhand store? A person gains or loses a lot of weight. A person passes away. A person decides they just don’t like how the item looks on them. A person is a clotheshorse who only wears an item a couple of times before getting rid of it. Each of these cases can result in some very nice clothes on the rack at the secondhand shop.

If you don’t like the item, don’t buy it. However, there are a lot of gems buried on the racks if you’ll spend some time digging through them.

Second, my biggest focus for clothing buys – once they meet a minimum standard of quality – really is cost per use. Yes, unquestionably, I could go to a store like Men’s Wearhouse, find a high quality article of clothing, and wear it, say, sixty times over the course of several years. That article of clothing might cost me $60, so the cost per use would be $1 per use.

On the other hand, I might find a nice item at the secondhand store. It might have been worn a few times already, so I might only get fifteen wears out of it instead of the sixty I might get from the new shirt. However, that secondhand item only cost me $3. That’s $0.20 per use.

I will take the second item of clothing any day of the week.

What about the time cost? Time cost is one of the first things people mention when they hear a money-saving tactic that they’re unsure about. Human beings are creatures of habit and if we can find a good reason to retain that habit (or even a not-so-good reason), we’ll use it. Time cost is often that reason.

However, in this situation, time cost matters little. I go clothes shopping twice a year, period.

In the spring, I’ll dig out all of my summer clothes (in fact, I’m intending to do this this weekend), determine what needs to go and what can stay, and then figure out if I need to add some clothes to the mix or if I have enough. I do the same thing in the fall with my winter clothes.

Once that’s done, I actually make a shopping list for clothes. I need some number of dress shirts, some number of jeans, some number of shorts, some number of khakis, some number of underwear – you get the idea. Then, I go shopping.

If I use secondhand store clothes in this process, I still just rotate them out at season’s end if they’re too worn, the same thing I’ll do with clothes that are purchased new. I’ll still go clothes shopping twice a year, regardless of whether I’ve bought new or used clothes in the past.

What this comes down to is simple: spending control. I keep a pretty tight rein on my clothes shopping habits. I simply don’t go clothes shopping more than twice a year. Because of that, I don’t devote much time in a given calendar year to picking out new clothes – and I don’t spend nearly as much money, either.

At its heart, an awful lot of frugality and financial success comes down to control over your spending. If you have firm control over how your money leaves your wallet, it’s often shocking how many ways there are to cut your spending without cutting your quality of life one iota.

I understand why such items are for sale – they’re convenient. It’s easier to just grab a bag of prewashed romaine lettuce than it is to grab a head of romaine and deal with it when you get home.

Yet, when you look at the prices, you’re actually paying a significant markup. Two bags of Dole romaine lettuce at my local grocer costs about the same as a single head of romaine. The bags cost about $4.50 together, while the head costs about $1.60 (with some variance, of course, due to weight, sales, and so on). By buying the head, you save $2.90 – or, from a different perspective, you’re paying $2.90 for the convenience of someone else washing your lettuce.

Is that really worth it? I bought a head of romaine lettuce myself, put it in one of those handy bags that they provide, and took it home with me. Upon arriving home, I set a stopwatch for myself, then chopped the leaves off of the head of lettuce, rinsed them thoroughly, rinsed the bag a bit (leaving some moisture inside), then put the leaves back in the bag, tying it. I then tossed the knife in the dishwasher and stopped the stopwatch.

Total time? Three minutes. Actually, it was just a bit shy of that.

Let’s say over the course of the next year, I repeat the same action twenty times. I buy a head of romaine, put it in one of those bags from the store, take it home, chop it myself, and store it in that bag. Each time, I’m saving myself $2.90. Over the course of a year, I spend an hour chopping up the lettuce and save myself a total of $58.

The same holds true for all of those convenience foods.

Apple slices? I found apples I like at the store for $1.29 a pound, whereas pre-sliced apples added up to $4.76 a pound (I found four four-ounce bags of them for $1.19 each). I have a nice little apple slicer, so I’m able to slice up a few apples at dinnertime and completely clean up from it in about thirty seconds. My estimate on this is that buying un-cut apples saves me about $80 for every hour of apple-slicing I’m willing to do.

Celery sticks? I can buy a bag of celery for $1.49 or I can buy about three containers of pre-sliced sticks for $1.99 each. I spend about four minutes cutting the sticks and it saves me $3.47 – or about $52 over the course of a full hour.

I can go on and on with these items, but in each case the central idea is true: the convenience has a really, really high cost, much more than it might seem at first glance.

To me, this type of convenience food is a perfect example of how the little things really add up when it comes to personal finance. There are so many little conveniences that we pay for in life, whether it’s pre-sliced apples or take-out food or a lawn care service. When you actually step back and calculate the hourly rate that these things are costing you, it’s truly astounding. Yet people fill their lives with these conveniences and question those who skip out on them, then they wonder why it’s challenging to make ends meet.

Take a stand today. Slice your own vegetables. Then put that saved money aside for something for yourself.

Time is the one thing I wish I had more of.

I just found out that I will be unemployed come mid-August and I am just wondering what steps I should start taking in savings and job hunting until then. I am currently an Americorps*VISTA, which means that I cannot start a second job until the completion of my term (again, August). I live very simply, but only make about $800/month take-home and have about $1400 in CC debt (started the year at $4000; I’ve been working to get rid of it) Your thoughts?

Related to that, my position generally only winds up taking about 25 hrs/week, while I’m required to ‘work’ (be in the office) for 40. How would you utilize those extra 15 hours?
- Tessa

The first thing I’d do is figure out what I would like to be doing with my time come August. What exactly is the next step for you? If you don’t know, start investing those fifteen extra hours a week (and more) to figuring out what comes next for you.

Once you know, then you should be able to fill in the blanks as to how to fill your time until the change happens. It might mean building up a resume. It might mean spending a lot of time firming up old connections and relationships. It might mean applying for college or for scholarships.

In short, you need to figure out what comes next, make a plan for how to get there, then spend the remaining time executing that plan as strongly as you can. The key, though, comes from you. What do you want to do next?

My husband is irresponsible with money. I knew when we got involved that he had a student loan and some credit card debt (about $5000 dollars combined), and that he felt no obligation to pay these off. He also hadn’t filed his taxes for several years. I probably should have listened to my gut then and run for the hills, but i didn’t, and I’m not looking for marriage advice here. Once we became seriously involved, I made sure his taxes were filed. The government garnished his refunds until the student loan was paid off, and we paid off the cc debt too with the understanding that he is unable to control his spending and should not have access to a cc in the future.

Once again, he got another card, and now has a $2000 balance, and is not making payments. I am done bailing him out. I am just wondering how his bad credit is going to affect me if he doesn’t pay this off? Whether or not we stay together, what can I do to protect myself from his debt? Is there anyway a spouse at the end of her rope can call the credit card companies and get his cards cancelled or say “Stop issuing this man cards!” If we do split up at some point, am I going to be responsible for half of his debt?
- Michelle

The important question is to consider whose names the debts are in. If he’s applying for credit cards on his own, are they just in his name? If they are and you file for divorce, they will remain his debts and are not your concern. If they’re in both of your names, you need to get your name removed from as much of it as possible if you’re considering a separation.

That being said, I think some professional counseling is in order in this situation. Clearly, there are serious trust issues going on in your relationship and your husband has some significant self-control problems. These are the types of issues that need counseling – they will not go away due to your sheer force of will.

If you care for him at all, seek help for him and for your relationship. I can’t tell from your email whether you’re beyond that point or not.

After I finished school I went to work for an outdoor education center for nine months. I loved the job but, wasn’t happy with the management so I came back to my parent’s house and found a job there. It is in a similar field but most of the work is in an office. I originally planed to stay at this job for three or four years but now the program might lose its funding. This wouldn’t affect the funding to my job but it would nearly make it pointless. My supervisor encouraged me to be on the lookout for other jobs. I sent out several resumes to some outdoor education centers and have interviews soon.

Do you think it would be foolish to go back to that type of work?
- Beth

Your father’s frustration is probably stemming from the fact that he does not see you heading down a path that leads you to financial independence. He wants to see you being at least successful enough to fly under your own power through adult life. If you take another minimum wage job and continue to live at home with your parents, you are shifting a significant portion of your life’s expenses off to your parents as well as intruding on the privacy of their adult lives. He likely sees your choice as not moving at all towards repairing that situation.

Regardless of what job you choose, you should be working on a plan to be independent and they should be in the loop about that plan. What form that takes is really up to you, your situation, your skill set, and your passions.

Recognize, though, that your parents are people, too. They’re providing for you now because they care deeply about you, but every time you drink from that well, you leave them less water.

We took up a mortgage of $200k, with $140k being fixed and $60k in what’s called a revolving credit account here in New Zealand. We thought the revolving credit facility would allow us more flexibility if we are disciplined enough with our spending.

For all these, we are paying a service charge of $12.50 a month. To me, the revolving credit facility seems like another good alternative, what do you think?
- Art

It sounds an awful lot like a money merge account, something I wrote about in detail in the past.

In the United States, such accounts are generally pretty expensive and can ring you into the thousands of dollars. For that kind of cost, I don’t view such an account as being worth it unless you have little financial discipline. In your case, I think it actually might be worth it, though.

I’m not entirely sure, though, why you’re taking money out of the account and putting it into a savings account. I’m assuming that this is for extra payments on the mortgage, but if I understand the account correctly (based on my understanding of money merges and the documentation on revolving credit accounts in New Zealand), leaving the money in the account has the same effect of paying down your mortgage faster, plus it decreases the risk that you might go over your credit withdrawal limit. If that’s the case, I would put a severe cap on how much I transferred out of the account, only keeping enough to serve as a true emergency fund.

You don’t talk about Lost enough in your mailbags so I’m going to keep emailing you Lost questions until you answer one. So here goes. Who is the good guy of the series? Jacob or UnLocke?
- Kelly

Neither one is. I think you have a prison-like situation where the inmate (UnLocke) has been held in solitary confinement for a very, very long time. He’s like a rat in a cage. But does that mean the guard (Jacob) is a saint?

I still think there are two real heroes in this series: Jack and Locke. I still believe that to be the case. My belief is that Locke on the island will come back to life at the same time as Locke off the island walks again thanks to Jack’s spinal surgery, and Locke will eventually become the guardian of the island. Jack has been searching for something to fix for the entire series – he will get to fix Locke.

Or maybe I have no idea what I’m talking about and the series will end with a “Cop Rock”-esque singing montage.

My partner has about $8000 worth of credit card debt and I’ve been trying to help her figure out the best way to pay it off. We’re in the process of refinancing our mortgage (to 5.25%) and are wondering if it makes sense to wrap it into our mortgage, since she pays a higher interest rate on the credit card. She also make the monthly mortgage payment (I made the down payment, and am making the monthly payment on a second property we own, so she says it’ll still be her responsibility, as we’re keeping track of who put how much into each property). I’m skeptical, not wanting to add any more debt to our mortgage (and feeling that HER debt being added to OUR total will make keeping track messy), but can you clarify just how much this is or isn’t an okay thing to do?
- Heidi

Yes, in a strict sense, it makes sense to wrap that credit card debt into the mortgage.

The challenge comes in when you look at the self-control issues. If you guys have no credit card debt at all, will she have the spending control to resist simply charging those cards up again for purchases you don’t really need?

I’m not sure about your domestic arrangement, however. You seem to want to distinguish heavily between HER debt and YOUR debt. If this person is genuinely your partner, then that includes your finances. There is no HER debt or YOUR debt. There’s OUR debt – you deal with it together because the debt is affecting you both.

I just realized that paying extra every month decreased my minimum payment amount and not the length of the loan. (Mostly because I just started paying extra.)

I’ve been trying to figure out how early my auto loan will be paid off if I add extra in every month. All of the loan calculators I’ve found online that calculate don’t seem to take into account that the minimum payment amount decreases every month while my payment does not. I keep paying my original amount that included the extra. Is there a formula to figure all this out?
- Susan

It’s simple: ignore the minimum payment. Instead, calculate what your payment should be right now. Tack a small amount on top of that. Pay that amount every month, regardless of what the bill says. Soon, your loan is gone.

If the minimum payment is getting smaller, it’s because the lender wants you to pay on the loan for a longer period in order to maximize the amount of interest they get from you. They don’t mind receiving smaller payments in the short term if it means more income in the long term. Thus, they’ll show you the minimum amount you’d need to pay to stick with your original payment schedule – and if you’ve overpaid in the past, that minimum amount will be nice and small.

Ignore it. Use Bankrate’s great loan calculator and figure out when you’ll get the debt paid off if you add in some extra to each payment.

My husband and I both have student loan debt of $10k each at around 3%, and a mortgage for $140 k at 6.75%. We have the option to refinance down to 5.1% but it would cost $3,000 into the principle. We’ve been paying the mortgage for 2 1/2 years, but have no plans to ever sell. The house is a rental property that we also live in, so the amount of mortgage, taxes, and fees and repairs we pay after the rents come in is only around $400/month, therefore allowing us both to save alot. We have no other debt.

Or would it be better for me to open a Roth IRA, or put my money somewhere else, or even pay my student loan off?? I doubt we would pay the mortgage down because we use the expenses against the income we get from the rents. My personal cash savings is earning no interest in my checking account (i know, i know, but this is why I’m working on this.)
- Danielle

First of all, funding a Roth IRA won’t get you a tax reduction, at least not today. Roth IRAs are funded with after-tax money.

Second of all, if you’re six months away from buying a property with a $25K down payment and have only $32K in joint cash savings, it is probably prudent to hold onto the cash until you have the purchase in hand. You do not want to find yourself in a position without a cash emergency fund, because when things go wrong at an inopportune moment, they can seriously snowball.

If I were to do anything with the savings, I would take $3,000 of it and refinance the loan. If you can drop the interest rate on $140,000 by 1.65%, you’ll be saving yourself a couple hundred a month in loan payments, which would pay back that $3,000 in a year or so and then leave you in better financial shape for the length of the mortgage.

Other than that, I’d sit tight until you’ve bought the property. I don’t see any major reason to change anything, assuming that the property buy is a definite thing.

Read this in your March 5 post: “…when my contract expires, I’m going to simply cancel the phone and get a pay-by-the-minute el cheapo phone.” I’d be curious to know how you go about choosing a pay-by-the-minute cellphone plan when the time comes. My husband and I would like to switch to a prepaid option as well, but each company structures their charges so differently that it’s hard for me to decide which plan would be best for us.
- Lynn

This is one of those times when I turn to Consumer Reports. What do they recommend when it comes to such pay-by-the-minute plans?

Right now, looking it up wouldn’t really help as I won’t be doing it for at least a few months yet. When it gets close, I’ll visit my library and start digging through the back issues of CR to find their most recent article about such cell phones (likely, it’ll be found in their most recent cell phone roundup). I’ll move on from there.

My choice will probably be the best “bang for the buck” phone rather than the cheapest one, at least with the “bang” being call quality. It’s not worth my money if I can’t easily place calls with the phone at my convenience, after all.

I’ve just read a document on “travel hacking” that gives tips on how to maximize your frequent flyer miles for free tickets. One of the tips is to “cycle” credit card applications where you are applying for a new Citi card (to get the American Airlines miles) every 60-90 days. It’s legal, but I wonder what it will do to my credit score. If I don’t need to apply for any loans in the near future, does a decrease in my credit score (now 790 I think) really matter? Thanks for your help!
- Jill

This will have a mild negative effect on your credit rating. However, with a credit rating near 790, I don’t think the negative effect will be strong enough to affect anything you might use your credit rating for.

My concern with such rampant credit card hopping is identity theft. To get each of these cards, you have to apply for a new card, which is another opening you’re giving yourself to identity theft. The threat of theft on any one application or card you have is minute, but if you have lots of cards and applications floating around out there, the chance multiplies.

Unless I’m already flying a lot and can directly save a lot of money by doing this, I would not view it as being worth the combination of time and personal risk. If you fly several times a year already as a normal course of life, then the benefits might outweigh the costs here, but if you’re only doing this to try to build up miles in case you might choose to fly somewhere someday, then it’s not worth it.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Because so many people care so much for these two children, they’re often the recipient of gifts. Yes, their birthdays and Christmases are full of presents, but it even goes beyond that. Their grandparents often buy them spontaneous gifts. Their cousins sometimes literally give them their old toys and clothes. We even do it ourselves, though our influence is often in the form of books for their bookshelves.

This has a challenging side effect – the kids have accumulated an awful lot of stuff. Their toy boxes are overfilled. Their bookshelves are stuffed with books.

Several problems are made evident by this. First, it’s difficult to keep all of this stuff in order, simply because of the clutter problem. Second, it encourages our children to be overstimulated because as soon as they even have an inkling of being less interested in a particular item, they can just bounce onto another one. Third, they’re often much less enthusiastic about the wonderful gifts that their grandparents give them because they already have so many.

The solution is obvious: reduce the toy count. But how do you do this without upsetting the children?

My goals are very straightforward.

First, I want to reduce clutter. Dealing with clutter means more money sunk into stuff and more time spent cleaning it up. That means less money for the things that are important (like a less stressful career, deeply meaningful experiences, and so on) and less time for them as well.

Second, I want my children to enjoy life with less stuff around them. I do not want them to feel that lots of stuff is the norm.

On a smaller note, I want my children to increase their attention span. With a huge number of toys easily at their disposal, it’s very easy for them to just jump from toy to toy. By strongly reducing the availability of such items, the opportunity to jump around is less.

Here’s my solution for this problem.

First, I’m taking an inventory of which toys they like and play with frequently – and which ones they do not. I’ve actually been making a list of the toys that each child plays with over a multi-week period. If toys are on this list, they’re probably going to be kept. Toys that are not on this list are going to be targeted for removal.

Second, I’ll talk about the process with them. I’m going to ask them what their favorite toys are. I’m going to also tell them that I’m going to take some of the toys that they never play with and give them to other boys and girls that don’t have many toys to play with. Believe it or not, this works very well with our children, even the two year old.

Third, I’ll take advantage of a period when they’re visiting grandparents to reorganize and minimize their toys. When they return from their grandparents, I will have removed many of the toys from their sight, minimizing the clutter. What will remain are the toys I’ve identified as their favorite ones. The toybox will be only about half full (if that) instead of overflowing. The bookshelves will be filtered a bit (though I’m not as interested in reducing their book count).

Finally, I’ll keep the excised toys in storage for a short period, then either yard sale many of them or take them to Goodwill. The reason I’ll keep them in (hidden) storage for a short period is so that if I discover that I removed a toy accidentally that the children really value, I can retrieve it.

One thing I won’t do is discourage family members from giving them gifts. I understand that this is done as an expression of love for children that they don’t get to see as often as they’d like. Instead, I simply want to create a situation where these toys and gifts are deeply appreciated.

For a long time, we did some toy rotations so that the children would always have something new to play with. In my eyes, that doesn’t really achieve the goals I listed above. We still have a lot of stuff. It still doesn’t subtly teach patience and attention to the children.

Any thoughts on this plan?

Of course, me being me, I already have a long list of stuff to do – things that simply require some focused hours and are difficult to do when the family is around. Five years ago, I would have been headed to the golf course or to Prairie Meadows. Times change, I guess.

Lessons for you and me from Warren Buffett’s annual letter Warren Buffett’s annual letter to Berkshire Hathaway shareholders often has a lot of interesting personal finance thoughts in it that go far beyond mere investing. (@ pop economics)

The High Cost of Clutter Every time you buy something new and bring it home, you’re adding to the clutter of your home. It’s one more thing to stuff on a shelf. It’s one more thing to dust. It’s one more thing to maintain. It’s one more thing to take up space. Those are costs, both in terms of money and time. (@ get rich slowly)

6 Ways To Keep The Fire In You Burning This can be a challenge for anyone at times, no matter how much they love what they’re doing. (@ pick the brain)

My Valuable Downgrade “Upon completion of the final draft of my latest novel three years ago, I sent out an e-mail to my family and closest friends. Subject heading: “What Has Mark Been Doing for the Last Six Years?” The message field was empty.” Something about that opening really struck me. (@ soul shelter)

Save Money! Get a College Degree In Three Years If I had not been blessed enough to get scholarships to cover my tuition, room, and board, this is likely the college path I would have chosen. Whether I would have been successful at it is another story. (@ free money finance)

When Your Friends Become Social Sellers and Multi-Level Marketers Quite honestly, I view such a thing as directly cashing in on a friendship, far worse than asking me for a favor. I’d far rather spend an afternoon helping a friend patch up his roof than spend two hours at a Lia Sophia party. (@ consumerism commentary)

Kenny:

I listened to your radio discussion with Vicki Robin and I was really intrigued by the whole five year plan. I have a big dream I’d love to accomplish (being a radio host) but I feel like it’s so far from my life that I’ll never get there. Any ideas?

Scott:

In five year[s] I would like to have built my own house but I don’t even know where to start.

Angela:

I would like to be a writer someday but I’m not a writer.

Monique:

You have the courage and ability to try such a thing. I do not. I might want to be making clothing in five years but I’ll still be working in this office.

Em:

All I ever wanted to do was play in the WNBA. Now I walk with a limp and people shy away from me. I would do anything to be back in the basketball world.

Raghu:

I keep telling myself I will move back to that town and really make a difference there but it is a lot easier to go home at night, take a nap, and watch a movie.

Sean:

Nothing makes me happier than playing the piano. Nothing makes me sadder, either, because I know nothing will ever come of it.

All of these people have a lot of things in common. They have a dream, one that they spend a lot of time thinking about. They’re nowhere near that dream in their day to day lives. They feel as though the gap between where they are now and where that dream is may simply be too much of a bridge for them to cross. So they’re walking in place through a life that has much less meaning for them than they would have ever liked.

I was there once, in a way. I know exactly how it feels to sense that everything you’ve dreamed about in your childhood and in your adult life slipping away from you. I know how hard it seems to fight for it when everything in your life seems to be flowing in a different direction. And I also know how good it feels when you find some success against the current and can feel yourself moving in the right direction towards that dream.

If you know what you truly, deeply want out of life, but you can’t see how you can get there from where you are now, here’s how to get started.

First, get your financial house in order. This is paramount. It is almost impossible to make powerful, positive life changes if you’re swimming in debt and your spending is out of control. Learn how to spend less than you earn. Pay down that debt as fast as you can. It seems difficult, but it actually works quite well in conjunction with the other tips here.

Second, re-engineer your free time and your social circle. If you really want to make this work, you’re going to have to make time for it in your life. For most of us, this probably means some significant changes. Maybe you give up your thrice-weekly raid night on World of Warcraft. Maybe you can cut your television viewing by an hour a day. Maybe you can withdraw fr some of your social commitments.

Once you’ve decided what to cut, it’s just as important to decide what to add to replace it. Obviously, it needs to be something in connection with your dream – but we’ll talk about exactly what to choose in a minute.

It’s important to remember that these choices are simple. They’re little choices you can make every day. “Instead of spending an hour channel surfing or watching SportsCenter, I’ll work on a short story.” “Instead of going out shopping with the gals, I’ll go to the workshop and work on a painting.” “Instead of playing computer games all night, I’ll get intimate with my piano.” They are choices that you make in the normal flow of your life.

Third, find ways to share what you love. If you love a sport, volunteer to coach a youth team. If you love to play a musical instrument, play a song, record it, and share it with others. If you love to write, start a blog. If you love politics, volunteer for a campaign.

If you want great things to happen, other people need to have access to what you’re doing. If you sit in your home playing the piano for your own enjoyment, you’ll never find a way to make a living with it. You have to get out there and find others. Remember, anything anyone does for a living involves relating to others. We all have customers.

Do not worry about compensation at first. Compensation will come once you’ve built a good reputation and used the experience you’re getting to develop yourself into something better.

Fourth, know how to deal with failure. It will not come easy. Success won’t fall on your lap. It takes time. It takes sustained effort. It takes an awful lot of “no” before you start getting “yes.”

If you take into account the entire scope of all of the writing I’ve done in my life, I am a monumental failure as a writer. Any success I’ve seen has come in the last couple of years. Virtually everything prior to that point was met with “no” and “no” and more “no.”

Why? I wasn’t a good writer – I had some good ideas, but I expressed them poorly. When I did find myself able to produce something good, I hadn’t produced enough goodness and hadn’t shared what good I had done widely enough to actually get anyone’s attention.

It would have been easy to quit. But I loved writing – and I still do. It was always something that made me feel better. It brought me personal pleasure just to write. I’d get a rejection letter in the mail and, yes, it would hurt. But that didn’t mean I would stop writing.

I love writing enough that I would keep writing even if no one read what I wrote. The fact that people do read it – and that I earn enough from it to put bread on the table for my family – is incredible icing on the cake.

If you feel that way about something – it makes you happy regardless of what other people think and whether it makes you any money or not – that’s something you need to dig into. Chase it. Master it. Share it. Then worry about the question of making money – if you’re good at it and share it, the answers will be closer than you think.

Good luck.

Let’s say, for example, you’re in the situation that Paul, one of my readers who wrote in recently, finds himself in. He just took out a $219,000 mortgage. His monthly payment on that mortgage is $1,300.89. Paul wants to know whether paying half of the mortgage twice a month will save him a significant amount.

The first thing he needs to do is make sure that his mortgage allows early payments – and how they work. Make a call to your lender and ask them how often interest is compounded (this needs to be daily or compounded monthly based on the average balance of the month – if it only compounds monthly, paying in advance won’t help), plus how multiple payments during a month are applied to your loan (they must be applied as soon as received for this to work). Most loans work this way, but not all.

There are two options with making early payments.

First, Paul can literally make two payments a month – say, on the fifteenth of every month and on the last day of every month. This means, over the course of a year, Paul pays the exact same amount in principle that he would otherwise pay. The only difference is that on the fifteenth of each month, he pays in half of his payment and at the end of each month, he pays in the remainder of his payment.

In my calculations in Excel, I assumed monthly compounding using the average balance of the last month. Using this method, I calculate that this method will save Paul just over two months’ worth of balance on the mortgage. He’d save $2,931.33 in interest, which would mean he would be able to skip his final two payments and make only a partial final payment.

However, a superior method of doing this would be to simply make a payment equal to half of the amount of the monthly mortgage bill every two weeks. Over the course of a year, this adds up to one extra full payment: since there are fifty two weeks in a year, you’d make 26 half payments, and thus 13 full payments.

In my calculations, I again assumed monthly compounding using the average balance of the last month. I calculated that this method will save Paul $41,117.09 over the course of the loan. His final, partial payment would be issued just shy of five years early.

This method falls perfectly in line with many income schedules (the federal government, for example, issues paychecks every two weeks), which means that you can just allot a certain amount from each paycheck directly toward your mortgage and then not think about it again.

For me, at least, twice-a-month payments would not provide enough benefit to be worth the management hassle of them unless it happened to line up directly with my paychecks.

On the other hand, biweekly payments – once every two weeks – do provide a lot of financial incentive to give them a shot. Add on top of that the fact that it’s directly in line with many pay schedules and that would seem to be a winner to me.

In a nutshell, simply paying twice a month doesn’t save much at all, but paying once every two weeks saves a lot. Yes, one or two fewer days per payment can save you tens of thousands at the end of the payments.

Good luck.

Five years ago, I would have rushed to the bookstore and picked up these titles in hardback. I would have been completely impatient to read them, so I would have just thrown down the $20 or so, picked up the hardback, and headed home with it. About twenty percent of the time, I would have read the book once, stuck it back on a shelf somewhere, and ignored it as it gathered dust. The other eighty percent of the time, I wouldn’t even have read it before it started gathering dust on the shelf.

Why did I do this? There were several factors – I didn’t have the time I wanted to have to read, for one – but the biggest one was what I like to call the “cult of the new.”

Simply put, the “cult of the new” is the willingness to pay a premium price for whatever the newest releases are. When something new comes out, you’re inordinately focused on it because it’s new. It pops up again and again.

If a new restaurant opens, you have to visit it even if the reviews are mediocre.
If a new book or album comes out, you have to pick it up.
If a new car is released, you can’t help but swing by the dealership to scope it out.

It’s a very expensive routine. You constantly overpay for things in terms of their actual quality – instead, you pay a premium for the “new.” You pay new release prices for DVDs and for film tickets. You pay hardcover prices for books. And, in the end, you get far less for your dollar – or you dig yourself into a financial hole.

Some people do it with some level of social justification – they need to keep up with (or keep ahead of) their friends. To them, I say that if your friends value you only because of what’s on your shelves or where you ate last night, there’s not much depth to the friendship.

Others do it to feel good about themselves, so that they feel current. This is perhaps even more dangerous, because you’re tying your self-esteem and happiness to material things and short-term experiences. Without a constant influx of these things, you begin to feel bad about yourself. True self-worth comes from within, not from external things, and it took me a very long (and painful) time to learn that lesson.

It took me years to break out of the “cult of the new.” Here are some of the things that really helped me.

I adopted a firm rule about buying such new things – I don’t. Excepting gifts for others, I simply don’t buy new releases, period. I don’t pick up books for myself until they’re in paperback. If I do happen to read a hardback I like enough to keep around for multiple readings, I still wait until the paperback comes out.

If I truly must read something that’s brand new, I visit the library. I’m a very heavy user of our local library’s book reservation system. Yes, sometimes I don’t get hot new releases in the first month they’re out. However, I do get them eventually and, quite often, I get them faster than I expect (because other readers check them out for much shorter periods than expected). You can do the same thing with movies – sign up early to rent a new release from Netflix, for example.

I also swap frequently with my friends. If I do receive a book as a gift that I think a friend will like, I loan it out. Similarly, they’ll loan their new releases to me. This way, a new release given to me as a gift is often like two or three of them, since I have friends with which I share interests and can trust in terms of swapping books. One’s social network, if filled with compatible, good people, can be a very valuable resource.

I learned to love exploring the archives. If I find an author I like, for example, it’s much cheaper to dig through his or her older books than it is to charge out and buy the new releases. Take Richard Russo, an author I discoverd a few years ago (and subsequently hooked my mother on). Rather than rushing out and buying myself his newest work in hardback, I used PaperBackSwap to read a multitude of his older novels. The cost for these older books was trivial, but I was still able to deeply and fully enjoy his writing without paying that “new” premium. I explored Douglas Coupland in a very similar fashion.

When I finish a book (or a game, or a movie…), I first turn to my own shelves. I don’t insist on finding the thing I want to read/play/listen to already on my shelf, but quite often I find it anyway. I’ll spy a book that just speaks out to me, saying “read me…” in its own special way. So I pick it up and I suddenly have free entertaiment that I’m deeply enjoying.

Some set of these techniques work no matter which form of the new you’re chasing, whether it’s restaurants or trading cards. Whatever it is, if you can seek out other avenues for your passion than the shiny new thing, you’ll almost always receive a big thank you from your wallet.

Right now, I’m trying to figure out some ways to encourage it in ways that might actually build into a lifelong love of creating music. (Yes, I’m the type of parent who would be thrilled to hear their child choosing a musical career.) However, I’m finding it difficult to reach out to her at this stage, so I’m mostly just encouraging her strongly whenever she completes a song or something similar.

Anyway, on to the questions.

I’m 23 and my husband is 24, therefore we are “newbies” in the credit card scene, making our credit limits pretty low (mine is 4000 and his is 2000). Is the ratio computed based on balances carried over month to month, or is it at any point in time? We pay off our credit cards each month, therefore never carrying over our balance. However, at some points in the month, our credit card balance is over 50% (easy to do with a 2000 credit limit). So if we charge over 1000, are we being adversely affected, or are we fine as we pay off our balances?
- Jena

I’m assuming you’re referring to your debt-to-credit ratio.

A big problem with how credit scores are calculated is that they’re effectively calculated in secrecy. FICO, the most commonly used credit score, is a secret formula held by the Fair Isaac Corporation, and they’re not talking. We can only believe tham (and rest on observations of scores and credit reports) when they tell us that the debt-to-credit ratio is important.

Based on my own observations, it appears to me that the amount that credit card companies report to the credit bureaus – and thus the amount that appears on your credit report – is your balance that is carried forward from the previous month. So, for example, if you pay off your entire bill each month, a $0 balance is reported. If you carry a balance of $2,000 forward from the previous month, $2,000 is reported.

I’ve looked far and wide for information on this and have even contacted my credit card company for writeups about it in the past and have never received a truly straight answer about this issue. However, this seems to be the case based on my repeated checks of my credit report and my own credit card statements.

My wife and I currently owe $119,000 on our 5/1 ARM. This is our ONLY debt. We are looking to refinance as our five year fixed period is up March 2011. We currently have $140,000 in savings and $100,000 in retirement assets. We are both 33 years old.

Is it better to eliminate the mortgage in one fell-swoop or should we refinance and then use our savings each month to pay the mortgage? Or refinance the mortgage and put some of the savings down to lower the loan amount.
- Greg

The best move you can possibly make as you prepare for a stay-at-home period is to minimize your monthly expenses, and paying off your mortgage would certainly do that.

If you completely eliminate your debt, you’ll be left with $21,000 in savings and six months of work time in which to build that up some more without the burden of a mortgage payment. Given that you’ll own the home free and clear at that point and could, ptentially, use it as equity in the future if you absolutely needed to, plus you have the retirement savings as well, my choice would be to pay off the entire mortgage and get it over with.

I don’t think there is a major advantage in keeping your mortgage and retaining a lot of money in savings at this point. If you were continuing to work or were perhaps saving for a different major goal (such as starting a business), the answer might be different, but you’re heading into an income reduction.

I was not lucky enough to find “the one” early and am now in my forties with no one and feel like it’s over. I am frugal as hell but have no one to share my life with and for some reason, maybe it’s an age related thing, find myself pining for marriage. What do you do when you’re not lucky enough to find the one early in your life and hanging out bars, church or synagogue(where there are mostly married men in your age group or single people but in their twenties)or other social groups does not seem appealing nor worthwhile? In DC there are lots of attractive women and very few single men and moving is not really an option for various reasons.
- Renee

I don’t think you’re doing anything wrong, necessarily.

If I were you, I would focus on finding and attending social events that really reflect your values and what you enjoy doing with your life. I don’t know what that might be. For some people, it might be the bar scene. For others, it might be their church. For others, it might be political activism or volunteer work or book clubs or countless other things.

What would you want your life partner to be passionate about that parallels your own passions? That’s where you’ve got to start in this journey. You’re much more likely to find true happiness by meeting someone whose passions match your own – a person who is already out there chasing them.

People often mention the “bar scene” when they talk about meeting people. I always find that really strange unless the bar is a major source of happiness in your life. It’s fine, I suppose, if you’re merely seeking short-term flings, but my eyes would be elsewhere if I were looking for a long-term mate.

There’s too many mixed messages out there! Which do I do first?? Save for an Emergency Fund? Snowball debt repayments? Pay off our Mortgage? Save for retirement? The kids college? Save for a bigger house? What about travel?

Suze Ormand says 8 months of savings? Dave Ramsey says snowball bigger balances first, David Bach says no lattes, Kiyosaki says buy your home outright – PF bloggers everywhere say a whole stew of things – the budget is sliced too thin already.
- Gina

I don’t think there necessarily is a perfect right-or-wrong answer here as long as you are spending less than you earn. That extra money can be used in a lot of productive ways, whether it’s paying off debts, saving for retirement, or saving for the kids’ college fund. None of these options are the best option for everyone.

The big difference in these choices really is your values. If you want to just follow someone’s plan, you’ve got to find someone who shares your values and who makes sense to you.

Dave Ramsey offers some strongly Christian values and emphasizes debt freedom. I value my family and discovering your passions and I usually advocate in favor of maximizing your day-to-day stability, which means building up an emergency fund first and foremost. Others speak from entrepreneurial values.

I don’t think any of these options are perfectly right or perfectly wrong. I think they click for different people because everyone thinks differently and is motivated differently. The important thing is that you’re motivated, too, and you’re making choices in line with what’s most important to you.

What is most important to you? Minimizing future risk for your family? Giving back to the community? Building a business? They all have different routes to financial successs. You have to figure out what you want first – otherwise, it’s like flailing around with a chainsaw.

Have you ever done a post on “How to host a game night” — I know from the blog that you do this from time to time, and lately my husband and I have become fans of playing board games as well. We like “Power Grid” and “Robo Rally” both really well. We’ve got a small group together that likes these games too – however getting everyone together at the same time / should we have food / will there be room for everyone when they come? (i.e. many games have a max of so many players). It seems like you play all sorts of games so where do you find the “right people” to play with and how do you bring them together. I mean the last time we hosted a game night, one of my friends walked out right in the middle of it – she didn’t say why – but I got the sense that this game was too much for her ( as you know some of the games have a lot of rules, and strategy involved.- which I enjoy, but some people don’t.) Ok – so what are your “keys to success” with this.
- Erin

First of all, Power Grid is one of our favorite games around here and RoboRally is on my wish list. We have a game group of about five people that meets about three times a month to play such board games and it’s a social highlight of the month.

I stick to three big things to avoid this type of scenario that you describe.

First, I make sure at least one person knows a game cold before we play it. Someone there should be able to always explain the game and answer questions throughout on your first play-through or two. It rarely ends well if everyone is new to playing a particular game. I often do this by playing a new game through a few times solo, meaning I lay out pieces for multiple people and play all the roles myself with the aid of the manual.

Second, if someone is new to such strategic games, I don’t throw them into the deep end of the pool. I simply wouldn’t sit down with my mom and play Agricola, not without having played a lot of other lighter strategic games first. I’d play Stone Age first so that the worker placement idea was familiar to her, for example. If someone has never played board games beyond Checkers or Monopoly when they were a kid, I’d play something like Ticket to Ride with them the first few times.

Third, if someone is really apprehensive, play one-on-one with them a few times first. If you’re a good friend and you know the game cold, invite just that one friend over and play the game just with them. Go through it nice and slow. Play with your cards/pieces revealed and explain why you’re making the moves you’re making.

Friends have been trying to convince us lately to switch our checking account from the bank where it’s been for over twenty years to a credit union. Ours isn’t a mega-bank, but it’s not local, either. However, the people AT the bank have been there through three changes in ownership in the last decade, and they know us. (Our son dated one of the tellers when they were both in high school… it’s a small town.)

What do you think of the differences between banks and credit unions? Which do you recommend, and why?
- Kate

Whenever I hear that banks still charge a fee just to maintain a checking account there, I’m shocked. There are so many banks out there that now offer free checking that paying $8 a month just for the checking service seems akin to just throwing $96 a year – or $960 a decade – out the window.

Unless there’s a compelling reason that you’ve not mentioned here for continuing to use your local bank, I would probably switch banks. However, I wouldn’t necessarily switch to the credit union just yet. I’d spend some time looking at the various options available to you, including online-only banks like ING Direct and so on. Look at their features and look at the fees they charge, too.

If having a local “anchor” bank is important, open up a checking and savings account at the credit union (if it’s the best local option). However, you don’t necessarily have to use that as your primary bank – you could just maintain small balances locally for the convenience of cashing checks and other purposes and keep your main banking at an online-only bank.

I am a recent college graduate who just married a wonderful man with $20,000 worth of student loans and no degree (he was studying English). He dropped out after his dad stopped paying financial aid, but not before getting depressed and flunking a few last courses. Right now, he really hates his tech customer support job and is having trouble finding a better job, like everyone else. Also, I was just laid off and the unemployment checks have just started coming in. Should he go back and get a degree in the field he wants to work in (Computer Science)? He has about 5 years of work experience. I don’t feel like adding on $40,000 more loans, but at the same time, I feel like his career will have a slow start because of this hindrance.
- Frances

If he’s figured out what he’s passionate about, then he should go back to school and get his degree. It will be worth the expense and the economy will be in better shape by the time he graduates.

However, you need to be absolutely sure that he’s not just picking this career because he thinks it’s something that he likes (but doesn’t necessarily love) that can earn him a lot of money. That’s the very mistake that I made and it wound up putting me in a very hard spot about seven years down the road.

I’d suggest that if he’s not 100% sure that he loves computer science, he spends some time figuring out what he really loves and then following that. It’d not be a smart move to put $40,000 towards a degree that he’s not really passionate about and is just doing for the money.

I recently read a article by Christine Benz, of Morningstar, about opening a Roth IRA and using it as your emergency fund, when necessary. She would rather you had both, but for someone just starting out and short on cash, it seems as though it is a good idea. Do you have any thoughts on this?
- John

I wouldn’t do it.

The big disadvantage of using a Roth IRA as an emergency fund is that when you make withdrawals from it, you can’t put that money back into the account later. You have a $5,000 window each year for contributions, period. Once you take money out, there’s no putting it back other than through your normal contributions to the account.

The last thing you want to do is sacrifice your long-term retirement savings because of a short-term problem like a temporary job loss or a car breakdown. I’d build up at least a month’s worth of living expenses in a savings account before I started to worry about a Roth IRA at all.

Anyway, when we bought our house about six years ago, we also took out whole life insurance policies on each other for $250K each, as well as some larger term-life insurance policies. My thinking at the time was that the term life policies were in the nature of income replacement, while the whole life policies were bought with the specific purpose of ensuring the surviving spouse would have the ability to pay off the house. The cash value of the policies builds at a guaranteed minimum of 4.25% per year, and I view them as additional house payments, since our intention is to cash them in when the cash value is sufficient to pay off what’s left on the mortgage, and then pay off the mortgage. At the time we bought the house, I figured that would enable us to pay off our 30-year mortgage in about 18-20 years, and I still think we’re on track for that.

The problem is that I keep hearing that whole life is a bad investment choice, I should instead pay for more term insurance and invest the difference, etc. Is (seemingly) the rest of the world right? Should I get out now, before I spend another dozen or so years continuing to pay for these policies? Or does my logic remain sound? I think the total difference in cost for the two whole life policies versus two term life policies with the same coverage would be something like $200/month – is that a worthwhile price to pay for what we’re doing?
- Mike

If you’re sitting at a crossroads and trying to decide whether to open up a whole life insurance policy or a term policy, I would go for the term policy. You can take the difference in cost between the two (since the whole policy will cost more) and invest it yourself into index funds or other such things.

However, once you’re into a policy for a number of years, the situation changes a bit. Quite often, the return you get in further contributions to a whole life policy versus the return you get on a term policy plus investments are similar once the first few years of payments are out of the way. Whole life policies tend to improve a bit in later years, returning better than they do early on (when the policies are covering the commissions of the salespeople).

You have to ignore the past when making these decisions. Don’t let what might have been influence you right now. Sit down and look at where you’re at with the policy. Right now, starting with your next contribution dollar, what puts you in better shape? Another dollar into the whole life policy, or starting over with a term policy and some investing with the additional money?

Without specific numbers, I can’t tell you that for sure. I can just tell you to ignore your contributions up to this point and look at what puts you in better shape starting right now.

My husband just started a post-doc position. There are two types of post-docs through the university. One gets paid officially by the university, taxes are taken out, and benefits are paid for. The other type of post-doc (the one my husband has) is paid for by a federal grant, so you get paid, but no taxes are taken out, it’s not reported to the IRS, etc. We will pay estimated taxes on it, of course, but a little wrinkle has come up that I wasn’t expecting.

It just doesn’t seem fair that we have what looks like a lot larger income in terms of taxes – most people do not pay any taxes on their employer benefits. Have you ever heard of this type of situation before? I suppose we could not report it but I don’t want to get in trouble with the IRS down the road.
- Amanda

IRS Publication 502 states that insurance premiums on health insurance are tax-deductible. In other words, when you go to file your taxes, the premiums you’ve paid in yourself can be deducted from your taxes, reducing the amount you need to pay in.

Most employers simply use pre-tax money to cover this insurance because it simplifies things for pretty much everyone. For some reason – probably related to the fact that they’re passing the tax management on to you – they’re not doing this in your case.

I would strongly encourage you to use a program like TurboTax when filing your taxes, as they help you greatly in discovering big deductions like this and applying them properly.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

The entire argument of Seth Godin’s book Linchpin is that there are no longer any great jobs where someone tells you what to do. That’s not to say there aren’t great jobs out there – there are many – but they now require the ability to basically blaze your own path, creating things and building connections that are indispensable to those around you. That person, in Godin’s terminology, is a linchpin.

I think, to a degree, this general argument is spot on. We live in a globalized world where most jobs can be shipped anywhere, from Mexico to Indonesia. Jobs in which people are merely following instructions all day are among the easiest to ship and the few that remain in America aren’t going to be strongly financially rewarding. Success comes from making yourself essential to the operation – and simply following orders, even if you do it well, keeps you firmly in the “replaceable cog” camp.

How do you stand out? What kinds of choices can you make to turn yourself into someone indispensable? Let’s dig in and see what the book has to say.

The New World of Work
Most jobs where you simply follow instructions and do a faceless job demean the real value you provide. They’re faceless jobs, but you’re not a faceless person. You’re not merely a cog in the machine of capitalism – but your job might be. The biggest difference between a follow-the-instructions job and a linchpin is that a linchpin creates his or her own value, whereas an instruction follower doesn’t add any value beyond a specified task that’s completed. A linchpin works in ways that improves those around him or her, while an instruction-follower simply follows the tasks at hand. I like to think of it this way: what’s the difference between a mediocre administrative assistant and the best administrative assistant you can imagine? That’s roughly the difference between a person who is a linchpin and a person who is not.

Thinking About Your Choice
The choice that’s on your plate is simple: do you keep merely following instructions and counting the days until Friday or do you look for ways to make yourself transcend those roles and become a linchpin? This is an urgent question, because a global marketplace makes the instruction-follower role more dispensable than ever. Some people are content to fill the role of instruction-follower – and that’s fine. However, the career opportunities for such people are simply shrinking – that’s a fact of life.

Indoctrination: How We Got Here
Most of what we learn in school serves one purpose – to make you an effective person at filling an instruction-follower job. Schools do not encourage creative thinking (which is an invaluable part of being a linchpin) – instead, they encourage lots of rote memorization and repetitive tasks which are scored on standardized tests. It’s a pretty neat trick to make school funding tied to these standardized tests, isn’t it?

Becoming the Linchpin
Every workplace has a few people that are simply indispensable. They take very challenging situations and make them work. They seem to solve tons and tons of problems. They’re the ones everyone goes to when there are crises. Those people are the indispensable ones – if you’re not one of them, you’re a lot more dispensable than they are. The question really is whether or not you’re willing to work to become one of those indispensable folks.

Is It Possible to Do Hard Work in a Cubicle?
Being a linchpin means a lot of hard work. The biggest part of it is being willing to give all of what you have to doing a great job. This does not mean just filling your hours with whatever task you’re assigned. It means bringing all of your passion, your ideas, and your creativity to the table whenever you work. It means taking on the hard problems that might scare you a little bit (or more than a little bit).

The Resistance
Our brains typically work in resistance to those kinds of tasks – we’re biologically wired to look out purely for number one. We avoid risk. We avoid anything that might be perceived as a threat. We avoid generosity. However, all of these things – risk, taking on threats, generosity – are key parts of being a linchpin. We have to work hard to overcome these resistances in order to become something greater.

The Powerful Culture of Gifts
Giving of yourself to others opens countless doors. Our brains often expect immediate reciprocity – if we give something, we want something in return and soon. The world rarely works that way. Our generosity – going above and beyond the expectations of others – builds a strong reputation for us, one that secures our work and builds positive relationships and interactions for us in ways we often never directly see. Quid pro quos rarely work – but building a strong reputation for great work and generosity certainly does.

There Is No Map
How do you do this? Unfortunately, there is no road map – and that’s a big part of the difficulty of it. You have to seek out the challenges in your own situation and take them on head first. You have to seek ways to up the quality of whatever it is you’re doing. In other words, you have to go off the instruction sheet – and that’s the real challenge.

Making the Choice
Linchpin value is created by what you choose to do, not by what you’re born with. Anyone can become a linchpin – it’s not an inborn trait, it’s a sequence of choices to step beyond the instructions and do things that improve everyone around you. It’s a scary choice, but it’s still a choice, one that offers a lot of rewards if you’re willing to take the leap.

The Culture of Connection
In order to succeed as a linchpin, you have to build a lot of connections with the people around you. Indispensable work is work that’s connected to the work that others do. You build on their work and they thrive on the work you’ve done. A big part of this is personality and attitude and a big first step is to recognize that negativity towards others will never, ever get you to being a linchpin. Positive relationships are the ones upon which you can build great things.

The Seven Abilities of the Linchpin
Here are the seven abilities, in a nutshell, from page 218:

1. Providing a unique interface between members of the organization
2. Delivering unique creativity
3. Managing a situation or organization of great complexity
4. Leading customers
5. Inspiring staff
6. Providing deep domain knowledge
7. Possessing a unique talent

Linchpins provide at least one of the things on this list and often provide more than one. It’s key to remember that these things are there to provide value to the people around you and make their work better, because in doing so you make yourself indispensable.

When It Doesn’t Work
If you’re trying to be a linchpin and it isn’t working, blind persistence is usually not the way to go. The value of a linchpin isn’t in repeating things that aren’t clicking or working. Instead, they constantly seek out new approaches and ideas and try them, instead. No one has a 100% success rate with their endeavors and ideas, but it is the successful ones that provide so much that they more than make up for the failed attempts.

Is Linchpin Worth Reading?
If I were to hand a recent graduate or a twentysomething a book on modern careers and how to succed in them today, I’m pretty sure that Linchpin would be the first book that I would grab.

The ideas in this book are reflected in virtually every workplace I’ve ever been a part of, from entry-level work to highly technical work. The people that stepped up to help others and solve problems were the ones that were indispensable, while the others merely hoped to hold onto their jobs. I also noticed that the people who stepped up to the challenge tended to be a lot more positive about their job, whereas the people who were dispensable were negative about their job and the people around them.

There are a lot of great ideas about the modern workplace in this book. If you’re struggling in your career, Linchpin is probably well worth a read.

Yesterday, I received a notice from [my credit card company] that my credit limit had been lowered from $10,000 to $4,000 on my primary credit card. I was immediately worried that my credit had been damaged by identity theft, so I checked it on annualcreditreport.com and there was nothing there at all. I’ve always paid all of my bills on time and my life has been pretty much normal and unchanged for a long time. Why would they make this change? I’m not concerned about reaching my credit limit, but that reduction in my limit does alter my debt-to-credit ratio, which could negatively impact my credit rating.

Jennifer describes a pretty typical scenario today. A credit card company sends a letter out of nowhere, for no obvious reason, announcing a significant drop in one’s credit limit.

One big effect that such a drop has is that it alters your debt-to-credit ratio, as Jennifer mentions. Simply put, your debt-to-credit ratio tells what percentage of your credit limit across all of your credit cards you’re actually using. So, let’s say Jennifer had a $3,000 balance on her $10,000 card – that’s a 30% debt-to-credit ratio. When the company drops her credit limit, she then had a $3,000 balance on a $4,000 card – that’s a 75% debt-to-credit ratio. The higher your debt-to-credit ratio, the more negative impact it has on your credit score.

This type of behavior seems alien, particularly after a decade where credit card issuers would commonly raise credit limits without you even asking. What gives?

The reality of the credit card industry has changed. For one, the econmic downturn has seen a large spike in the number of people who have simply defaulted on their credit card bills, not bothering to pay them. For another, the Credit Cardholders’ Bill of Right Act recently became the law of the land, restricting some of the business practices of the credit card companies.

Credit limits are not a right. Another issue is that many people, particularly after the last decade of rampant growth in credit limits, view their limits as something of a right and when credit card companies reduce those limits, their rights are somehow being infringed. In truth, that’s not the case at all – your cardholder agreement makes it very clear that your credit limit and your interest rate can be changed at any time.

So how do they decide when to lower your limit?

They watch what you buy via data mining. Every time you make a credit card purchase, the credit card issuer’s computers store a record of that purchase (you’ll see such information on your bill). Obviously, this is a wealth of information, one that they can use to figure out all sorts of things, such as where you live (so that if you suddenly make a rash of purchases elsewhere, they can throw a block on the card).

They draw conclusions based on what you buy. Another thing that they do is watch what you buy. They look at the places you normally shop and draw conclusions based on that.

Let’s say Jennifer normally shops for clothing at, say, Banana Republic (I don’t know this, I’m just creating a hypothetical example). Based on this, the credit card company would conclude that she fits the profile of an average Banana Republic customer, meaning she has a fair amount of discretionary income.

Now, let’s say Jennifer is suddenly a bit worried about the economy. She and her husband decide to curb their spending and she starts doing things like buying soap at the dollar store with her credit card.

When the credit card company analyzes the data, looking for spending changes that might affect credit limits, they’ll observe from their data that Jennifer is spending a lot less at the Banana Republic and a lot more at the dollar store. That means she’s got a different spending profile – one that signifies the potential for financial trouble.

They act in accordance to those conclusions. Given their recent problems with people defaulting on credit card debt, they take pre-emptive action and reduce her credit limit.

To Jennifer, this seems sudden and unfair – and for good reason. She’s likely not in any true financial trouble at all and is simply choosing to be a bit thrifty in these uncertain times.

What can you do to protect yourself? The truth is that Jennifer should avoid being in any kind of position where such a credit limit change has any impact at all on her. In other words, don’t be reliant on that piece of plastic. Use it as a tool instead of as something you need to have.

One big way to do that is to never carry a balance on your card. If a bill comes at the end of the month, pay it off. If you’re thinking of making a purchase where you wouldn’t be able to do that, you can’t afford that purchase. Wait a few months and save up the cash.

This not only keeps your debt-to-credit ratio pretty low, but it also leaves you out of any sort of “danger” from the credit card company adjusting your limits or your interest rates. More importantly, though, it prevents you from building up a significant amount of debt on the card, which can be very, very difficult to pay off.

Use your credit cards wisely and changes like what happened to Jennifer will have little or no impact on your life.

I’ve been shopping there for several years and I’ve found several little techniques that really maximize your value in shopping there. You really can do much better on some items by utilizing a warehouse store, but you’ve got to follow a good plan. Here’s how.

1. Take a look before you sign up. Before you walk in the door and sign up for a membership, visit the store and look at the prices and the selection to make up your own mind. Warehouse clubs often offer one-day memberships, either in the newspaper or at the desk there. Give them a call and find out before you go.

If you can’t get in using these methods, ask around your social network to see if anyone’s a member, then ask if you can visit the store with them. This method is even better because you can make purchases when visiting with a full member, whereas with the short-term memberships, there’s a 10% markup on prices.

2. Split a membership. Find a close friend and split a membership with them. Just go to the store, sign up for a membership, put your friend down as the other card, and get membership cards for both of you. This will cost you each half the normal price of an annual membership, getting you in the door for a year for just $20.

You usually have to sign up at the same time, but warehouses are completely fine with you and your co-member having different last names, different addresses, and different phone numbers.

3. Bulk-buy in cooperation with friends. Hesitant to buy a giant mountain of toilet paper? Talk to a friend of yours and agree to split the cost of that mountain. This way, your cost per roll on that toilet paper is very low, but you also don’t have to deal with the storage of that much toilet paper.

There are lots of items you can purchase this way, from paper towels and fruit juice to diapers and bagels.

4. Only buy stuff you know you’ll use up. One of the big temptations at a warehouse club is to convince yourself that you’ll use a huge amount of something that’s perishable, whether it’s salad greens or fresh fruits. You see the price per pound, recognize that it’s much lower than it is at other stores, and talk yourself into it.

Don’t.

Ignore the cost per pound. Instead, you have to focus on the amount you’ll actually use before having to chuck the rest – and that’s a tricky thing. I usually figure on the very low end. On occasion, it’s still a value even if more than half winds up in the compost bin, but most of the time, it’s not really a bargain.

5. Make a price book. Along those same lines, in order to maximize the value you get from a warehouse club, you have to have some sort of a price book.

A price book simply means that you have a list of prices of many of the common things you buy at various stores that you shop at. Maybe you just have the prices from your favorite grocery store on it. In any case, you simply take that list with you to the warehouse club and use that as a basis for comparison. So, an entry in the price book might be “3 rolls of Bounty – $3.33″ and then you can use that to figure out whether twelve rolls of Bounty for $11 is actually a bargain (it is).

6. Use a shopping list. Another important factor is to know what you actually need before you go. Thus, before you go, make a shopping list. Write down all of the things you actually need, then hit the warehouse club before you visit the grocery store.

Doing this not only helps to ensure that you get all the stuff you actually need, but sticking to that list goes a long way towards curbing impulse buys, since you’re so focused on the grocery list instead of wandering down the aisles.

7. Look at gas prices. Most warehouse clubs offer gas prices that are lower than other gas stations in the area. This savings varies a lot – in some areas it can be as much as a dime per gallon and in other areas it’s only a penny or two. Our area seems to vary between about two cents per gallon and five cents per gallon.

Thus, whenever I have an opportunity, I fill up at Sam’s Club. If I fill up there once a month, putting 20 gallons in my tank and saving five cents a gallon, that saves $12 a year. If my wife does the same, filling up there three times a month and putting 12 gallons in the tank, that saves $21.60. All told, we save $33.60 from the gas alone.

Two other areas where the savings were surprising for me were liquor (beer, wine, and hard liquor) and big-ticket electronics, like laptops and televisions. Their prices were very, very strong on these items.

8. Take note of the other benefits. Most warehouse clubs offer other benefits beyond the cheap household stuff and the gas benefits. Take a careful look at the pamphlets that the club provides and see if any match your needs.

For example, Sam’s Club offers a discount on car prices with certain cooperating dealerships. Thus, I can take that extra info into account when we make a car purchase and it might reveal a better car deal for me. That’s a potential significant savings.

9. “Gap” your membership. When your membership is about to expire, go to the club and stock up on all of the nonperishables you buy there – shampoo, toilet paper, soap, and so forth. Then allow your membership to expire for several months as you use your backlog of items. When you start to run out of your backlog, go in and renew your membership.

Let’s say that you fall into a twelve months on, six months off pattern. Over the course of six years, you would reduce your membership buys to four, saving you $80 over that period.

10. Get your impulses in check. This is perhaps the most useful tip for warehouse club shopping. You have to get your impulses in check before you go. If you don’t, the benefits of the club will go away for you.

What do I mean? It’s easy to see items at a warehouse club that you might use, and the price per unit is often very low. It becomes really tempting to throw it into your cart. However, if those buys are impulsive, not only is it something you wouldn’t have otherwise bought, it’s also something bought in an excessive quantity. That’s a recipe for throwing your money away.

We save a lot of money each year by shopping at Sam’s Club.

One Year Ago (February 28 – March 6, 2009)
The Cost of the Psychology of New When I re-read this post, I was reminded of an email I received from a reader recently who didn’t like PaperBackSwap because she couldn’t get all of the newest releases on it. I pretty much never buy a new release in book form – I use the library for those. I don’t buy books unless I’m sure I’ll reread them multiple times. The cult of the new is expensive.

Depression Cooking I loved these videos – they were the best thing I’ve seen on YouTube, perhaps ever.

Personal Finance and 1,000 True Fans Planting the seeds of powerful relationships might cost you a little bit now, but it’ll reap huge rewards later on.

A Step-By-Step Guide to Building a Big, Healthy Emergency Fund Emergency funds are a vital tool for personal finance success, but many people have difficulty getting started with one. Here’s a guide to doing just that.

Do You Want to Be Rich? Being rich is not my goal (trust me, if it were, The Simple Dollar would be quite a bit different). Is it your goal?

Two Years Ago (February 28 – March 6, 2008)
The Stock Market Is Way Down This Year… Here’s Another Way To Think About It I look at stocks being down as an opportunity. The companies themselves haven’t changed a bit, but their cost is lower. That’s called a sale.

“Freegans,” Dumpster Diving, and the Limits of Frugality We all have some personal lines that we won’t cross. Yes, for me, dumpster diving to save money on food is one of them.

Financial Planning for Self-Employment: What’s Different? The biggest challenge with self-employment is that your income is very irregular. You don’t get that steady paycheck week in and week out and you have to plan accordingly.

Learning the Right Lessons from Your Mistakes When you make a mistake, it’s worth your time to step back and think deeply about why you make it. If you don’t, it’s easy to draw the wrong conclusion.

Six Ways to Break Free of the “Purge and Splurge” Cycle This type of cycle happens in anything that requires self-discipline, from spending control to dieting control. Here are some techniques to control it.

Three Years Ago (February 28 – March 6, 2007)
Personal Productivity and Personal Finance: Ten Techniques I Use To Juggle This Blog, My Money, My Work, and My Life I wrote this when I was simultaneously working a full time job, creating The Simple Dollar in my spare time, and juggling other personal needs as well.

An Average Day: Ten Tweaks I Made To My Daily Routine To Start Saving Money These little tweaks can help a lot when it comes to putting yourself in the right mindset at the start of the day.

PaperBackSwap: An Effective Way To Save Money On Books I can’t even tell you how much I’ve used PaperBackSwap over the last few years to save money on my voracious reading habit.

Ben Stein And I Explain Why I Just Bought Stocks Today, Even With Stocks Down 5% In The Last Week Similar to the above post, if you buy stocks when they’re down 5%, you’re essentially buying them when they’re on sale. The company itself hasn’t changed, just the sticker price has.

How Much Money Does Breastfeeding Really Save? It saves quite a bit, really, according to our real-world math.

If you’d like to browse through more of the archives, visit the chronology, where all posts are listed in chronological order.
Nine Ways to Get More out of The Simple Dollar
This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are nine great ways for new readers to dig deeper into The Simple Dollar.

1. Subscribe by email or RSS. Visiting The Simple Dollar’s website is great, but for many people, it’s more convenient to receive the articles in another form. It’s easy to join 60,000 other subscribers and get The Simple Dollar’s content by email or in your RSS feeder (if you’re unfamiliar with RSS, check out Google Reader.

2. Comment. Each article on The Simple Dollar has lively discussion. Just click on the green square in the upper right of each article on the website and join in!

3. Read my story of financial meltdown and recovery. The Simple Dollar isn’t based on what I’ve read in books or learned in school. I’ve made a lifetime of financial mistakes – The Simple Dollar is a record of what works for me during the process of getting my life on a better track.

4. Download my free 49 page e-book. Everything You Ever Really Needed to Know About Personal Finance On Just One Page is completely free. It summarizes all of the key lessons I’ve learned along the way about personal finance in one tidy package – in fact, all of the main principles can be found right on the cover.

5. Follow me on Twitter – or other social networks. I post tons of interesting articles, quotes, follow-up material, commentary, and other material on Twitter. Follow me! If you’re unfamiliar with Twitter, it’s essentially an open discussion forum for people to share ideas and thoughts with other like-minded folks – you just choose the people you want to listen to and their ideas and thoughts are all delivered to you on a single page.

I also participate on several other social networks. Feel free to check me out on del.icio.us (it’s where I collect links, from which I select the ones that appear in my weekly roundups), wakoopa (what software I use), GoodReads (what books I’m reading), Facebook, and FriendFeed (which aggregates everything). I also have an irregularly-updated personal site, TrentHamm.com.

6. Dig through “31 Days to Fix Your Finances.” 31 Days to Fix Your Finances is an article series that outlines how you can get a grip on your finances over the course of a month.

7. Send me your questions and suggestions. Send me an email and let me know what you’re thinking, what you’d like to see, and any questions you might have. I try to respond to as many emails as possible and I read them all. I may even use your question in a future article!

8. Become a “Friend of The Simple Dollar.” If you find the stuff on The Simple Dollar valuable and are willing to spend five minutes or so a month to help me out with small things, please consider signing up to be a “Friend of The Simple Dollar”.

9. Email a great article you find to a friend. Find an article that you think your friend would love? At the bottom of each article, you’ll find a link that says “Email this” – just click on that, type in your friend’s address, and send it right along to them!

Since I had accumulated such a pile of notes for the interview in advance and Dean asked so many worthwhile questions, I made something of a transcript of the interview and am sharing it with you.

Tell us about your background.
I grew up in rural Illinois. My parents didn’t have much money and, sometimes, they struggled to make ends meet. I learned a lot about frugality from them, but I didn’t learn as much about pure money management skills. I attended Iowa State University and graduated with a degree in the hard sciences, after which I spent about six years working in various jobs in research fields. Recently, I’ve been a full time writer.

How long have you been writing The Simple Dollar?
I started writing the blog that would become The Simple Dollar in October 2006. I launched The Simple Dollar publicly in November 2006.

How did you decide to do that?
In April 2006, I experienced a personal and professional meltdown of sorts. I had always dreamed of being a writer, but it felt as if my dreams for doing that were slipping away in the flow of my professional life. I was unhappy with some aspects of my current job. To make things worse, we were in dire financial straits, with a large pile of consumer debt over our heads.

I decided that things had to change. After a while, I began to see that a lot of people my age were going through similar crises – a “quarter life crisis,” if you will. They were finding themselves in serious financial problems and sometimes were deeply questioning the path they had chosen in life. However, most people my age were very reluctant to actually talk about these problems with anyone outside of their immediate family and maybe a very, very close friend or two.

I started The Simple Dollar because I felt that this was a conversation that people needed to have. I felt that by sharing my story and my experiences, both in the positive sense and in terms of my own failings, I would open people up to think about their finances and career more and talk about it, whether by sending me emails or comments or by talking to people in their own lives.

Where did the name ‘Simple Dollar” come from?
One night shortly before the launch of the site, I just brainstormed a long list of names. I crossed some of them off that I didn’t like and my wife took a turn at the list, too. Eventually, The Simple Dollar is the name that stuck out.

Looking back, I’m glad I didn’t choose a name like “Trent’s Financial Failings.”

About how much time do you spend on this per week?
On The Simple Dollar alone, I probably spend fifteen hours purely writing and composing posts. I spend another five to ten researching posts and doing reading related to it. I probably spend another ten hours on site management, approving comments, and answering emails – but, frankly, I have more emails and comments and other things like that than I can cover in ten hours, so I sometimes have to pick and choose.

I spend additional time on other writing projects, such as my upcoming book.

Where do you get most of your information?
Books. I’m a voracious reader. I read, on average, three books a week, of which one is usually something geared towards personal finance or careers.

What are your “14 Money Rules”?
My 14 Money Rules is simply a list of what I think are the true core values and ideas of what I talk about on The Simple Dollar. I keep these rules posted on every page on the site, in the right hand bar. The 14 Money Rules are:
1. Spend Less Than You Earn.
2. Don’t Over-Think Your Investments.
3. Stop Wasting Time.
4. Eliminate (and Avoid) High-Interest Debt.
5. Talk About Money (And Be Honest).
6. Stop Trying to Impress Other People.
7. Watch Your Progress (But Make It Fun).
8. Take Care of Your Things.
9. Do It Yourself.
10. Plan Ahead Every Time You Spend.
11. Find and Work Toward Your True Passions.
12. Build Real Friendships and Relationships.
13. Improve Yourself Every Chance You Get.
14. Give Without Strings or Regrets.

Which ‘Rules’ generate the most discussion?
Doing it yourself tends to generate the most discussion. Many people argue that it’s better to pay someone else to do something for you if you’re earning more than that person’s hourly wage. My argument against that is twofold: first, you only earn more than that person’s wage if you’re earning more post-tax and you actually spend the time you’ve hired someone in gainful employment. Two, and perhaps more importantly, doing things yourself teaches you things and makes you more resourceful. Almost every skill you have in life has value – if nothing else, it can help you build relationships with others. If you know how to fix a toilet, for instance, you can share that skill with a new friend or acquaintance in an effort to forge a stronger bond.

Tell us about your free E-Book “Everything You Ever Wanted To Know About Personal Finance On Just One Page.”
A long time ago, I wrote a very popular post entitled “Everything You Ever Really Needed to Know About Personal Finance on the Back of Five Business Cards“. After posting it, several people contacted me and suggested that I try to turn it into a book of some sort.

Over the next several months, I tossed the idea around and eventually developed it into a fifty page short book, intending to use it to shop around to various book publishers. I incorporated a lot of original writing, pieces of various Simple Dollar posts, and lots of other interesting elements.

At some point, I just decided that it would be a very worthwhile move – in terms of helping people with their finances and encouraging people to think about it and talk about it – to simply give the short book away, which is exactly what I did.

What are your thoughts on the new credit card regulations which just went into effect this week?
I think, on the surface, they protect consumers. However, the credit card companies are businesses that are out there with the purpose of making money. If you close one door on them, they’ll open another.

I think we’re in a period where they’re going to try different methods of earning money, since some of their previous methods have now had the door shut on them (such as young card holders). What form will that take? Whatever it is, the end consumers will be the ones paying for it. It might be the return of annual fees. It might be higher interest rates. It might be something entirely new, like a minimun number of uses required per month. Only time will tell.

You also have some downloadable books. What can you tell us about that?
The “downloadable books” on The Simple Dollar are simply collections of older posts on a common theme. I’d write a series of posts on a certain topic – say, building a blogging business – and then I collected all of the posts together, edited them a bit so that they made sense as one long document, and turned them into a downloadable PDF. Since the posts are available for free anyway, I have a minimal charge on these donwloadabe books – they cost two dollars a piece. Some people buy them because it’s convenient for the purpose of printing them out for a trip or something like that; others buy them simply as a way to support the site.

The Simple Dollar has some great open discussions which readers participate in. How were you able to come up with 25 Gadgets That Save Money?
One big thing I like to do when writing an article is look for things that have something interesting in common, sometimes in an unusual or unexpected way. In that case, I simply collected a list of items that can actually save you money, including paying for themselves, over a long period of time.

The idea started from looking at programmable thermostats. If you buy one of those and set it so that your furnace doesn’t run when you’re not at home or when you’re asleep – or the same thing with the air conditioning during the summer – your energy bill savings will add up to much more than the cost of the thermostat after a few years.

A few of the items in the article were a bit extreme, such as a wind turbine, and I think most of the discussion came from those items. You can, indeed, save money with the purchase of a wind turbine, but it takes quite a while.

I loved the McDonald’s article! You compare a McDonald’s double cheesburger to making a cheesburger at home. What did you learn?
If you take all of the short term costs into account – time and money, in other words – the two roughly balance out. The homemade burger is slightly more expensive, but it’s also more tasty. Of course, I did add a lot of toppings to the homemade burger that weren’t on the double cheeseburger from McDonald’s, such as lettuce and such, but it wouldn’t be a homemade burger if I didn’t.

If you’re making just a single burger for yourself, then there’s a decent argument that McDonald’s provides a better value in the short term. If you’re making several burgers, the homemade ones are much less expensive. The real advantage of fast food is the convenience – it’s not really all that cheap, as you get lower quality food than what you can make at home for a similar price.

How long did it take to gather your research?
It took a surprising amount of time. I had to plan out what I intended to do – make a burger and compare it to the McDonald’s one. I had to shop for the ingredients for the homemade burger. I had to visit McDonald’s to get the double cheeseburger. I had to make the actual burger at home. I also spent time documenting all of this with pictures and time recordings as well. I spent on the order of six hours on the post.

Have you seen the documentary film “Super Size Me”? (2004 by Morgan Spurlock)
I think that movie touches on what would be my real concern with eating fast food – it’s unhealthy. It causes you to gain weight. The high amount of salt in the food can cause high blood pressure. It can definitely leave you feeling lethargic. It’s not exactly good for your heart.

Thus, the long term costs of that double cheeseburger is quite a bit more than the ninety nine cents you paid at the drive-thru. You’ll have health care costs and lost productivity costs as well.

I see the “Rich Dad, Poor Dad” books and seminars by Robert Kiyosaki everywhere. What should people know about him and these books?
I am not a fan of Robert Kiyosaki’s work. For starters, he severely underestimates risk in nearly everything he discusses. He paints a picture that makes it seem as easy as a run down to the courthouse steps to make thousands of dollars. It’s no different than any other “get rich quick” scheme – there are opportunities out there, but it takes a lot of hard work to find them and there’s a lot of risk for failure along the way.

The biggest problem, though, is the utter disdain he has for people who make the choice not to do things the “Rich Dad” way. He actually refers to people who work at a job and make an honest wage as “hamsters,” right in print in the book.

He’s right in that a steady job will not make many people wildly rich. A 401(k) will not make a person wildly rich. What it will do, however, is make a person secure, both in the sense of not having to worry about the future and in the sense that their future life won’t have financial need. That’s the goal that a lot of people have in their life, and achieving that goal revolves around low-risk choices. Kiyosaki ignores risk and calls such people “hamsters.” I don’t really have much respect for that attitude. Different people value different things in life, and an awful lot of people value steadiness and security – that doesn’t make them “hamsters,” it makes them the backbone of America.

Have you met anyone who said that his advice really worked for them?
I’ve never met people face to face who have said positive things about Rich Dad, Poor Dad. I’ve read many positive comments from Simple Dollar commenters about the book, but it’s often hard to tell whether the people are legitimate or whether they’re people who have paid thousands of dollars for a seminar and want to feel as though they’ve made a good decision.

You also wrote an article about buyng your car – 2009 Toyota Prius. What were some of the main reasons you bought it?
We bought the car for two reasons: fuel efficiency and reliability. My wife commutes almost forty miles one way to work about three days a week, plus all of our family lives about four hours away from where we live and we visit them regularly. Thus, we rack up a lot of miles on our cars.

We sat down and ran the numbers several times on a multitude of cars available, both new and used. We took the Consumer Reports reliability data on makes and models into it, and we also calculated fuel costs up to 200,000 miles on the car’s odometer assuming gas prices at $2 a gallon and at $3 a gallon. We simply couldn’t find a better deal than the Prius that we purchased, even after a multi-month hunt. We found ones that exceeded it on total cost of ownership questions – the cost of buying the car, getting it road-worthy, and paying for fuel up to 200,000 miles – but they all had reliability concerns.

What types of concerns have you had with recent news about Toyota?
Every large manufacturer is going to eventually have some sort of product problem that warrants a recall or a fix. You simply cannot test everything – you just have to do as much due diligence as you can and ship the product.

The current Toyota issue is a tricky one because it’s apparently very hard to replicate. I’ve read on messageboards where one person claims to have caused the problem by doing some specific thing, then another person can’t replicate it.

The real question is how Toyota deals with all of this over the next six months. They have to absolutely make it right by their customers, but we won’t know the full story for a while yet.

I know you are not an advisor, but what are your thoughts on municipal bonds?
I think they’re good choices for people in a high tax bracket who want something pretty safe that has returns that aren’t a big tax burden. Municipal bonds definitely have a place in a larger portfolio. However, I’m not sure that they’re the best choice for beginning investors who are often not in a really high tax bracket and would often be better off chasing larger returns with a bigger risk.

There is a lot of information out there. What is ONE THING someone listening today should do if they are having financial difficulty?
Talk about it. Don’t be ashamed of having financial difficulty. There are many, many people out there going through similar problems to what you’re going through. If you feel you can’t talk to your friends about it, go online and look for others sharing your problems.

Knowing that there are people out there who share your concerns and are willing to offer you helpful words and helpful advice can make an enormous difference when it looks as though the chips are down.

In other words, they are heavily focused on minimizing the number of preservatives, toxins, and other chemicals that come into their home.

The question on their minds is what can they do to save money while also subscribing to these values? My answer is kind of a surprising one.

The convenient part with this approach to modern life is that some things are in fact cheaper. Using vinegar and baking soda for most cleaning challenges is a great way to save some cash. During peak growing seasons, eating mostly raw foods can be a big money saver – trust me, during the peak of sweet corn season in Iowa, it can be very inexpensive to eat.

However, most things are much more expensive with this approach. Fresh foods out of season can be very expensive. There’s also a major time cost, as you’ll be doing lots of food preparation work yourself that would go far beyond what other people would do (like making pasta out of flour and eggs, for example, instead of popping open a box to boil it), as well as some preparation work for home cleaning supplies.

By choosing this kind of approach, you’re inherently adding not only to your family’s food and home care costs, you’re also investing a significant amount of time in keeping it up. Since food and home care are pieces of a family budget that everyone has, by making this kind of choice, you largely cut yourself off from money-saving and time-saving tips in that area.

Here’s the thing, though. If protecting your family in these areas is one of the key values in your life, that’s completely fine.

Most people really only have the time, passion, and resources in their lives to really follow through on a small number of key values in their lives. For me, those key values are my family and reading/writing. In some way, virtually everything else I do with my time and my money is in line with one of those two values.

If you’ve made the choice to live that sort of healthy, chemical-free lifestyle because it’s a central value in your life, that means that you’re devoting some significant amount of time and energy to it. You’re more careful with your shopping. You’re more careful with your food preparation. You’re more careful with your household cleaning. That eats up attention and time, but that’s absolutely an awesome use of your time and energy if it’s something that you truly value.

The key thing is to recognize that it is eating a significant amount of your time and energy and that energy and time have to come from somewhere. If you’re spending your time on these things because that’s what you value, it means you’re not spending time and energy on other things.

Maybe you have a huge DVD collection, but you don’t find yourself watching movies any more because you’ve moved on to new values.
Maybe you have a beautiful car, but you don’t get the same rise out of driving it that you once did.
Maybe you have some exercise equipment in the garage that’s just gathering dust.

If you’re living a life in line with where your values are now and not where your values were ten years ago, then it’s perfectly fine to not have the time and energy for those old things. Instead, you should focus on converting what you can of that old value into your newer values. Sell off your DVD collection. Downgrade your car. Have a yard sale. Cancel your memberships. Get rid of your cell phone.

What I see, time and time again, is that people have a short-term passion for something, invest money and energy into it, then grow tired of it and move on, but they don’t let go of the vestiges of that passion. They keep paying the bill for something they don’t use any more. Things sit around and gather dust and fill up a closet.

What are those things in your life? What passions have you moved on from, but still hold onto the material elements of?

Wouldn’t your life feel more complete if you cleaned out your attic, sold that stuff, and invested it into the things you value today?