Over the past week or so, my wife’s 2004 Odyssey has given her a blinking green “D” (drive) light on several occasions. After looking in the owner’s manual, we were a bit concerned because the blinking green light is a sign of transmission trouble.

For those that are unaware, the 2nd generation (1999-2004) Honda Odyssey has a history of transmission troubles, particularly in the earlier years. We were thus concerned that we might be facing a major repair.

At the same time, we haven’t noticed any slippage, racing, or other shifting problems, so we were hoping it wasn’t anything major. We dropped the car off with our favorite mechanic this morning, and guess what?

He called this afternoon to say that the warning code indicated a bad 4th gear pressure switch, which is a trivial repair. We picked the car up tonight, and are hopeful that’s the last we’ll see of the blinking green light.

And with that, here are some recent links that caught my eye…

• How to Frugally Stock Your Home Toolbox
• Yes, You WILL Get Social Security
• What it Takes to Really Succeed
• I Want to Become a Minimalist, But I Could Never Give Up My…
• Dealing With Investment Confusion
• The Future of Economics, Explained With Physics

That’s it… Happy reading!

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It’s time to stop learning and start earning.

I’m not kidding. You really should stop studying and just get out there. Once I did, I became a lot more successful.

I can best explain the true cost of learning when I tell you about launching my blog.

Two years ago, I didn’t know what a blog was.

A friend convinced me to launch one in order to market a book I was writing, so I decided to “look into it.”

The more I looked into blogging, the less I understood it. As a result, I went deeper.

I bought every book on the subject I could.

I paid gurus to lead me to the blogging “promised land.”

I participated in programs that offered to teach me what to do.

I literally spent six months (and a big chunk of money) learning about blogging before I wrote my first post.

Don’t get me wrong; I did pick up some very valuable nuggets – but I learned volumes more in the first month of actual blogging.

In retrospect, I was lying to myself.

I was frightened.

And I was wasting time studying. It was my excuse to justify why I wasn’t actually doing the work. Who was I kidding?

Only myself.

I share this with you because you might find yourself in the same trap someday.

Let’s say you’re about to launch a new project.

You’ve decided you need to:

• Budget better.
• Invest smarter.
• Install a sink.
• Get the right kind of life insurance.
• Buy the right car.
• Get your business out of debt.
• Improve your credit score.

You realize that if you want a good result, you’re going to have to invest some time and possibly money. But why not try to save as much of both as you can?

Here are three steps to help you do just that:

1. Clarity

Be crystal clear on exactly what you want to do and why you want to do it. Don’t worry. Later on, as you learn and experience more, you can change you mind. But be clear on your direction before you leave base camp.

Say you want to get out of debt. Even on a subject as straightforward as this, there are many opinions on what the best path is.

Is your goal to get out of debt quickly, or is it just to get out of debt and never get back into debt? Believe it or not, depending on your answer, you might take different actions.

Think hard about what exactly you want to get done.

2. Anoint your gurus carefully

There are so many experts on each subject, you’ll drive yourself crazy if you follow more than one guru. That was my biggest problem when I started learning about blogging. Each guru – even though they were all very successful – had a different message. I figured that if I could take the best that each had to offer, I’d be a sure success.

Wrong.

This was the biggest time waster I could have imagined. I followed one person’s ideas just long enough to get interested in someone else’s thoughts. As a result, I spent hours and hours chasing my tail. Don’t repeat my error.

Pick your mentor carefully and follow his/her direction.

Of course it’s important to keep asking questions. But if you are clear about your goal, pick the best person you can to help you achieve that goal and follow their lead. And put your blinders on.

Along the way, a little voice inside will tell you to veer off course. That you need to study someone else’s ideas.

Don’t listen.

If you’re trying to get out of debt for example, you don’t have to read a ton of books on the subject. You probably don’t need to spend hours and hours researching it either. You need to find one trustworthy expert and just follow that person’s direction.

3. Got Grit?

There’s a great John Wayne movie called “True Grit.” I recommend you rent it sometime.

It’s the story of a person who takes on a task without having all the tools and equipment he needs. But he makes up for that with determination. That’s what you need.

Don’t be afraid of making mistakes. They can be fixed. And be patient. Solutions take time.

Don’t be afraid of refining your goals and changing direction. Once you embark on a path, you can always make adjustments. It’s easier to do that once you leave port. But you’ll never reach your destination if you stay in port.

Every time you make a mistake, you’ll learn a ton and you’ll get much closer to your ultimate goal.

Your homework assignment

Pick the most important item on your “to do” list and take action.

Make a list of the steps you need to take in order to make that wish a reality.

If you want to improve your credit score (for example), the first step is to get your FICO score so you’ll know where you stand.

Next, get a credit report and start correcting any errors you find. Finally, take other steps to boost your credit score.

It will take patience and time but you can knock these pins down… One at a time.

Expect to do it wrong and be OK with that. Expect to make mistakes. Just put put the books down. Stop doing research.

Get going — and remind me to do the same when I get caught in the trap.

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This is for all you financial statistics junkies out there…

According to the FDIC’s quarterly banking profile, more than one in ten US banks (829 out of 7830) are currently in trouble, and the number appears is climbing, with the number of banks on their “problem list” increased by 7% during the 2nd quarter.

In terms of bank failures, 118 banks have already under in 2010, compared to 140 in all of 2009, and just a handful per year prior to the current economic crisis. In other words, be sure to pay attention to FDIC limits when managing your bank accounts.

The good news is that, for the first time since 2006, the number of loans that are 90 or more days past due declined, falling nearly 5%. The same can be said of loans charged off by banks, which showed a slight year-over-year decline for the first time since the 4th quarter of 2006.

Interestingly, the 2nd quarter of 2010 also marked the first time in 38 years that the FDIC didn’t add any new banks.

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This is a guest post from Matthew Kepnes of Nomadic Matt’s Travel Site. If you like what you see here, please consider subscribing to his RSS feed.

When we go on vacation, we book a hotel. We are sort of taught that?s where you stay. By instinct we book a hotel. We go online, shake our head at the high price, and book it anyways, wishing there was a better way.

Well, there are a lot of better ways. The problem is that most aren?t advertised because they don?t have the marketing budgets that hotels have. On your next trip, consider these four alternatives:

Bed and breakfasts

Bed and breakfasts are a good alternative to hotels. You?ll get treated just as nice (if not better), you get breakfast, a smaller and more intimate setting, and the hosts who will take care of you.

B&B?s are usually owned by a family or couple and not some big corporation. The quality of service is usually a lot better and the prices a lot cheaper. Moreover, unlike hotels, they usually provide free internet.

You can find B&Bs on this website.

Apartment rentals

If you are with a family or a large group of people, renting an apartment is a much better choice than staying at a hotel. In NYC, the average price of a hotel is $250 dollars/night, but yyou can find apartments that sleep up to 5 for $200 dollars.

If you are with a big group, a hotel is not worth it. The rooms will be far too expensive. Rent an apartment. Or a beach house. Or a condo. Just skip the hotel. I highly recommend Home Away. They have the biggest inventory and best prices.

Couchsurfing

Couchsurfing is a website that connects travelers with locals who are willing to give them a place to stay for free. You can stay with families, couples, or single people. Many hosts allow families or couples to stay with them.

I stayed with a lovely family in Denmark, a student in Oxford, and a nice lady in Athens. Members are verified by other users, the company, or people who have stayed with them. It?s very safe. Alternatives to Couchsurfing are Hospitality Club and Global Freeloaders.

Hostels

When people think of hostels, they think of dirty dorm rooms, bacteria infested showers, dirty kitchens, and smelly young people. But hostels have grown up a lot since the 60s.

Now, you can imagine them as mini-hotels. While you can still find dorm rooms, you can also find private rooms and double rooms. Moreover, most have free breakfast, free Internet, computer terminals, offer free tours, and have a kitchen.

While in NYC, I stayed in my own room with private bathroom, wi-fi, TV, and turn down service for $90 USD per night. All of which was right near Central Park. That?s a lot cheaper than any hotel in the area.

For hostels, I like to use Hostelbookers since they have no booking fee.

Just say “no” to hotels

The bottom line is that accommodations don?t have to cost a lot of money. I never stay in hotels. They’re simply too expensive. Instead, I use one of the options above.

These alternatives cut my accommodation budget in half or (sometimes) to zero. That?s money that stays in my pocket and can be used to see the sights, buy dinner, buy beer, or pay for a plane ticket. I have much better things to do than give hotels my money, and I bet you do too.

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Are you swamped with high interest debt and looking for a solution? The airwaves are filled with ads for debt consolidation, but do you really need someone to do it for you? Why not do your own legwork and roll your debts into one low(er) interest loan?

One option for consolidating your debt is rolling it into a HELOC. But first… You might have some questions.

What is a HELOC? Is consolidating debt with a HELOC a financially sound decision? What problems might arise if you use your HELOC to reduce your debt?

What is a HELOC?

The term HELOC is shorthand for “home equity line of credit.” Home equity is defined as the difference between what your house is worth and what you owe on the mortgage. This home equity line of credit essentially let you borrow money using the equity in your house as collateral.

Lenders typically calculate the line of credit based on a percentage of your home’s appraised value. For example, if you have a house that is appraised at $200,000 and your principle is $135,000, he lender may calculate your home equity line as:

$200,000 * .80 (it varies among lenders) = $160,000
$160,000 – $135,000 = $25,000 HELOC limit

The percentage of your home’s appraised value depends on the lender, but it’s generally 75-80%. With houses appraising for much less than they used to in some areas, many homeowners have had their HELOC reduced or closed.

Why you should use a HELOC

The big plus with using your home equity line of credit to consolidate your debt is that you’ll almost certainly reduce the amount of interest that you’re paying. Since it’s a secured loan, your HELOC will typically will have a much lower interest rate than your credit cards.

If you’d like to play around with just how much you can save, I highly recommend the online calculator over at Dinky Town.

Another good reason to use a HELOC is that, assuming you itemize you tax deductions, the interest on your HELOC is tax deductible. Thus, you’re not only paying much less in interest, but you’re also catching a tax break, thereby reducing the cost further.

Why you shouldn’t use a HELOC

The other side of the coin when using a HELOC to consolidate debt is that you’re taking unsecured debt (credit cards) and tying them to your home. This can be a risky bet – what happens if you lose your job and can’t pay your HELOC? You risk losing your house, that’s what.

Also, getting a HELOC isn’t necessarily cheap. There are several possible fees associated with it that add to the total cost. Some of the fees you might face include:

• Appraisal fee
• Application fee
• Annual fees (some, not all lenders charge this)

Ultimately, you’ll have to weigh the costs of opening an account against simply using a debt snowball, or similar approach, to get out of debt.

It’s also worth noting that lenders have gotten much more strict when it comes to approving loans, so if you’re looking at getting one, be sure that you can qualify.

Another minor downside is that when you apply for a HELOC, they’ll do a hard credit inquiry which can hurt your credit score. It’s not much of a hit, but it’s worth keeping in mind.

Thoughts on using a HELOC for debt reduction

In my opinion, if you can get yourself out of debt in two years or less, I wouldn’t bother with a home equity line of credit. If you’re struggling with high interest rates, try negotiating with the credit card companies or look into doing a balance transfer to a card with lower interest.

Personally, I’m not a fan of converting unsecured debt (credits cards) to secured debt (HELOC). Yes, you can save money, but… With people getting laid off and paychecks being cut, your plans could fall through and you could lose your home.

There are other options besides using a HELOC if you’re looking to consolidate your debt. For example, you could try to get a personal loan through your bank or credit union, or you could consolidate your debt with a loan from Lending Club.

Your take

Have you ever used a HELOC to consolidate your debts? How did it work out for you? Would you do it again? Why or why not?

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Open enrollment season is just around the corner. With that in mind, I wanted to remind you of some changes that will soon be affecting Flexible Spending Accounts.

For those that are unaware, an FSA allows you to use pre-tax dollars to pay for medical expenses. Starting in 2003, over-the-counter (OTC) medications were added to the list of allowable expenses, thereby giving consumers a lot of flexibility in how they could spend their FSA money.

As I’ve outlined in the past, FSAs operate under some fairly Draconian “use-it-or-lose-it” rules. More specifically, if you don’t spend out your balance, you lose whatever money is left over at the end of the year. Given this stipulation, the OTC allowance was very valuable addition.

No more OTC purchases

Now for the bad news… Starting in 2011, OTC purchases will no longer be eligible for reimbursement unless you are expressly directed by your doctor to use them. In other words… It’s going to be a heck of a lot harder to spend down your FSA balance is you set too much aside.

Yes, you’ll still be able to use your FSA to pay for deductibles, co-pays, orthodontia, and eyeglasses, but you’ll no longer be able to claim OTC allergy medications, pain relievers, vitamins, antacids, contact lens solutions, and so on.

In other words, be very careful when deciding how much to set aside in 2011.

Caution: falling limits

Looking a bit further ahead, another big change will be a federally-mandated $2500 cap on FSA contributions starting in 2013. This new limit is part of the healthcare reform legislation that was passed this past spring.

As things currently stand, FSA limits are determined by employers, and it’s not uncommon to be able to set aside $5k. Depending on your income tax bracket and level of healthcare spending, that can be a huge benefit.

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Here’s some homework for this weekend… Log into your credit card accounts and claim whatever rewards you might have accrued. While some reward credit cards (such as Amex Blue Cash) automatically credit your cash to your account, others (such as Chase Freedom) don’t.

When I logged into our Chase Freedom account the other night, I found that we had a bit over 25k points waiting to be redeemed. I quickly requested a $250 check and went merrily on my way. Granted, $250 isn’t necessarily a life-changing sum, but I’d rather have that money sitting in our savings account vs. sitting around idle.

If you’re in a points-based program and you can’t turn your points directly into cash, look for a gift card to a store that you frequent. Just be sure to get at least a penny per point. In some cases, you’ll have to save up for a higher denomination, but it’s usually well worth the wait.

And with that… Have a great weekend!

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Do you still write checks?

Whenever I mention the (seemingly) ancient are of check writing, I always get a few comments from readers who have long since quit writing checks.

As much as I’d like to join the ranks of the non-check-writers, we still have a number of instances where we need to write a check. Note that I’m talking here about the physical act of writing a check, not using online billpay to send a check.

More often than not, our check writing needs stem from the fact that we have four school age kids. Thus, we write checks for fundraisers, to put money in their lunch accounts, and so on.

While we’ve been able to automate many of our check writing tasks through our bank, there are still numerous instances where we have to dash off a check for one thing or another — again, mostly kid-related.

Anyway, I thought this might make for an interesting poll topic, so… Here goes. Please keep in mind that I’m asking below about how often you actually grab the checkbook and physically write a check.

How many checks do you write in a typical month?

• Zero
• 1-3
• 4-6
• 7-9
• 10-12
• 13-15
• More than 15

Interestingly, as recently as 2007, 54% of people were paying their bills by check.

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It occurred to me recently that I can use my character flaws to make much smarter life choices going forward – financial and otherwise. More importantly, so can you.

The thought popped into my head while my wife and I were on vacation in New York. (Side note – the vacation was debt free!)

While there, we visited two of our best friends – Lori and Nathan. This couple (and their two amazing kids) are a family we love dearly.

My buddy Nate is uber-successful. He is second in command at one of the largest financial institutions in the world – and he’s only 46 years old!

I want to be like Nathan, but I’m not.

I’m delighted for Nathan and honestly not jealous.

But while I was visiting him, I noticed I was beating myself up pretty good.

I asked myself why I wasn’t as successful as my buddy.

I came up with many reasons – some of which I have no control over. I’m not stupid, but I’m not a genius like Nate. Not much I can do about that.

But I did come up with one reason for which I found no excuse – impatience.

Don’t get me wrong. I’m really grateful for where I am in life. But had I been more patient at any number of turning points in my life, things would have been easier and (possibly) better.

Once I came to this realization, I asked myself how to use that understanding to do better rather than as an excuse to put myself through the ringer. Could I use this to improve my small business? Could I harness the power of that realization to improve my investing results?

I came up with a great idea.

I decided to go against myself.

Attack your weaknesses

By nature, I want to get it done and move on to the next issue as quickly as possible. Sometimes I move on too soon.

I decided to be ultra patient in any business or interaction that was on my plate even though it was the last thing I wanted to do.

I committed to slow down and hold myself accountable to others.

The result has been very positive so far. If nothing else, I feel more relaxed.

I’ve also realized that success in certain areas that I’m working on are going to take time. I’m going to force myself to be OK with that.

And once I feel comfortable with my ability to be more patient, I’m not stopping. I’m going to keep listing my character flaws (news flash: I have many). Then, I’m going to go against myself again. My character flaws cost me too much. I’m going to put everything I have into going against the grain.

How can this help you?

Simple.

Find your flaws

Ask yourself what is the one thing that has kept you from where you want to be in life.

Are you impatient like me?

Are you selfish?

Do you fail to think things through?

What is it?

This is super important. It’s painful, but you have to be completely honest with yourself if you want the payoff – and believe me, it’s worth it.

If you’re having trouble coming up with the answer, ask five people you trust and respect. Tell them you are trying to overcome your main character flaws and you need their help to identify them.

Ask your boss and spouse. Ask your co-workers. Your workout partner. Five people.

Once you have identified your main character flaw, write down how it’s impacted you in the past. What has that flaw cost you?

Has your impatience created credit card debt?

Has your laziness resulted in not having the right life insurance?

Has your selfishness kept you from getting your budget under control?

Has your anger made it difficult for your small business to thrive?

Write it down

If you want this exercise to have its full impact, you must actually write this down with a pen and paper. There is something magical about actually writing (as opposed to typing) that I can’t explain. Do it, then tell me if you don’t agree.

Once you’ve done your writing, don’t put your pen and paper away. You’ve got more work to do.

Let the past go. Don’t beat yourself up.

Instead, think about what your dealing with right now.

Are you putting together your estate plan?

Are you trying to launch a new business?

Looking for a new career?

Trying to help your kids get on track?

Think about how your character flaw, if left unattended, is going to make your job harder.

Now write it down. See yourself shooting yourself in the foot. Describe how that character flaw is going to make it harder to accomplish your goal.

Look to the future

Now, map out a different course.

See yourself NOT giving in.

See yourself NOT being lazy, but doing your homework before you buy that life insurance.

See yourself NOT being selfish but thinking of others before you create your estate plan.

Can you see how taking contrary action is going to get you closer to your goals?

How does that feel? Can you write that down too?

Lather, rinse, repeat

The great news is that you don’t have to stop there.

You can use this exercise to master other character flaws in your business and personal life.

Are you willing to do it?

Have you ever undertaken an exercise like this in the past?

What was the result?

Do you have any other ideas that can help others overcome character deficiencies?

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The other night while driving my son to soccer practice, I passed by a local church. On the sign out front it said:

“Be weird. Live debt free.”

This message was part of a pitch for Dave Ramsey’s “Financial Peace University,” a Biblically-based personal finance course with a major focus on debt reduction.

This got me to thinking… While I realize that they were just trying to be cute and catchy (it worked), have we really gotten to a point where debt freedom is “weird”?

I was raised in a family that never carried consumer debt and, aside from our mortgage (now paid off), my wife and I have never been in debt ourselves. In other words, debt freedom has always been normal for us.

What about you? What’s your debt situation? Do you have a mortgage? Student loans? Credit card debt? One or more car loans? More importantly, do you have a plan for getting out of debt?

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This is a guest post by Craig Ford of Money Help for Christians. If you like what you see here, please consider subscribing to his RSS feed, and don’t forget to check out his e-book on budgeting.

In many people’s eyes, there’s a dark cloud surrounding the topic of budgeting. As such, it’s easy for budgeting myths to circulate. The following list highlights things people say about budgets and budgeting that simply are not true.

Myth #1: Budgeting takes a lot of time

Many people complain that they don’t have time to budget. However, budgeting need not be an elaborate or time-consuming event. Sure, budgeting does take some time, but here are some things that take more (in some cases much more) time per week than maintaining a budget:

• Painting your finger nails
• Reading the newspaper
• Watching TV

Fact: You should be able to budget in about 20 minutes a week. If it is taking longer than that, your budget is probably too oppressive. The servant (your budget) is trying to control you.

Tips for simplifying your budget:

Myth #2: Budgeting only works for geeks

Your budget should be customized to your personality. Sure, budgeting tends to be a better fit for people who are more detail-oriented. However, budgeting rules can be stretched until you find something that works for you.

A reader once e-mailed me to say that she just watches the bank account to be sure there is money before she buys something. She asked, “Is that alright?” I responded by telling her that her approach is better than nothing. In other words…

At least she’s living on cash, not credit. That’s better than what a lot of people are doing. I suspect she would be able to save more if she set up a traditional budget, but every time she set up a budget, it didn’t work. So I encouraged her to keep doing what works.

Fact: You can be a free spirit and find a budgeting system that works for you.

Myth #3: Budgeting is only for those who don’t earn much

I made this mistake once upon a time. When my wife and I graduated from college, we were living on two incomes. Since there was always money in the bank, we just spent money as we wished.

Fast forward ten years and my wife is at home and we have three kids. While we can’t go back and change the past, we both wish we’d thought more about how to budget and been responsible with our money when we had a larger income.

The amount of money you make has little to do with how much you save and how much you invest. Those things are the result of good, disciplined budgeting.

Fact: Regardless of income, budgeting is a tool that helps people reach their financial goals.

Myth #4: Budgeting requires a lot of math knowledge

If you use cash, you don’t even need to know any math to budget. Take cash out of the bank when you get paid, and when it’s gone, you’re done spending.

My daughter is five years old and is so proud when she remembers that 1 + 1 = 2. Guess what? She now knows enough to budget. She has one jar for saving, one for giving, and one for spending. When she goes to the stores, she looks at something, shows us her money and says, “Is this enough?”

If you feel like you’re weak at math, you should use something like an envelope budgeting system. The envelope budgeting systems only requires that you to put the right amount of cash into a labelled envelope. From there, you simply spend until the money is gone.

Fact: Simple addition and subtraction are all that’s needed to budget effectively.

Myth #5: Budgeting is a burden

When some people hear the word “budget,” they treat it like it is a bad word. It’s almost as if there is nothing good about a budget. However, budgeting is just a vehicle you can use to get to a financial destination.

Budgeting is about saying “yes” as much as it is about saying “no.” If you don’t keep a budget, the problem is that you are saying yes to more things than you can afford. However, if you learn to throw in the occasional “no,” you could actually say “yes” to the things that are most important to you.

Fact: Budgeting is a tool that helps you accomplish your life goals.

Note from Nickel: Craig is right. Budgeting is very important if you want to make the most of your money. At the very worst, I encourage you to do what we’ve done… Adopt a “reverse budget.” In other words, set specific savings and investing goals and then let the chips fall where they may.

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» Money Poll #1: Budgeting
» Five Common 529 College Savings Plan Myths
» Money Poll #2: Coupons
» The Fine Art of ‘Reverse Budgeting’
» Budgeting Poll Results
» Money Poll #3: Credit Cards
» Mid-Holiday Roundup
» Sunday Roundup – The Back Porch Edition

Having your credit card (or card number) stolen can be extremely stressful. If the thief gets your entire wallet, the situation is even worse. The good news is that there are steps you can take to minimize your liability and otherwise protect yourself.

Here is a quick and easy guide to point you in the right direction.

Contact your card issuer quickly

Immediately call the credit card issuer to report your card stolen. If you don’t have the number handy, go online or grab an old credit card statement to get the credit card company’s phone number.

Be ready with the following information:

• Verification of identity (name, address, etc.)
• Account number
• Best estimate as to when your card was stolen
• Date of the last purchase you made with your card

Since time is of the essence, don’t delay in reporting it. Many companies have a 24-hour number you can call so you don’t have an excuse not to call as soon as you find out.

• MasterCard: (800) MASTERCARD / (800) 627-8372
• Visa: (800) VISA 911 / (800) 847-2911
• Discover: (800) DISCOVER / (800) 347-2683
• American Express: (800) 992-3404

MasterCard, for example, can also provide assistance if you need money while you’re waiting for a new card to process. This can come in handy if you’re on the road when your wallet gets stolen.

If you need to make purchases or arrange for a cash advance, with your card issuer’s approval, you can receive a temporary card the next day in the United States, and within two business days most everywhere else.

Report the crime

Make sure you call the police to file a report. This is an important step, as it affords you additional protection if your stolen card turns into full-blown identity theft.

Having a police report can also help you down the line if you have to untangle any problems with your credit report that might arise down the line. Speaking of which… You might also want to consider ordering a credit freeze to prevent any shenanigans.

Here are the phone numbers for the three major credit bureaus:

• Equifax: (800) 685-1111
• Experian: (888) 397-3742
• TransUnion: (800) 888-4213

As reminder, please keep all of your documents and file away notes from any conversations as well as all related paperwork and information you receive about the incident. If someone needs a copy, keep the original for yourself.

Protection against unauthorized charges

The Fair Credit Billing Act protects you if your credit card is stolen. Simply report it stolen and, even if unauthorized purchases have already taken place, you’ll only be liable for a maximum of $50. If you called before any unauthorized purchases are made, then you won’t be liable for any charges.

Be sure to double check your credit card benefits, as some companies offer $0 fraud liability. The best time to check is before you need it. If you can’t find the relevant paperwork, give you card issuer a call.

If you run into any problems, don’t hesitate to contact the FTC:

FTC Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
(877) FTC-HELP / (800) 382-4357

Preventing the problem before it happens

As they say, an ounce of prevention is worth a pound of cure…

• Don’t carry cards that you don’t need. If you have several credit cards, keep only one or two in your wallet. Put the rest in a secure location.
• Only share your credit card information with a trusted source. If you’re purchasing online, be very careful with the sites you use.
• Double check your statements for unexpected charges. If you don’t keep tabs of where your card is at all times, at least check your statements. If you notive an unauthorized charge, you can follow up immediately.

Acting quickly and having good records are the key to minimizing the headaches associated with a stolen credit card. Nothing can guarantee that your card won’t get lost or stolen, but if you’re diligent you minimize the risks.

Have you ever had your credit card (or number) stolen? If so, how did you respond? And how did your credit card company handle the situation?

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Related Articles at fivecentnickel.com:

» Dealing With the (Possible) Theft of Your Personal Data
» Tips for Protecting Yourself Against Car Theft
» Weekend Roundup – Countdown to Vacation Edition
» How Not to Win the Lottery
» The Convenience of Using a Debit Card
» Fun with Identity Theft, or How My Credit Card Went Nuts in Brazil
» Hot Wheels 2008: The Most Frequently Stolen Cars in the United States
» Ten Tips for Dealing With a Lost Wallet

A recent study by Morningstar has provided support for something that many of us have long believed to be true… When it comes to investment performance, cost matters. A lot.

In fact, looking across the past five years, low fees are perhaps the best predictor of future mutual fund performance – even better than Morningstar’s own star rating system. This isn’t to say that Morningstar’s ratings are without merit, as higher rated funds do typically outperform lower rated funds.

In comparing expense ratios and star ratings, Morningstar thus concluded that both were helpful. However, looking at expense ratio alone resulted in better results more often (58% of the time) as compared to looking at star ratings alone.

So, what did Morningstar learn from all of this?

“Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance. Start by focusing on funds in the cheapest or two cheapest quintiles, and you’ll be on the path to success.”

The study’s author went on to say that:

“If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.”

More often than not, this means you should focus on index mutual funds and ETFs, as their expense ratios are typically the lowest. Of course, as Morningstar also points out, you also need to be sure that you understand the funds management and goals before investing.

This result shouldn’t really come as a surprise, as most mutual funds with similar goals have similar holdings (yes, I’m generalizing here). Thus, if one fund charges significantly more than another, its performance will ultimately be lower.

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Related Articles at fivecentnickel.com:

» Index Mutual Funds vs. Exchange Traded Funds (ETFs)
» What are Vanguard Admiral Shares?
» Mutual Fund Sales Loads: Just Say No
» Avoiding and Reducing Mutual Fund Fees and Expenses
» ETFs vs. Index Mutual Funds, Revisited
» Schwab Mutual Funds: Ideal for Investors With Limited Means?
» Converting Mutual Funds Into Exchange Traded Funds (ETFs) Without Incurring Taxes
» Favorite Mutual Fund Company?

Are you in debt and looking for some relief? If so, a 0% balance transfer might be just what the doctor ordered. And guess what? Unlike a year ago, when banks were tightening their belts, such offers are once again fairly common. That’s the good news.

The bad news is that the fees associated with many of these offers are climbing. The good old days of no fee balance transfers within a promo period of 12-18 months are (for the most part) long gone. Instead, most 0% offers come with a transfer fee and/or a much shorter introductory period.

While these fees used to be in the 1-3% range, and were often capped at a max of $50-$100 per transfer, credit card issuers have been ratcheting things up. In fact, according to a recent study by the Pew Charitable Trusts, balance transfer fees climbed from 3% in July 2009 to 4% in March 2010.

And guess what? The longer the intro period, the higher the cost, with promos lasting 14 months or longer costing as much as 5% of the total amount transferred. In other words… You need to look critically at any offers that you receive, and don’t forget to factor in the transfer fees when doing the math.

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Related Articles at fivecentnickel.com:

» Are You a 0% Credit Card Daredevil?
» New 0% Balance Transfer Credit Card Offers
» No Fee Balance Transfers from PenFed
» Current 0% Balance Transfer Offers
» Why Avoid the 0% Balance Transfer Game?
» 0% Balance Transfers: 18 Months from Citi Platinum Select
» Beware New Credit Card Fees
» Buying Gift Cards at a Discount

According to J.D. Power and Associates, customer satisfaction with credit cards has recovered slightly since 2009, but consumer loyalty has continued to decline.

Here’s a snippet from their 2010 report:

Overall credit card satisfaction in 2010 averages 714 on a 1,000-point scale, up 9 points from 705 in 2009. However, customers who say they “definitely will not switch” primary cards in the next 12 months continues to decline, averaging 22 percent in 2010, down from 25 percent in 2009 and 30 percent in 2008. While customers perceive card issuers as “financially stable” and even “reliable,” they are significantly less likely to view them as “customer driven.”

Interestingly, satisfaction has improved the most amongst “revolvers” – i.e., those who carry a revolving balance. On the other hand, satisfaction amongst those who pay their bills in full (“transacters”) has declined.

I can’t say that I’m surprised by either of these changes. After all, the requirements of the CARD Act have improved things for those that carry a balance. At the same time, most credit card issuers have cut back on their rewards programs.

As was the case last year, American Express ranked #1 in terms of overall customer satisfaction, with Discover coming in second. In fact, this is the 4th consecutive year in which AmEx has ranked #1. In case you’re curious, here’s the full top ten:

• American Express
• Discover
• U.S. Bank
• Wells Fargo
• Chase
• Barclaycard
• Bank of America
• Capital One
• Citi Cards
• HSBC

The issuers at the top generally performed well in terms of rewards and other benefits as well as customer service (both on the phone and via other channels).

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Related Articles at fivecentnickel.com:

» Credit Cards: Can’t Get No Satisfaction?
» The Power of Delayed Gratification
» No Fee Balance Transfers from PenFed
» The Worst Banks in America
» What’s Your Favorite Credit Card?
» Too Young for a Credit Card?
» Weekly Roundup: The Internet is Getting Expensive Edition
» Using Credit Cards to Post Bail

Some people are scared to death when confronted with the need to negotiate with others. They’d rather pay more or do whatever they have to – anything – in order to avoid this process.

I completely understand the sentiment. The only problem is, if this describes you, you might end up paying too much for your mortgage, credit cards, etc. You’ll also pay too much for insurance and almost everything else.

The good news is that you can overcome your fear of negotiating. Indeed, I believe that you can actually learn to love it. As a bonus, you can save yourself a great deal of money and time by learning some basic negotiating techniques.

Here are a few that have helped me tremendously:

1. Ask questions

The more you understand the other party, the better off you’ll be. Find out what’s important to the other person and why. Show some interest. I don’t care what you are negotiating for, you need to understand the person on the other side of the table and what her motivation is. It’s rarely just money.

Once you get a few answers, don’t stop. Ask if there is anything else that is important to them. Keep asking until your negotiating partner doesn’t have any more issues to explain.

What good does this do?

First, it shows that you’re empathetic. That helps your negotiating partner relax. If you demonstrate friendly behavior, the other party will be more apt to reciprocate. That could translate into better terms for you.

Also, by understanding the other person, you might learn that the things they want most, are least important to you. As a result, you can concede on some points that don’t really cost you much even though those concessions are worth a lot to the other person. As a result, you can trade your concession for something you need.

On the other hand, if you start the conversation by making demands and being aggressive, you actually give the other party a tool to use against you. At that point, they already know what’s important to you and (possibly) why.

You need to get that advantage and you can achieve that by simply asking questions.

The more you understand your partner, the better. If you have to use the internet or other sources to learn about your partner, do so.

Why is this refrigerator being offered at a special price? Does the store get a special incentive for selling this brand? Is this person trying to build her business? What kind of clients is she looking for? Does the salesperson earn more commission by selling this or the other machine?

You may not always get answers, but you should ask anyway. You never know what you’ll learn.

2. Know what you need

You should always know what you need before you start negotiating. Have a clear idea of what you need, how much you can pay, and when you need it. Do the leg work and know what other vendors are selling the same product for. Bring proof with you.

You should also be comfortable walking away from any deal if it’s not the one you need.

Let’s say you’re looking for a credit card alternative. There are plenty of them. If your credit card company won’t play ball, let them know you’ll be transferring the debt to a lower cost provider. That should wake them up. Don’t ever think you have no alternatives.

The same goes for business. You might need working capital for your small business, but you are not (I repeat) NOT desperate. There are plenty of alternatives to help fund your business too.

Other than paying for health care, there are very few transactions that are life-or-death. You’ll survive if you don’t get the deal and have to drive home in your old car. There is always tomorrow. There is always another seller.

3. Use time to your advantage

Sellers try to use time to pressure you into taking action now. That’s because they know that if you don’t take action now, the chances of you buying are greatly reduced. Once you understand that, you can use this dynamic to your advantage.

Get them to give you a price and respond immediately… With silence.

Let it sink in. Let the seller wonder what you’re thinking. This puts them on the defensive. They’ll start worrying about losing the sale. As a result, they’ll be more interested in negotiating further.

You can use time to your advantage in another way, too. Let the seller know you aren’t going to buy anything until next week. You’re planning on shopping all over town and you actually enjoy the process. The only way you’ll buy now is if the seller gives you an amazing deal. This will light a fire under them.

Finally, never go shopping when you are hungry, rushed, or tired. These are poor conditions to negotiate under. In essence, time is against you because a part of you wants to end the process quickly so you can rest or eat. The best time to negotiate is in the morning after breakfast.

4. Become valuable

Explain to the seller why you are a good customer. Talk about how you’ll make other purchases in the future and that you’re an influential member of a large community. Tell them how you’d love to share good deals with others but you need something worth sharing.

Get the salesperson to see you as a long-term customer rather than as a transaction.

5. Smile

This is similar to the tactic of being quiet and it’s my favorite technique.

When the salesperson gives you a price, don’t say anything.

Just smile.

This works on a few different levels.

First, when you smile at someone, you disarm them and (often) they can’t help but like you. When you smile at someone, you telegraph friendship. And most folks want to do favors for their friends.

But it goes beyond that.

When you smile at the salesperson, while they like you more, they have no idea what you’re thinking. They don’t really know why you’re smiling even though they feel better about you.

So on the one hand, when you smile, the salesperson will feel more inclined to want to work with you. On the other hand, the salesperson will be concerned that you aren’t happy with the terms.

These five techniques have saved me a small fortune over the past several decades. In addition, I actually enjoy a process that I used to abhor.

The bottom line is to remember that you have power and you deserve to get the best terms possible. Don’t ever think you have to make a deal with someone. By simply taking back your power, you’ll see how much you really have.

Your thoughts on negotiation

What are your favorite negotiating techniques? Have you ever used those I describe above? What was the result?

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Related Articles at fivecentnickel.com:

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» From the Archives (March 31st – April 12th)
» Carnivals – Week of 04/09/07
» How to Haggle
» Weekly Roundup: Geocaching Edition
» Friday Night Roundup: De-Caffeinated Edition
» Carnivals – Week of 03/17/08
» Mortgage Fees: What’s Legit and What Isn’t

Shortly after publishing this morning’s article on the best money and finance apps for your iPhone, a couple of readers e-mailed asking for a similar list of apps for Android-based phones.

Unfortunately, I can’t provide a lot of guidance here because I use an iPhone. I do, however, know that many FCN readers use Android phones, so I thought I’d create an open thread where people can share app recommendations.

If you’re an Android user and have any recommendations for good/useful apps that are at least tangentially related to money or finance, please leave a comment.

If you’d just like to browse around and see what’s out there, hop on over to Android Marketplace. If you click on the “Top Free” or “Top Paid” tabs, you’ll be presented with a list of categories so you can narrow in on “Finance” apps very easily.

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» Banks and Credit Unions That Accept Online Scanned Check Deposits
» Money and Finance Apps for Your iPhone
» Eight Great iPhone Apps for Managing Your Money
» MoneyBlogNetwork in the News
» Buying a New Car: True Cost to Own
» Investing in the S&P 500 Dividend Aristocrats
» Orlando Gas Gouging
» 24 Hours of Personal Finance

About a year ago, I put together a list of handy iPhone apps for managing your money. In the time since then, the app market has grown dramatically, and I’ve discovered many more uses for my iPhone. Thus, I thought I’d put together another rundown of money and finance apps that I have on my iPhone.

• Bank of America – This is where we have our “local” bank accounts. I use the app to transfer money, pay bills, etc. Hopefully they’ll add remote deposit sometime soon.
• ING Direct – Provides an overview of account balances and activity, ability to transfer money, and access to their bill pay functionality. Here again, I’d love remote deposit.
• Vanguard – This is where we do most of our investing, and their app allows you to check in on your account and complete mutual fund transactions.
• Fidelity Investments – Provides access to consumer and NetBenefits accounts, which is handy for an employer-related retirement account that I have at Fidelity.
• American Express – I use this to check in on our Amex Blue Cash and Amex Platinum SkyMiles accounts.
• Citi Mobile – I use this to check in on our Citi Platinum Select account.
• Chase Mobile – I use this to check in on our Chase Freedom card, but if you have a bank account with Chase, you can use this app to deposit checks remotely.
• PayPal – Exactly what it sounds like… A portable PayPal client. I don’t use this one very frequently, but it’s nice to have on hand.
• CardStar – This handy little app stores your the numbers from your grocery store affinity cards, reward cards, and membership cards. It even generates a scannable barcode so you can whip out your iPhone instead of fishing through a stack of cards.
• Amazon Mobile – I frequently use this app when out shopping to check Amazon’s pricing as well as user reviews on whatever I happen to be looking at. More recently, I’ve also been using it to place orders instead of firing up my computer.
• SnapTell – Very slick app that lets you scan the front of books, CDs, DVDs, or video games to access online pricing, reviews, etc. More recently, they’ve also added barcode scanning.
• Kayak Flight & Hotel Search – I use this to keep tabs on the price of airline tickets. If you like Kayak.com, then you’ll love this app.
• Evernote – This is the iPhone client for the Evernote document-storage service. I use it for storing scanned images of receipts, keeping notes on tax-related transactions, etc.
• JotNot Scanner Pro – This app turns your iPhone into a scanner so you can snap pictures of checks, receipts, etc. Crop them, square them up, and convert to pdf before storing in Evernote (above) or e-mailing them to yourself from within the app.
• SplashID – This one is a little pricey by App Store standards ($9.99), but it’s totally worth it in my book. It’s an encrypted login/password/info keeper that syncs over wifi with an optional desktop client.

What others think…

With so many apps out there, I’ve only scratched the surface. I thus decided to ask my Twitter followers for recommendations of their own. Here are fourteen more that they came up with:

• Mint.com
• Discover Mobile
• DebtTracker Pro
• Save Benjis
• Ace Budget (Lite)
• PocketMoney (Lite)
• QuickTip Tip Calculator
• Square
• Barcode Scanner
• Shop Savvy
• Morningstar
• Yahoo Finance
• CNN/Money
• CNBC Real-Time

If you have any other suggestions, please share them in the comments.

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» Weekly Roundup – Foundation Wall Edition
» Banks and Credit Unions That Accept Online Scanned Check Deposits
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This is just a quick update on my Lending Club performance. During the month of July, I experienced my second charge off, dropping my net annualized return into the 9.5% range.

I actually knew this one was coming because the borrower in question never made a single payment. Nice, huh? This is one of the reasons that I’ve been attracted to buying notes on the secondary market. While I still can’t be sure that borrowers will live up to their obligations, I can at least weed out the total deadbeats.

Going forward, I’m thinking of pausing my new contributions. I’ve now built up a reasonably large portfolio, and will likely focus on reinvesting the proceeds as opposed to adding new money.

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Related Articles at fivecentnickel.com:

» Lending Club Update – April 2010 Performance
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» Lending Club Update – March 2010 Performance
» Lending Club – August 2009 Performance
» Lending Club Update – December/January Performance
» Testimonial From a Peer Lending Borrower
» Lending Club $64.62 Signup Bonus
» Lending $100 Giveaway Reminder

This week we’ve had both good and bad news. After our car accident, it’s quite possible that we may have to dip into our emergency fund. While I’m not happy to be using it, I’m very glad that it’s there for us.

All of this got me to thinking about the slight difference (in my mind at least) between a regular savings account and an emergency fund. When do you use your emergency fund, and when should you have a specific savings fund? I’ll share my thoughts below based on recent events. Hopefully you’ll have some advice as well on how to use your emergency fund without going broke.

Total loss on the car

This car accident is proving to be more and more of a headache, as USAA declared our beloved Acura Integra. That means USAA will pay us a fair amount for our car and will then junk it because the repairs cost more than the car is worth. While I’m happy that we’re getting a check to put toward a new car, we now have to deal with the hassle of buying a car.

Between the check we’re supposed to get and the money have stashed away in our car replacement fund, we’re hoping to find something reliable. If not, we’re prepared to dip into our emergency fund.

Avoiding car payments

We’re going to do our best to pay cash for our next car. As you saw with my tips on buying a car, that means we have to go through the process of finding the right one for us.

I’m digging through Edmunds and Consumer Reports to get ideas on what we need to avoid and which car may give us the best bang for our buck.

We’re happy that we paid off our car loan and we don’t intend to have car payments again. They’re just such a big monthly expense that we’d like to avoid having a car loan if at all possible.

Emergency fund or savings?

Buying another car was part of our financial plan – eventually. We knew that one of cars would eventually going to break down, and that it would be smarter to get a reliable replacement.

The emergency for us now is having to buy that replacement car much sooner than we planned. As you can see, all of our well thought out plans we had went out the door when this came up. So while we don’t have nearly enough to buy a car in our ING subaccount, we’re happy to have something set aside.

Ultimately, my recommendation is to build up your emergency fund before you start saving for specific goals. If an unforeseen expense, such as a car accident, leaky roof, etc. crops up before you have enough saved in a dedicated account, then you’ll have to dip into that emergency fund. If not, then spend from other sources of money and keep that emergency fund in tact.

So just how much should you have stashed away in your emergency fund? Most experts generally recommend 3-6 months expenses, but I think a better rule of thumb is enough to allow you to sleep well at night. The fewer responsibilities you have, the less you’re likely to need. In other words, a couple with kids probably needs much more than a college student.

Once you have a fully funded emergency fund, start redirecting those deposits into a car replacement fund, an account for a house down payment, etc. You’ll be amazed at how quickly those focused deposits accumulate, and hopefully you’ll have a decent cushion when the unexpected happens to you.

Have you ever had to dip into your emergency fund?

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» Buying Non-Laddered CDs With Your Emergency Fund
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This is a guest post from Richard Barrington, who is a banking analyst for MoneyRates.com. Richard previously spent over twenty years as an investment industry executive.

People can easily be intimidated by the amount of money it takes to fund retirement. However, it all becomes more manageable if you approach building your savings rates the way you would build muscle in a gym — starting with moderate exercises, and then increasing the intensity as your ability increases.

Fortunately, life makes this process of ramping up seem natural, by placing savings tasks along the path of life in order of difficulty, starting with some easy ones:

In short, life’s savings challenges grow in size as time goes on, but that’s a good thing. It allows people to start small, and then tackle bigger challenges as they develop better savings habits.

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As I noted this morning, I happened upon our Chase Freedom Visa statement in the mail last night. In addition to the new “Minimum Payment Warning” box, I noticed that I had earned $0 in bonus travel rewards.

For those that missed it, Chase has moved to rotating reward categories, and this summer they’re offering 5% back on travel-related expenses, including gas, airlines, auto rentals, and hotels.

A few days after signing up for the bonus program (you have to opt in each quarter) I bought a plane ticket for a little over $600. Yes, it was rather pricey, but it’s work related, so I’ll be reimbursed.

Anyway… That should work out to a bonus of around $25 (4% extra on top of the 1% you normally get), but I got nothing. On top of that, I paid for gas a few times and also charged a hotel room on my card. I was thus expecting to see some bonus cash in my account.

Confused as to why my purchases didn’t qualify, I called Chase to ask. According to the rep that I spoke to, everything is okay. While you accrue bonus rewards throughout the quarter, they don’t actually post to your account until eight weeks after the promo ends.

In other words, I shouldn’t expect to see a bonus until the end of November since the current bonus runs through September 30th. I’ve since confirmed on the Chase website that this is the way that it works. Lesson learned… I need to do a better job of reading the fine print.

Regardless, it seems a bit strange to me that they would print a line on my statement for “Ultimate Rewards Travel” along with a $0 value when they know full well that the bonus won’t post until the end of November.

Whatever. The point here is that if your statement is showing $0 in bonus rewards, don’t worry. They’re not actually supposed to be there until later this fall.

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» Chase Sapphire Preferred 25k Point Signup Bonus
» Changing Our Reward Credit Card Strategy (Again)
» Credit Card Offers: Excellent-Credit Credit Cards
» Credit Card Deals and Free Rewards Offers

Last night while going through the mail, I happened upon our Chase Freedom Visa statement. Don’t ask why we’re still getting a paper statement from them, as I’m honestly not sure – guess I need to change that.

Anyway, I don’t usually look at our credit card statements too closely, as we pay our credit card bills in full every month. I usually just skim over the transactions to make sure everything looks right, and that’s about it.

This time around, however, my eye was drawn to the “Minimum Payment Warning” box, pictured below. I’ve talked in the past about recent credit card statement changes, and this is one of the new additions.

For context, our closing balance was $2720.12, the APR is 15.24%, and the minimum required payment is $54. As you can see from the image above, if we made that minimum payment each month and never made another charge, it would take us 21 years to pay it off. 21 years!

Not only would we be paying for our July 2010 purchases through the year 2031, but it would come at a total cost of $5,936. That’s 118% extra. 118%! If that’s not motivation to get out of debt, I don’t know what is.

The whole point of this table is to make it clear to people just how much money they’re wasting by carrying a balance. They do their best to obfuscate things in the next line, however, where they present an alternate payment scenario.

Guess what? If you pay $95/month, you can pay it off your balance in three years while “saving” $2,525. That’s all well and good until you remember that this “savings” actually represents nearly $700 in extra interest payments vs. paying it all off up front.

Hmmm. No thanks. I think I’ll keep paying my bill in full. What about you?

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Related Articles at fivecentnickel.com:

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» Carnivals – Week of 03/17/08
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» Consolidate Your High Interest Debt With Lending Club
» Twelve Reasons to Stay in Debt
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Many people dream of becoming a millionaire. But why stop there? Why not dream a bit bigger and shoot for billionaire status?

If that’s your goal, then you might be interested in this list of the top US universities in terms the number of graduates to have become billionaires (in parentheses).

• Harvard (50)
• Stanford (30)
• Univ of Pennsylvania (27)
• Yale (19)
• Columbia (15)
• Princeton (13)
• NYU (10)
• Univ of Chicago (10)
• Cornell; MIT; Northwestern; UC-Berkeley; UCLA; USC (9)

Not surprisingly, the majority of these billionaires were business majors at their respective campuses.

Interestingly, NYU also has five dropouts who went on to become billionaires – including financier Carl Icahn, who left med school to become a stock broker.

And yes, I do realize that that it might be the students who choose to attend these schools, rather than the schools themselves, that make the difference. Either way, it’s still a fun list to look at.

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If you’ve tried several times to get out of debt and can’t seem to manage it, this is the article you’ve been waiting for. I’m going to tell you why you continually struggle, and I’m also going to provide a simple solution.

On the face of it, getting out of debt seems simple; spend less than you earn and pay back what you owe with the difference.

So why is it that it’s so hard to actually do?

There are a few reasons.

First, trying to get out of debt is intimidating. It’s like having to climb a very tall mountain starting from a very shallow valley.

Most of us stare at that mountain in awe. We think about how much work it’s going to take to get to the top. As a result, we stay anxious and paralyzed. And we stay in the valley.

But how does a mountain climber approach this task?

One step at a time.

They don’t think about the torturous days ahead. They just think about putting one foot in front of the other.

When you’re trying to get out of debt, you might face a mountain of bills, and your debt might be so great that it gives you a nose bleed just thinking about it.

In that situation, I know it’s really tough to think about taking one step at a time but let me tell you a secret.

That is the only way you’re ever going to get out of debt.

In fact, this is exactly what’s behind your struggles. You start off very motivated but little by little, you change your focus to the mountain rather than the step in front of you.

As a result, you give up.

Think about the challenge of losing weight.

Let’s say George wants to lose 20 pounds, and he’s been trying to do it for years.

He’s tried lots of diets – and they all work.

For awhile.

Then, he slips back and ends up heavier than ever.

Why?

Let’s take a look a closer look.

Every time George steps on the scale, it reminds him that he is 20 pounds overweight. Let’s say he decides to do something about it.

He joins a gym and starts working out.

He gets serious about eating well.

After a week, he’s shed 2 pounds.

But when he looks at the scale, you know what George sees?

Failure.

He still sees that he’s 18 pounds overweight.

Those 2 pounds were tough enough to lose. He tells himself that he’ll never lose 18 more. He gives up.

The only way George is really going to lose those 20 pounds is to lose them 1 at a time.

And the only way you’re going to get out of debt is 1 dollar at a time.

What we really need to do is remain focused on taking one step at a time.

How do you do this?

1. Slow down

Get the word “fast” out of your vocabulary. When you want “fast” results you’re setting yourself up for failure. Resolve yourself to the fact that it may take time to get out of debt. Make a commitment to yourself and someone else that you’re going to stick to it.

2. Redefine success

This is also a critical step. If you define success as “having no debt” you’re actually setting yourself up for failure – just like George did every time he stepped on a scale.

Success has to be available in smaller increments, so let’s break it down.

In order to get out of debt you might need to do any number of things. There are two main areas; stop creating more debt and paying off existing debt.

In order to stop creating more debt, you need to get a tight grip on spending. That may require finding and implementing a budgeting system and having a family discussion about the new focus on spending cuts and getting out of debt.

There may be other steps as well – like renegotiating or consolidating debt. You also might have to go through all your expenses. Rather than cutting, you might need to shop for lower cost replacements. (Life insurance is a great area where a little shopping could save you a nice chunk of change.)

Each of these are steps and offer you “success.”

Get out a piece of paper.

List all the steps.

Break each step down further. What are all the steps you need to take in order to accomplish those steps?

You might have a list of 30 items. That’s great. You now have 30 “success” steps.

Assign each step to a member of the family with a due date.

Once you complete these steps, you’re going to be much closer to getting out of debt.

Keep in mind that some steps, like following your budget, are ongoing. That’s great, because such steps offer you daily success. All you have to do is follow your daily budget today in order to have success.

If you want to get out of debt, you don’t need to buy another book and you don’t have to start living like a monk. All you have to do is break down your goals into bite-size chunks and start taking care of business – one day at a time.

Your thoughts on debt reduction

Have you faced challenges like these? Did you get out of debt? How?

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This is a guest post from Dan Wesley, who is the CEO of CreditLoan.com. If you like what you see here, please consider subscribing to their RSS feed.

Salaried employees generally have an employer-sponsored 401(k) retirement account administered by the company’s HR department. Failing that, many use Individual Retirement Accounts (IRAs) from local banks, credit unions, or brokerages. Some especially conscientious employees use both.

Small business owners tend to likewise be big fans of the IRA, either in Traditional or Roth form. And while these are certainly better than having no retirement plan at all, an IRA is rarely the ideal plan. The self-employed have several retirement options which are both exclusive to them and, often times, more lucrative than the more traditional plans above.

Simple IRA

Simple IRAs are ideal for small business owners who wish to set up retirement accounts for their employees. As Bankrate explains, these accounts were established with businesses of “no more than 100 employees who earned $5,000 or more on the payroll for the previous calendar year” in mind.

Over time, Simple IRAs have become most commonly used by employers with seven or fewer employees. Fortunately, the Simple IRA is extremely easy to set up, requiring just four pages of paperwork and about ten minutes of one’s time. Employers are limited to contributing 3% of an employees pay, up to an $11,500 yearly contribution limit.

The Solo 401(k)

One rarely discussed advantage of self-employment is the existence of retirement accounts with much higher yearly contribution limits. The Solo 401(k) account is a prime example. SmartMoney explores how Solo 401(k) plans work, explaining that they’re essentially regular 401(k) accounts with much higher contribution limits: up to $49,000 per year in 2010, depending on age, income and other circumstances.

Putting things in perspective, regular 401(k) and IRA contribution limits top out at $16,500 and $5,000 per year (not counting catchup contributions), respectively. It should be noted that Solo 401(k) plans are generally restricted to business owners, rather than employees of the business in question.

The Solo Roth 401(k)

Solo Roth 401(k) plans are similar to regular Solo 401(k) plans, but offer the tax advantages of a Roth IRA. As you may know, Roth IRAs are accounts for which contributions get taxed, but withdrawals (which contain the accumulated savings, interest and investment returns of decades) do not. Moreover, InvestorGuide reveals several key advantages the Solo Roth 401(k) holds over a regular Roth IRA:

• High income earners can contribute to Solo Roth 401(k) accounts even if they’re not eligible for a Roth IRA
• You can contribute much more per year to a Solo Roth 401(k) as compared to a Roth IRA
• You can borrow from your Solo Roth 401(k)
• You can avoid (if you wish) the required minimum distributions of a Roth 401(k) by rolling its funds over to a Roth IRA prior to age 70-1/2, so long as you set up the Roth IRA account five years prior
• You can also maintain a Roth IRA in conjunction with a Solo Roth 401(k), which expands your potential annual contributions even further

The Simplified Employee Pension (SEP) IRA

The Simplified Employee Pension IRA (SEP-IRA) is in many ways similar to a Solo 401(k). While both have the same maximum annual contribution limit, it takes a higher level of income to max out the SEP-IRA. In 2009 and 2010, self-employed individuals and business owners can contribute 20% of net self-employment income or 25% of W-2 wages up to $49,000 per year. Contributions are tax deductible.

Withdrawals prior to turning 59-1/2 are subject to a 10% penalty (plus income taxes), while withdrawals after 59-1/2 are just taxed as ordinary income. Unlike defined contribution plans, there are no restrictions on whether or how much money you can contribute to a SEP-IRA in a given year. SEP-IRAs are also designed for one person businesses or business owners with employees, rather than for the company’s employees themselves.

Keogh Plans

Keogh plans are a type of defined contribution retirement plan. Established by Congressional legislation in 1962, Keoghs allow tax deductible contributions of up to 25% of annual income up to $49,000. Keogh funds can be withdrawn by 59-1/2 and must begin by 70-1/2.

A Keogh (also known as an HR10 plan) can be invested into the same broad range of securities – stocks, bonds, CDs and annuities – as can traditional accounts like 401(k)s and IRAs. Investopedia cautions, however, that their high contribution limits are accompanied by greater paperwork burdens and upkeep costs.

Defined Benefit Plans

Described by Bankrate as “the most expensive and complicated retirement plan for the self-employed,” defined benefit plans are nevertheless an option for self-employed individuals with “mountains of money” to put toward retirement. Employers can save an eye-popping maximum of $195,000 per year, but there’s a catch: an actuary is needed to determine the exact amount that can be contributed (a rather costly expense).

In contrast to the flexibility offered by Solo 401(k) accounts and Simple IRAs, a defined benefit plan is an extremely structured arrangement that must be operated in accordance with strict rules. Largely because of these expenses and complications, Bankrate finds that there are roughly 38,000 defined benefit plans today, down from 114,000 in 1985. Nevertheless, they remain a worthwhile tax-deferral possibility for wealthy business owners.

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Over the past few months, it’s become clear that a lot of homeowners are strategically defaulting on their homes. In other words, they’re intentionally walking away from their mortgage obligations because they owe significantly more than their home is worth, even if they can afford to keep making the mortgage payment.

But what then? Once you’ve defaulted, you won’t be able to get a new mortgage for a long, long time. Well… According to a recent Bloomberg article, some homeowners are starting to “buy and bail.” In other words, they’ll acquire a new house before they walk away from the old one.

While “buy and bail” constitutes fraud if the borrower lies on their loan application, this strategy is most often employed by those with a big paycheck and relatively little debt, as they’re more likely to legitimately qualify for financing on a second home. Lenders are then left holding the bag.

What do you think?

Are there any circumstances under which you’d consider a strategic default?

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Last week while driving home, my husband and I got into a car accident. We were stopped at a red light behind another car. When it turned green we started to move, but got slammed into from behind by a young guy going way too fast.

After the accident, he said that he was messing with his cell phone when he saw a car “pop out of nowhere.” He then swerved into our lane where he rear-ended us.

We’re grateful that it wasn’t worse, but we’re definitely upset by all the work we’ve had to do to get the car fixed (possibly replaced) just because some guy was messing with his cell phone.

What to do when filing a claim

Even if you’re in the right and have been a victim in a car accident, you have to make sure you follow your insurance company’s procedure for filing a claim. If you don’t, you can expect headaches and problems with getting the claim sorted out, and you might not get the money you deserve.

Exchange information

After you’ve established that everyone is okay, go ahead and exchange information with the other driver(s). Besides getting their name, contact information, and license plate number, you should get their VIN and car insurance information (including the policy number).

While this is generally easy, sometimes the other driver will be belligerent, especially if they know they’re at fault. Don’t say anything to provoke them. Instead, just wait for the police to arrive – you did call them, right?

Another point to consider is whether or not you should talk about the accident with the other person. In general, it’s a good idea to avoid speaking about the details of the accident with the other driver. This helps to protect you from a misunderstanding, and from them blaming you when it’s really their fault.

Contact your car insurance company

Another important step is to contact your car insurance company as soon as possible. Some insurance companies have very specific time frames for reporting claims. As soon as the police officer finished up, I called our car insurance company.

If you have serious injuries, of course, you should get them taken care of immediately – the insurance company can wait. Even if you think you’re okay, you might want to stop by an urgent care center to double check for any injuries related to the accident.

While I felt fine for a few minutes after the accident (aside from a killer headache), I noticed that my knee was bleeding. It didn’t look too bad, so we didn’t need an ambulance. Since our car was still functional, we drove ourselves to urgent care. I ended up getting a tetanus shot and a prescription for a pain killer.

While waiting for the nurse, my husband and I called and gave the insurance company all the information they needed. This included:

• Names and contact information of all involved
• Names and contact information of any witnesses
• Vehicle information and VIN of the other car
• Detailed description of the accident
• Information on any injuries and/or medical treatment sought

If you have the presence of mind, you should try to give them this information as soon as you can after the accident, or at least write down the details so you don’t forget anything important.

Take pictures and organize your documents

My husband took numerous pictures of our car, but forgot to get pictures of the other guy’s car. Along with the photos, we’ve been accumulating related documents, receipts, and paperwork in a central spot.

When you’re getting phone calls and scheduling repairs, it’s very helpful to keep all of your information organized. If you don’t, you might lose documents that you don’t even know you’ll need.

Be careful before signing anything

While your car insurance company is processing your claim, take some time to review your policy to make sure you’re getting everything you’ve paid for. If you don’t understand any part of your policy or claim, call your insurance company for a thorough explanation.

Insurance companies often try to give you estimates of losses that are lower than your actual losses. Don’t accept their estimates without getting some estimates of your own. Also be sure to read any paperwork that you’re given to make sure you’re not signing off on anything that you don’t agree with.

Your thoughts

Have you ever been in a car accident? If so, what happened? And how did the claims process go? Did the other driver or their insurance company give you a hard time? What about your own insurance company? Please share your thoughts and experiences in the comments section.

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Have you ever wondered what you should do if you find a lost credit or debit card? We ran into this situation over the weekend, and I thought it would make for an interesting discussion topic.

Finding a lost card

We took the boys to see a movie on Saturday. My wife and I were out and about separately, so we decided to meet at the theater. She got there first with our oldest, so she went in to save seats.

As I walked our younger three across the parking lot, our five year old said “Daddy, there’s a credit card on the ground under Mommy’s car.” Sure enough, when I got down to his level, I spotted it.

When I fished it out, I discovered that it was actually a debit card. Unsure of what to do, I headed into the theater. I wasn’t comfortable turning in an active card at the box office, but I also didn’t want to just throw it away or hang onto it until later.

Doing the right thing

Our eight year old jokingly (I hope!) said “Cool, now we can financially ruin them.” But instead, I decided to do the right thing. I started by trying to look up the owner using my iPhone, but I came up empty.

Since the movie was about to start, I decided to call the number on the back of the card and simply report it as lost. Once I reached a rep – harder than you’d think without a PIN code – I told her I had found a card and wanted to report it lost.

The rep took down the number and said they’d place a hold on the account until they heard from the owner. I then turned the card in at the box office just in case the owner came back looking for it.

What would you have done?

So, dear readers… What would you have done if you were in my shoes? Left it lying there on the ground? Turned the card in at the box office? Called to cancel it? Cut it up and threw it away? Go on a shopping spree?

(I’m kidding about that last one.)

As an interesting aside, we found this card maybe 200 yards from where we found $1100 cash about 12 years ago. I guess we should hang out there more often!

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Earlier this week I began experimenting with the Lending Club note trading platform. I’ve been investing with Lending Club for about 14 months now, and have almost exclusively invested in new loans. Sure, I’ve sold a few sketchy loans, but I still hadn’t bought a note on the secondary market.

I finally decided to take the plunge after: (1) several commenters shared their positive experiences, and (2) I had a hard time finding enough suitable notes through the ‘normal’ investing channel.

What is the note trading platform?

Instead of trying to describe the note trading platform myself, I’ll let Lending Club describe it themselves:

The Note Trading Platform is an electronic marketplace where individuals and organizations can buy and sell Notes that correspond to consumer loans issued through the Lending Club website… The Note Trading Platform is operated by FOLIOfn.

You can access the trading platform from the “Trading Account” link in your Lending Club account. Be forewarned: You have to apply for an account and wait for it to be activated before you can use it.

Why use the note trading platform?

There are several reasons you might want to use the Lending Club note trading platform, including accessibility, speed of investments, risk reduction, and discounts.

Increased accessibility

Probably the biggest reason to buy notes on the secondary market is that not everyone is eligible to invest directly via Lending Club. In fact, you can only use Lending Club if you live in one of 26 select states. Residents of the other 24 states (and DC) are out of luck.

As for the note trading platform, nearly everyone can participate. In fact, only residents of the District of Columbia, Kansas, Maryland, Ohio, Oregon, Texas, and Vermont are ineligible.

Put your money to work quickly

Another big reason to use the note trading platform is that you can use it to put your money to work much more quickly than via direct investments. While new loans can take 10-12 days to fund, you can buy a note on the secondary market and the transaction will settle within 24 hours.

Risk reduction

Of my two notes that have been charged off, neither borrower ever made a single payment. By investing on the secondary market, you can screen these individuals out by only investing in notes that have received at least one (or a few) payment(s).

While an established payment record doesn’t guarantee that a borrower won’t eventually turn into a deadbeat, it does get rid of the outright scammers.

Buying notes at a discount

Finally, it’s possible to pick up decent notes at a slight discount. And yes, this applies to decent looking notes, not just stinkers. Sure, the discounts will be smaller on better notes, but I’ve been able to find plenty of promising notes at a 0.2% to 0.5% discount – not much, but I’ll take it.

How to select notes

So… Now that I’ve convinced you to give it a try, how do you go about selecting notes to buy? I’m still rather new to the game, but I’m always happy to share my strategies.

Unfortunately, FOLIOfn only has rudimentary filtering capabilities. You can filter based on interest rates, payment status, and the number of payments remaining. My primary considerations here are status and number of payments remaining.

I set the status to “Never Late” and the number of payments remaining to “35” – this latter setting guarantees that there’s been at least one payment made. At this point I have a huge number of loans to choose from, so I sort them based on their “Markup/Discount” with the largest discounts at the top.

Another major consideration at this point is the borrower’s credit score change. There’s a column for this in the resulting data table, with an arrow pointing up (increase), down (decrease), or across (no change). From here, I simply look for notes that have had no change or an increase in the borrower’s credit score, and I click to load each of them in a new tab.

Now the fun begins… I simply flip through the tabs and click the “Original Listing” link to load the original loan application. I then quickly check the loan against my loan selection criteria and close tabs that don’t meet my expectations. I then hop back to the list of loans, check off those that I want to buy, and submit my order.

The first time I did this, I managed to identify and order twelve promising loans rather quickly. If you place your order before 2:30 Eastern, your trades will settle that day. Otherwise, they will settle at the end of the next business day.

The downside of the note trading platform

The primary downside of the Lending Club note trading platform is that the interface kind of sucks. As I noted above, the filtering is rather limited, and I was also frustrated by the order submission process.

Instead of being able to add notes to a shopping cart of some sort and continue clicking through the available notes (you can only view up to 60 at a time), you have to submit your order before changing pages. No big deal, right? Wrong, as you can’t easily pick back up where you left off.

Instead, you get dumped back out to the main screen where you have to re-filter, re-sort, and then find your place back in the long list of available notes. Not a deal killer, but their design is definitely lacking.

Another minor issue was that, of the twelve notes that I selected, I only ended up getting ten of them. The other two simply disappeared from my order, and the money was credited back to my account.

Confused, I pinged Rob Garcia of Lending Club. His response was that, if there are payments coming in while a purchase is in progress, the transaction might get cancelled “so the purchase is not mispriced.”

My interpretation of Rob’s explanation is this:

The interest that has been accrued but not yet paid goes to the buyer. If a payment comes in before the sale is completed, the accrued interest plus the principal portion of that note would end up in the seller’s account, thereby reducing its value. Because this has an adverse impact on the buyer, the transaction gets scrubbed and you get your money back.

It seems like it would be easy enough for FOLIOfn to protect against this possibility, but I guess this is just how things work — at least for now.

What do you think?

For those of you who have tried out the note trading platform, I’d love to hear your thoughts. Any tips or tricks for navigating the interface a bit more efficiently? What about tips for finding those “diamond in the rough” notes? Anything else to add?

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The following is an excerpt from Your Life & Your Money In the book the author says every family needs a chief financial officer (CFO), and he gives these four rules for that person.

Do what you can, with what you have, where you are.?THEODORE ROOSEVELT

Once you have a mission statement, you can start acting as your family?s CFO. The job has many dimensions, of course, but there are four basic rules:

Rule #1: Know Your Expenses

Familiarity with expenses is the CFO?s most important job. Think about it. If you don?t know how much money is going out, how will you know how much money to spend?or not to spend? People, businesses and governments get into fi nancial trouble when they don?t know exactly how much goes out each month. Unlike the government, however, you can?t print money when you?re in trouble or running a little short.

Can you imagine what would happen if a corporate CFO didn?t know how much his company was spending every month? He?d be fired. Well, if you?re the family CFO and you don?t know your monthly expenses, you?ll be fi red too. (It?s called divorce.)

Here?s how to start getting a handle on expenses.

Review the last three months of your check register and see where the money is going. Also, look at the last three months of credit card statements to see what you?re charging. Don?t plan the next three months of expenses until you get a clear idea of how much you and your spouse have been spending recently. This will give you a ballpark figure of what you can afford. If you pay quarterly, biannual or annual bills like homeowner?s insurance or association fees, for example, then divide those bills by the appropriate number to get as close as you can to figuring out your monthly expenditures.

Computer software can help get you expense house in order. Packages such as QuickBooks? and Quicken? can help you tally your monthly bills or expenditures and keep everything well organized. I like doing my family?s expenses on QuickBooks.

Rule #2: Analyze Your Expenses

After you have organized your expenses over the past three months, look at the biggest expenses fi rst. The number one expense is likely to be your mortgage payment or rent. If it?s a home mortgage, research your market frequently on the Internet to make sure you have the best interest rate possible. If you?re renting, check comparable rentals every three to four months to see if you can get a better deal elsewhere.

The next big expense may be car and homeowner?s insurance. Every six months, look for the best possible rates. Insurance rates vary significantly, and many insurance companies are very willing to save you money. Please don?t let your friendly relationship with your insurance agent get in the way of saving money. If you can get a better deal on the same coverage, say goodbye! Too many times I?ve had people who could be saving thousands of dollars on insurance over a couple of years? time tell me that their insurance agent is a good friend or a family member, or that they?ve been with him or her too long, and don?t want to cause hurt feelings. Well, your insurance agent doesn?t pay your bills. Maybe you could give him or her a financial tip: Work for a more competitive insurance company!

Because you are now your family?s CFO, you get to fi re poor producers or people who cost you too much money. Do it tactfully, but fire away. Hire the insurance person, CPA and fi nancial advisor who?ll give you the best service and the best rates. They are out there if you do your due diligence and research.

Next, credit cards. Take a look at all the credit cards on your expense list. I am a fi rm believer in paying credit card bills in full each month. Buying what you can?t pay for is called living beyond your means. It?s delusional, so don?t do it.

If you have problems with credit card debt and would like to pay off the debt as soon as possible, then research credit card deals to find the lowest rate. Do this as often as you can. Always pay off cards with highest interest rate fi rst, then the next highest card, and so on.

I could write a book on how to lower your credit card debt, but that?s not what I aim to teach you here. This book is designed to give you your own personal blueprint to fi nancial success. It?s for you to get off your butt and not let someone else do the work. If you have a specific problem with credit card debt, fi nd a book, CD or other material to help. Don?t let mindless TV, Internet chat or other idle activities get in the way of this goal.

Other expenses. Since you probably look for the best price every time you shop for food, gas and clothing, apply that same tenacity to cell phone bills, cable expenses and everything else your household spends money on.

Once you pay off your last credit card balance, do the right thing from then on and charge only what you can pay off each month. Better yet, avoid credit cards altogether; pay cash whenever you can. Yes, that means the convenience of pulling out your credit card is over. Go to the ATM and keep yourself honest. Isn?t that what you would tell your kids to do?

My motto is, ?A dollar saved is a dollar earned.? If you analyze every expense, you can?t help but start saving money.

Rule #3: Hold Regular Financial Meetings with Your Spouse or Yourself

During the first year of your term as CFO, you and your spouse should meet monthly for the first six months and then every two months until your ?anniversary.? After that, meet with your spouse (or review your financial affairs yourself if you are single) once a quarter to make sure you are implementing your mission statement. You have to make sure everything is going according to plan. If it?s not, you can make adjustments so that you keep yourself and your spouse motivated and willing!

A great CFO always keeps the lines of communication open. Always ask your family members, ?How can we save more money?? or ?With all the money we?re saving, how should we invest or pay off unwanted debt?? Here?s an idea: Make one spouse the CEO and the other the CFO for the fi rst year. After that, switch roles so both can see what it?s like to be in charge of the expenses. The CEO?s job is to keep the mission statement on the table at all times and to display leadership. That means practicing what your mission statement is preaching. As a team player, the CEO can do research in conjunction with the CFO and help to lower expenses.

Rule #4: Institute a Family Reward System

To get everyone involved and demonstrate that the family CFO idea works, develop a bonus structure or reward system based on a portion of the family?s quarterly savings. Get the children involved since as shareholders they contribute to the family expenses and can help control them. Give them assignments with monthly or quarterly deadlines to research cell phone packages, for example, or to fi nd how (by taking shorter showers, for example) they can reduce water and fuel bills. Help them understand in a practical way that they can help lower most household expenditures.

Bonuses or rewards should go to those whose ideas and practices lower expenses. If you make the process fun and creative, you?ll get a lot more out of saving money than you ever imagined. Your activities will help your child develop a positive relationship with money and build confidence, reduce anxiety, and create a sustainable attitude of empowerment and well-being in your household.

It seems like all the "rage" now in my city -- every time I fill up my car with gas I get a commercial on the pump screen before they print out my receipt. It always says something like, "You could have saved 5 cents per gallon today if you had used the Shell Credit Card." Yeah, yeah, yeah -- can I just have my receipt?

The reason this may look like a good deal is that while it says "5 cents" some people might translate this into "5 percent." If the card did pay 5 percent, that would be a pretty decent return. But it doesn't offer that -- it offers 5 cents per gallon off.

Let's say a gallon of gas costs $2.60 (I've paid more than this on most recent gas purchases, but I'll go low to help the card companies out). That's a 1.9% discount per gallon. Not bad, but my Schwab Visa gives me 2%. In addition, it gives me 2% off EVERY purchase -- and I buy a whole lot more other stuff on it than gas. Many (most?) of the gas cards pay 1% on non-gas purchases -- even those that do offer (usually for a limited time) 5% back on gas purchases. So the cards aren't really that great of a deal. And yet, I have to endure a commercial every time I fill up.

Could you just give me my receipt, please?

The following is an excerpt from Buying a Home: The Missing Manual.

You may have heard horror stories about scam movers who demand a big deposit and then never show up on moving day or who hold people's possessions hostage until they pay an amount three or four times greater than the original estimate. Don't get scammed. If you plan to use a professional mover, follow these tips:

• Choose a local mover. Most scammers operate online only. Work with an established local company whose office you can visit.
• Get in-person estimates. Don't settle for an estimate that you get from a phone call or by filling out an online form. To get the most accurate estimate, have someone from the moving company look around your home to see what you'll be moving. Get written estimates from at least three different companies.
• Be suspicious of lowball estimates. If one estimate comes in much lower than the others, it's probably too good to be true.
• Get referrals and references. If you know someone who's moved recently, ask which mover they used and what they thought of the experience. And before you choose a mover, ask for references from previous customers, then call and ask whether those customers were happy with the mover's work.
• Get a list of reliable movers. The American Moving and Storage Association (AMSA) is the national trade association for professional movers. AMSA's website (www.promover.org) lists certified ProMovers, who must pass criminal background checks and agree to ethical standards (such as honesty in advertising and all business transactions). You can also use AMSA's referral service to request quotes from up to six prescreened ProMovers local to your area.
• Check reviews. Consumers use review websites like Yelp (www.yelp.com) and MoverReviews.com (www.moverreviews.com) to rate and write detailed reviews of moving companies they've worked with.
• Ask for the FMCSA Rights and Responsibilities booklet. By law, a mover must give you a copy of "Your Rights and Responsibilities When You Move," a publication of the Federal Motor Carrier Safety Administration (FMCSA). If a mover can't or won't provide you with a copy, look elsewhere.
• Don't hand over a large deposit before the move. Scammers often demand a big chunk of cash up front?and then never appear to move your stuff. It's not unreasonable for a mover to ask for a deposit of $100 to $200 to cover their costs if you change your mind, but if a mover wants more up front?like 25 percent of the cost of the move?don't pay it.
• Get everything in writing. Make sure the mover's estimate includes the cost of the move and any extra charges (for packing boxes, tape, wrapping materials, and so on). Don't ever sign a blank contract that the mover fills in later.
• Check for past complaints. Contact your local Better Business Bureau to see whether anyone has filed a complaint there about the mover. If you're moving from one state to another, you can also search for complaints filed with FMCSA (which regulates interstate moves).

For a smooth move, think ahead. Unlike Dorothy in The Wizard of Oz, you're not going to look out the window one day and discover you're not in Kansas any more. A move happens in stages?and staying on top of those stages at the right time is the secret to a successful move. Use the to-do lists in this section as a starting point for your own, adding any tasks your situation requires.

Moose Tracks ice cream (yeah!) and yard work (boo!) is on the horizon for my family this weekend. We're going to Chicago in a few weeks, so we're going to be low-key until them vacation-wise.

What are your plans to celebrate the holiday?

The personal finance book Grow Your Money!: 101 Easy Tips to Plan, Save, and Invest ends with a list of what financial steps we should take each month. They list the August steps as follows:

• Review your insurance coverage to make sure no changes need to be made.
• Do an employee benefits checkup.

Here's what I do on these:

• I usually review our insurance needs when I get the premium notice for the next year (or prior to it if I plan to shop around a bit.) Some of my insurance is set (like life insurance) while others can vary (like car insurance), but unless there are some major changes in my life, the insurance plans are good to go.
• We don't have a FSA (we have an HSA), but if we did, September would be the time I'd want to look it over to be sure I had my spending plans set for the year (so I used it all.)

How about you? Are you working on these this month?

Here's an email I recently received from a reader:

I am recently married, and my husband's parents took out a Universal Life Insurance policy for him when he was six (6) years old.  Yesterday, we met with the insurance agent to transfer the policy into my husband's name, and add me as a beneficiary.  After growing for 20 years, the policy is now worth $58,000 and the premium is $17/month.

I know from reading your blog that 1) buy term and invest the rest is usually the better way to go; and 2) you don't need life insurance until you have dependents who rely on your income.  We currently have no children (but hope to in a few years), and neither of us relies on the other's income to survive.  So, normally, I wouldn't even think about buying life insurance until kids came around.

But--given that he has had this policy hanging around... is it worth keeping?  I hate to "throw good money after bad" and spend $17/mo on a bad investment, but wonder if there is any value to maintaining what he's been building for so long.

What's your advice for her?

I've previously talked about all the ways being a AAA member can save you money, and here's another example.

When I was recently looking at what I was going to do regarding TV services (detailed in My Comcast Saga Continues), I considered satellite TV as an option (specifically I was looking at DirecTV since the friends I asked seemed to like them the best). As such, I started to save every DirecTV ad I saw from every source -- Sunday newspaper inserts, promotional offers we were mailed, ads in magazines, etc. In almost every instance, the price for their three main packages (Choice, Choice Xtra, and Choice Ultimate) were exactly the same -- $29.99, $34.99, and $39.99 per month respectively.

But there was one resource that had a different price. AAA mails a free magazine to its members on a regular basis (once a quarter?). In a recent one I found an offer for DirecTV that had the following prices: $19.99, $24.99, and $29.99 per month. Yep, that's right, the AAA offer was $10 per month better than any other option I had seen. If I had been interested in getting DirecTV, having AAA would have saved me $120 per year. Not a bad deal for something that costs less than that to be a member, huh?

Anyone else out there have ways to save by being a AAA member?

The following is an excerpt from Your Life & Your Money.

We must become the change that we want to see in the world.?Mahatma Gandhi

We live in an age of delusion. It seems to be the inherent nature of mankind.

Our biggest delusion is a sense of entitlement. It permeates our country. People delude themselves into believing everything is fine while engaging in behavior that?s definitely not fine. Then, when something goes wrong, they stand there blankly and do nothing about it, expecting somebody else to pick up after them! Everywhere you turn, people are blaming everybody else for their problems.

Look around. It?s everywhere?in our neighborhoods, schools, big business. There?s the chain smoker who sues the tobacco company. Or the overweight, overfed cheeseburger eater who sues the hamburger chain, claiming that their food made him fat. Or the guy who drank too much, left the bar and then crashed his car, who blames the bartender for serving him too much alcohol.

Are you kidding? The next thing you know, the government will be bailing out all the homeowners who double- and triple-dipped into their home equity and are upside down, plus the brokerage houses that bought lousy loans and the banks that accepted those loans. Oh, wait?that?s happening too!

Worst of all are our politicians. They believe they can print money and manufacture prosperity.

I?m not making this up, it?s true. What in the heck is happening? And why is it happening? The answer is simple: it?s much easier to blame others than to take responsibility for yourself.

The Delusional Trap

We delude ourselves when we?re uncomfortable with accepting things the way they are as opposed to the way we want them to be. When we act on the way we want things to be instead of how they actually are, we make bad financial decisions and create painful problems that often end up hurting many others.

People become ensnared in the delusional trap when they create financial trappings in their lives without noticing or acknowledging or, even worse, deliberately ignoring reality. They?re afraid to face their financial lives head?on with brutal honesty. They?ll do anything to avoid the consequences, often at the expense of other people or businesses, and when it?s too late, they take down a lot of innocent people with them.

Every time someone claims bankruptcy, overspends on credit cards and repeatedly refi nances their home, they are lying to themselves and being negligent and disrespectful of their fellow humans.

As my dear friend Willy M. Nieman put it, delusional thinking is defined as:

1. Telling yourself a lie
2. Believing in that lie
3. Acting on that lie

The Sub-Prime Debacle

For a vivid example of how our entire society is ensnared in a delusional trap, look at the sub-prime debacle. As I write this, we are seeing millions of foreclosures nationwide, and it?s probably going to get a lot worse before it gets better. How did this happen? Let me give you my version:

In response to considerable housing discrimination against minorities and the poor, Congress over the years has been trying to make amends. It passed the Equal Credit Opportunity Act (ECOA) of 1974 which made it unlawful for any creditor to discriminate against any credit applicant on the basis of race, color, religion, national origin, gender, marital status or age. The Community Reinvestment Act (CRA) of 1977 further mandated that no lending institution could discriminate within various low-income and minority neighborhoods nationwide. Failure to comply subjects a fi nancial institution to civil liability for actual and punitive damages.

Talk about the road to you-know-where being paved with good intentions. Banks were accepting loan applications that in ordinary times they would have thrown in the trash. The reason was that as soon as the banks issued the loans, they could package them up and sell them to brokerage houses, which in turn packaged the loans and sold them as mortgage-backed securities.

The banks and securities fi rms were making so much money that they fell into a delusional trap themselves, believing the less-than-stellar securities they were manufacturing actually were sound. Nevertheless, the euphoric mood allowed many people to buy a house for the first time despite less-than-ideal (or sub-prime) credit.

To buy what most times were properties they could not afford by any conventional yardstick, many fi rst-time homebuyers of primary residences and rental properties used adjustable rate loans, which had low fixed rates for the fi rst two or three years of the mortgage. After that, their monthly payments increased signifi cantly.

What happened next shook the world?although anyone not deluding himself could have predicted the mess: those sub-prime adjustable loans started adjusting. For example, people paying $2,700 a month for their mortgage were receiving new mortgage payments at $3,400 to $3,600. And the monthly payments kept rising.

Borrowers began to default. Eventually, so many of these loans went into default that the capital structure of many brokerage firms, banks and hedge funds worldwide became questionable. The financial soundness of the world?s banking system and the ability to create the credit needed for the world?s daily economic functioning was being called into question.

Governments around the world had to bail out troubled financial institutions, leading to credit cutbacks and the recession we?re in now.

Everyone was deluded: the government, banks, loan brokers, securities firms and the sub-prime borrowers themselves. The problem spiraled out of control because there was so much money to be made in believing that a fantasy?taking on more debt than anyone could afford?somehow would work out.

A Solution

When you lose, don?t lose the lesson.?THE DALAI LAMA

The mortgage mess can teach us valuable lessons.

First, we must take responsibility for ourselves. Once you get the hang of it, it?s liberating. Yet taking complete responsibility for yourself is tough, which is why most people would rather blame others or deflect responsibility.

If you get anything from this book, it?s that taking responsibility for your own actions is the key to success and fi nancial and emotional well-being.

You will become empowered by taking full responsibility for your actions and for your role in all situations. If you blame and judge others without looking at your own actions, you will lose the essence of authentic accountability. It takes courage and practice to look at yourself first and foremost in all of your affairs, but it builds character in you and goodwill for your family, your friends, and your community. That?s what I call making a positive impact in your life!

Once you start taking responsibility, you?ll start noticing positive changes. You will feel empowered. You won?t waste time and energy on what someone else should have done. You will stay consistently focused on your role in all of your affairs.

By taking responsibility, you may be surprised to discover that you weren?t as much of a victim or as innocent as you initially believed. That realization is both humbling and enlightening, and it?s where your inner awareness takes place. Can you imagine how much better the world would be if all of us were accountable and took responsibility for our actions?

Let?s start wiping out the cobwebs of delusional thinking by asking a few questions. Do you overspend? Do you have a savings account that will last for three to six months in the event of an emergency? Do you know what your monthly expenses are? Do you know what you are invested in and why?

You probably don?t, and we?ll be giving you the tools to answer those questions over the course of this book. The fact is we all suffer from delusional fantasies, just some more than others. Notice how I use the word ?suffer.? Suffering is usually the result of delusional thinking in any financial aspect of our lives. Some psychologists might say that this behavior is a necessary mechanism to cope with certain situations. They might be right. But when it comes to your financial affairs, nothing could be further from the truth. If you don?t meet your financial affairs head-on, you will eventually suffer. The more honest we are with ourselves in all of our affairs, not only the financial ones, the better off we will be, because we will always know who we are, what we are, and what we stand for.

It takes courage and bravery. But the rewards are worth it. If you don?t take care of your financial affairs, who will?

Here are some thoughts from the author of the Millionaire Next Door on car-buying habits of millionaires:

86% of those who drive prestige makes of motor vehicles are not millionaires [having an investment portfolio of $1M or more]. Also, I mention the median price paid for the most recent motor vehicle purchased by a millionaire was $31,367 [for decamillionaires-$41,997].  It is understandable why so many people relate wealth with the price tag of a motor vehicle.  In a study of more than 2,000 respondents, The Wall Street Journal  found that 35% believed that in order to qualify as being rich a person must drive a car that costs $75,000 or more.  If I applied this $75,000 threshold to the millionaires whom I surveyed, more than 90% would fail to qualify.

A few thoughts on this issue as I start looking for a new car in the next month or so:

1. Leaves you with a different conclusion when you now see people driving a Lexus, Mercedes, or BMW, huh? ;-)

2. $31k is still a good amount to spend on a vehicle. I'm looking at all-wheel drive SUVs (to handle the Michigan winters and have room for our growing kids and friends) and I'm not sure I'm going to get that high. So people buying $40k vehicles would still be getting something "prestige" in my book.

3. I thought people reading the Wall Street Journal were smarter than that. $75k? Yikes!!!

4. I know that many of you are "buy quality used cars" buyers. Personally, I like a new car every seven years or so (100k miles) and I can afford it, so consider it one of the ways that I choose to spend/enjoy my hard-earned money. ;-)

And just to throw fuel on the flame of this issue, how about this as a debate question: should I buy, a Honda Pilot, Toyota Highlander, or something else? ;-)

Here's an employment scenario from Yahoo:

Bob and Joe are both applying for the same job. They each interview well, but Bob has 15 years' experience and no college degree, and Joe is fresh out of college with no experience. Who gets the job?

My answer: Bob (assuming he's performed well for those 15 years and is willing to work for the same pay.)

Their answer: It depends.

They are probably more "right" than I am -- there are other factors involved -- but I think that "in general", I'm right.

It's been awhile since we've discussed the age-old question of whether education or experience counts more in career success, so I thought this was the time to bring it back up. I'll give my thoughts and then you all can chime in:

• Education is vital as you begin your career. You want a job but have nothing to offer an employer that gives them a reason for hiring you. An education does that -- it lets them know that you have a base level of knowledge that can be useful to them. Thus, they feel more comfortable taking a "risk" in hiring someone with a degree even if they have no experience. In addition, an education is required by many companies even to be considered for a job. So in some places, if you have no degree, all the experience in the world won't do you any good.
• Once you get your first job, experience gets more and more important and education gets less and less important. Employers care less about what degree you have and more about the results you produce (and the better the results, the better for you.) Sure, if you're in a professional industry people will still want to know you have a degree, but they're much more interested in how you saved your last company $300,000 or grew sales by 12%.
• My advice is to determine what field you want to enter. If a degree is required or helpful, it's usually best to get it early on (I have known many people that have had to go back for their degree and it's a big pain/hassle, especially once you have a family) and get it at a "good" (doesn't have to be the "best" school) at a decent cost (be sure the cost of the degree matches up with the salary you can earn post graduation.) From there, do all you can to grow your career by getting good experience and performing well while doing so.

That's my take. Agree or disagree?

The following is an excerpt from Buying a Home: The Missing Manual.

Weeks?or sometimes months?can pass between the time you make an offer on a house and the day you take possession of it. In between, things can happen that affect the home's condition?an appliance might go kaput, the owners' toddler could dump a half-gallon of grape juice on the white living-room carpet, the roof could spring a leak. That's why you put a final walkthrough contingency in your purchase agreement?so you can check for last-minute problems before the house becomes yours.

If the home has been sitting vacant, problems might go unnoticed and unrepaired, until you have the bad luck to discover them after closing. You don't want to find that a burst pipe has flooded the house or that the seller has removed appliances or fixtures that were supposed to convey with the sale. If the seller is still living in the home or has recently moved out, check to make sure no recent damage has occurred?walls and floors can get pretty banged up when the seller moves his furniture and personal property.

What to Look for on the Final Walkthrough

Although a "walkthrough" sounds like a quick, casual check, dispel that notion. Take your time. Don't get distracted by deciding whether the sofa should go against the far wall or under the window?you'll figure that out later. Your priority is to make sure the house is in the condition you expect. If the seller made repairs and you haven't inspected the work, you might want to ask a professional to walk through with you, to make sure the repairs are complete. Also, bring a camera so you can document any problems.

Tip: If you took photos when you toured the home or during the home inspection, take them along to the final walkthrough. Use them to compare the condition of the home when you made the offer with its current condition.

In all likelihood, the next time you walk through the house, it'll be yours. Make sure it's in the shape you expect by doing a thorough check of all areas of the home, inside and out. Here's a summary of what you're looking for:

Outside the home

• Visually inspect the home's exterior, including the roof, siding, shutters and trim, and so on, looking for any changes since you signed the purchase agreement.
• Inspect the driveway and walkways.
• Check the grounds?are the trees and landscaping the same as when you made the offer?

Interior rooms (general)

• Open, close, and lock/unlock all doors.
• Open, close, and lock/unlock all windows, and check for missing or damaged screens.
• In each room, inspect the ceilings, floors, and walls for physical damage (such as dings, gouges, or scuffs that the seller may have left when he moved out) and water damage (stains, dampness, soft spots).
• Check the cleanliness of any carpets.
• Make sure closets are cleaned out.

Kitchen

• Open the fridge to make sure it works.
• Turn on all the stove's burners and oven.
• Test the light and fan in the range hood.
• Turn on the dishwasher.
• Run the garbage disposal.
• Test any other appliances.
• Run both the hot and cold water in the sink; check for clogged drains and in the cabinet underneath for signs of a leak.

Bathroom

• Run water in sink to check water pressure.
• As the water runs, check under the sink for leaks.
• Turn on faucets in the tub/shower.
• Check for clogged drains.
• Flush toilet.
• Turn on the exhaust fan.

Utility room

• Turn on the washer and dryer.

Garage

• Test the automatic door opener.

Attic and basement

• Look for areas that are damp, wet, musty-smelling, or show visible mold.

Electrical system

• Turn each light switch on and off.
• Turn on ceiling fans and exhaust fans.
• Test electrical outlets.

Heating/cooling system

• Turn up the thermostat a few degrees and make sure the heat comes on.
• If the home has central air conditioning, turn down the thermostat and verify that the air conditioner comes on.

Miscellaneous

• Confirm that all conveyances remain in the home.
• Make sure there's no trash or debris left behind.
• Check that the seller removed all his personal property.
• Check that the seller has made all agreed-upon repairs. Tip: Bring along a list of issues that the home inspector found that weren't serious enough to require repairs. Check that these problems haven't gotten worse since the inspection.
• Ring the doorbell.
• If there's a security system, test it. Tip: Before the final walkthrough, make sure the security service has your phone number as the designated contact. You don't want to set off the alarm and have no way to stop it.
• Make sure you have the owner's manuals for all major appliances (furnace, central air conditioner, and so on).
• Test railings on stairs, decks, and porches to make sure they're firmly attached.
• Check that any built-in shelving is stable.
• If there's a fireplace, make sure it's clean; open and close the flue.

Tip: If the seller has left junk behind on the property, find out how much it would cost to have it hauled away. Ask the seller to put that amount of money into an escrow account and get a written agreement that the seller will remove the junk by a certain date?if not, you can use the escrow money to pay someone to take it away.

Here's an interesting post from Thomas Stanley (the Millionaires Next Door author) that sheds some interesting light on average versus median net worths in the US:

The average net worth of an American household is $434,782. However, there is a major problem with this wealth figure.  When it comes to expressing the net worth/wealth of a household the average figure is very misleading.  The presence of high net worth households, billionaires like Buffet and Gates, for example, highly skews the distribution and thus the average in an upward direction. 

The median measure of household net worth paints a much more accurate picture of the character of wealth in America than does the average.  The median is that of the typical household, the mid point range of all of the more than 115,000,000 households ranked from bottom to top along the net worth scale. 

Today the median net worth of an American household is $91,304.  It now costs more than this amount for a one year stay, drugs excluded, in a high grade nursing home. Therefore, less than one half of the households in this country do not have enough to pay for such a service even if they sold everything they owned and worked for.

The $91,304 net worth figure also is indicative of something else.  The typical American worker who becomes unemployed today has only about two years of wealth to live on before he hits economic ground zero.

Most American households are nowhere near being financially independent.  Nor will most be able to retire in comfort.  Yet there is more bad news.  What if the equity in homes and motor vehicles is factored out of the median net worth figure?  Then the median figure is about $34,000 or about 2/3 of the annual median income generated by a typical American household today.

A few thoughts on these points:

1. Ugh. $34,000. I am almost speechless...

2. Not surprising to me. I've quoted various stats/research showing that net worths in the US were low (though specific data is sometimes hard to come by). And you know what I think of the average American's ability to save/invest. This just confirms it.

3. As one commenter pointed out, it's not that Americans don't have high incomes, it's just that we spend too much of it. We've discussed previously that there are reasons why high incomes don't translate into high net worths. Yep, overspending. And overspending is the worst money move anyone can make.

4. The numbers are for the total population and are not age-adjusted. I'm guessing that older people would have higher median net worths and younger people wouldn't be as well off. That said, the numbers are so low that no one age group is likely to be doing that well even when separated from the pack.

5. Personally, I'm way above these net worth numbers (both median AND average). I'm sure many of you reading this today are as well.

6. As the post goes on to say, these numbers have huge implications for our country. Who takes care of an aging population that's living longer but doesn't have the financial resources to pay for their own care? It's a big, big issue for our country and one that's likely too big for the government. The author's solution? We all need to save and prepare to take care of ourselves and our own families -- and not leave it to others.

The Best of Money Carnival is now up. Congrats to all participants and especially the winning post, How I Run My Home-Based Business.

Enjoy!

The following is an excerpt from Personal Investing: The Missing Manual.

After you spend decades living off a paycheck and saving money for retirement, selling investments so you have spending money can be downright unsettling?it's the exact opposite of what you've done your entire life. In addition, you worry about having to sell investments during a down market and hurting your portfolio. Meanwhile, you have enough on your mind wondering whether you'll get to the local diner in time for the early bird special. You can balance withdrawing cash from your portfolio and making sure your money lasts. This section tells you how.

Figuring Out What You Can Spend Each Year

The whole point of a retirement plan is to save enough money so you can live the way you want during retirement. However, when you retire, you have to be realistic. If you want your money to last, you can spend only a certain amount each year. That amount depends on the sources of income you have:

• Social Security benefits.
• Pension benefits, if you qualify for a pension.
• Part-time work.
• Income from your portfolio.
• Withdrawing principal from your portfolio.

If you're lucky and frugal, you may receive enough money from the first four sources to pay your living expenses. However, most people have to withdraw principal from their portfolios to make ends meet. If you fall into this category, here's how to figure out how much you can withdraw from your portfolio in income and principal each year without worrying about running out of money:

1. Figure out the real return you expect from your portfolio between now and when you die.

The real return is the investment return you expect, reduced due to the effects of inflation. For example, if you expect to earn 7% and inflation is 3%, your real return is 3.9%. (To calculate the real return for yourself, use this formula: (1 + investment return)/(1+inflation rate) ? 1, and then multiply by 100 for a percentage.) For simplicity, this example assumes the real return is 4%.

2. Use the real return you calculated to figure out how much you can withdraw during your first year of retirement.

Say your portfolio is $500,000. Multiplying your portfolio balance by the real return ($500,000 x 4%), you see that you can withdraw $20,000 the first year.

3. Calculate the withdrawal for each subsequent year by multiplying the previous year's amount by the inflation rate.

In this example, you'd increase your second-year withdrawal by 3%, making it $20,600. You'd withdraw $21,218 in the third year of retirement.

Note: If you opt to withdraw only the income from your portfolio, you may be tempted to weight your portfolio heavily on the bond and REIT side of things. Although you'll be able to withdraw more each year, your portfolio won't grow fast enough during retirement, and you'll run out of money sooner.

Creating a Retirement Paycheck

The withdrawal strategy in the previous section assumes that the annual return is the same each year. But you know that the market has good years and bad years. That's why you set up a cash reserve to cover several years of living expenses. That way, you won't have to sell investments at a loss to pay your bills. As long as you have a cash reserve, you can set up automatic withdrawals to act as a replacement for the paycheck you grew accustomed to.

Using the $20,000 first-year withdrawal from the previous example, here's how you use your cash reserve to set up a retirement paycheck:

1. Set aside a cash flow resesrve for 5 years of living expenses.

To keep things simple, multiply your first year's withdrawal by 5 (totaling $100,000 in this example).

2. Put 1 year's worth of expenses ($20,000) in an ultra-low-risk savings account, like a money market account.

You don't earn much interest, but you don't lose any money either.

3. Invest the second year's living expenses (another $20,000) in a low-expense, short-term bond fund.

Invest in high-quality bonds to keep your risk low (see Section 7.2.1.1). You'll earn a better return than you do in the money market account without much additional risk. If you invest in municipal bonds, your taxes on the income will be low, too.

4. Invest the remaining 3 years of living expenses in short- and intermediate-term bond funds.

These investments are still relatively low risk, but provide slightly higher returns than the rest of your cash reserve, which helps protect your money against inflation.

5. Set up a monthly transfer from your money market account or savings account (the one in step 2) to your checking account so it acts as your retirement "paycheck."

You can live on this money just like you did with your paycheck while you were working. In this example, the monthly amount starts at $1,667. Each year, you increase your monthly withdrawal for inflation, so the monthly amount in the second year is $1,717.

6. Every year, replenish your cash reserve.

Remember, your cash reserve has to increase for inflation. So, if you started with $100,000, the next year's reserve would have to be $103,000.

Because you have to sell investments to refill your cash reserve, choose what to sell wisely. If you can sell some investments without taking a loss, sell the investments that also keep your overall asset allocation on target. You can also use these sales to get rid of investments that aren't meeting your expectations. If stocks and bonds are both in the toilet, sell short-term bonds first (they drop the least of any duration bond, as explained on page 138). That way, you give the rest of your portfolio time to recover.

Because you have 5 years of expenses in your cash reserve, you have time to wait out a bear market. If all your investments have lost money, you can wait before replenishing your cash reserve. For example, you may choose to delay adding to your cash reserve for a year. Then, when the market recovers, you can sell investments to top off your reserve.

Tip: If you have money in traditional IRAs or 401(k)s, you have to take required minimum distributions. When you refill your cash reserve, be sure to withdraw your RMDs first. After that, it usually makes sense to withdraw the additional money from your traditional IRAs and 401(k)s, so money in Roth IRAs can grow for as long as possible. (Roth IRAs don't have RMDs, so you can leave the money in as long as you like.)

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

Ok, I'm on a Bible quirk kick. Lately I've been finding interesting tidbits about the Bible and Money (such as last Sunday's post on the cost of Roman citizenship). Today, I'm going to share something else I found interesting along these lines.

A couple years ago I bought a new Bible. I then read through it and highlighted every verse that had to do with money in some form or fashion. As you might imagine, there's a lot of yellow in this book -- because the Bible talks a lot about money.

I use the Bible often to easily find verses for my Sunday posts. While looking through it recently I wondered what was the first set of verses where the Bible addressed the issue of money (want to guess before I tell you?). Here's what I have as the answer (let me know if you find something that appears earlier):

When they grew up, Abel became a shepherd, while Cain cultivated the ground. When it was time for the harvest, Cain presented some of his crops as a gift to the Lord. Abel also brought a gift?the best of the firstborn lambs from his flock. The Lord accepted Abel and his gift, but he did not accept Cain and his gift. This made Cain very angry, and he looked dejected.

?Why are you so angry?? the Lord asked Cain. ?Why do you look so dejected? You will be accepted if you do what is right. But if you refuse to do what is right, then watch out! Sin is crouching at the door, eager to control you. But you must subdue it and be its master.? Genesis 4:2-7 (NLT)

Most of you know what happens from here. Cain is mad and ends up killing his brother. Then God asks him where his brother is and Cain answers in what is still a phrase used now and then these days: "Am I my brother's keeper?"

Of course God knows what happened and punishes Cain, banishing him from the area and cursing his efforts to grow crops. Cain goes to live in a place "east of Eden." Some of you may remember that this became the title of a popular John Steinbeck novel, a 1955 movie (James Dean played the lead), and a 1981 TV mini-series.

I often wondered why Cain's offering was not accepted and Able's was. I've heard it taught that the reason was because Cain offered "some of his crops as a gift to the Lord" while Able offered "the best of the firstborn". Notice that Cain just gave "some" while Able gave "the best and first." What implication does this have for us today? Think about it in context of our own giving and, in particular, whether giving should be done on gross or net income. It certainly conjures up some interesting thoughts. ;-)

Anyway, see how these mini-tidbits can be so fascinating. Ok, maybe it's just me. ;-)

Next I wondered what the last time was where the Bible mentioned money (again, correct me if I'm wrong). I found these as the last money-mentioning verses (FYI, they are talking about a wicked city, though in Revelation everything seems to have two or three different symbolic meanings):

?The fancy things you loved so much are gone,? they cry. ?All your luxuries and splendor are gone forever, never to be yours again.?

The merchants who became wealthy by selling her these things will stand at a distance, terrified by her great torment. They will weep and cry out, ?How terrible, how terrible for that great city! She was clothed in finest purple and scarlet linens, decked out with gold and precious stones and pearls! In a single moment all the wealth of the city is gone!?

And all the captains of the merchant ships and their passengers and sailors and crews will stand at a distance. They will cry out as they watch the smoke ascend, and they will say, ?Where is there another city as great as this?? And they will weep and throw dust on their heads to show their grief. And they will cry out, ?How terrible, how terrible for that great city! The shipowners became wealthy by transporting her great wealth on the seas. In a single moment it is all gone.? Revelation 18:14-19 (NLT)

BTW, you could say that Revelation 22:12 was about money because the Lord said he'd "repay" people for their deeds, but that's a stretch IMO.
 
What strikes me is the phrase, "In a single moment it is all gone." I know it wasn't "in a single moment", but the recent collapse of the US economy seemed like it was pretty fast. So this phrase really hit home with me.

And I wonder -- is this a real city the Bible is talking about? And if so, what city is it (Revelation is forward-looking, so it's either a current city or one yet-to-be.) The Bible calls it "Babylon", but what's the name in current times?

Again for this week, no spiritual thoughts -- simply some things I found interesting and thought you might as well. ;-)

The following is an excerpt from Buying a Home: The Missing Manual. At the end I've included two sidebars (in red) on related topics.

In your quest for a new home, the person you'll interact with most is your real estate agent. She's a lot more than a smiling face in the classifieds, hovering over pictures of homes for sale. She's a licensed professional, authorized to negotiate and carry out the sale of real property on behalf of a buyer, a seller?or sometimes both simultaneously. Read on to learn the different roles real estate agents play, how they make their money, and?most importantly?how you find one who works well with you.

Agents and Brokers and Realtors

Every state and the District of Columbia require real estate agents to hold a license, but not all licenses are the same. Most states define two types of real estate professionals: broker and agent. But you may come across several other terms as well. Here's the lowdown:

• Real estate broker. This is an experienced real estate professional who has met state requirements to own, manage, or operate a real estate company. Licensing requirements usually include experience in the industry as a sales agent, advanced coursework, and passing an exam. (In some states, attorneys can become real estate brokers, even if they've never worked as real estate agents.) The broker in a real estate firm is its "boss," the person who takes responsibility for all the agents who work there. Depending on where you live, you may hear real estate brokers referred to as principal brokers or qualifying brokers.

Note: Some licensed brokers choose not to run their own firm but to work as agents for another broker in that broker's firm. These people are called associate brokers.

• Real estate agent. This is someone who's taken classes and passed a state-administered exam to get a license to sell property. The educational requirements cover the specific state's real estate laws and practices. Real estate agents are associated with a real estate broker and act under that broker's authority. Depending on where you live, real estate agents may be called subagents, sales agents, real estate salespeople, or, confusingly, brokers.

As you look for a home, you'll probably work primarily with a real estate agent. Real estate agents can represent the seller of a house, the buyer of a house, or both:

• Seller's agent. Also called a listing agent, this person works exclusively for the seller. Most often, you'll deal with the seller through the seller's agent. Except in cases where you have a specific agreement with an agent to represent you as a buyer (see the next item on this list), you should assume that any agent you work with is a seller's agent. Even if an agent didn't personally list the seller's property, any agent involved in the sale of a property is considered a subagent of the listing agent?unless that agent has a contract to represent only you, the buyer (see "Buyers' Agent" below).

Note: Agency means representation, and an agent is a representative. If you enter into an agency agreement with someone, it means that you've both agreed that that person will act as your representative.

• Buyer's agent. A buyer's agent works solely for you the buyer, and represents your interests throughout the real estate transaction, from initial house hunting through closing the deal. Buyer's agency is a formal agreement, signed by you and a particular real estate agent, saying that the agent represents you and your interests in buying a home.

Tip: In a transaction, the buyer's agent is called, confusingly enough, the selling agent. To keep from being muddled by the terminology, think of agents' roles this way: In transactions that have both a listing (seller's) and a buyer's agent, the listing agent puts a home on the market and represents the current owner; the selling agent facilitates the sale by representing the buyer who makes that sale possible.

• Dual agent. This is a single agent who represents both the seller and the buyer in the same transaction. In most states, dual agency is legal so long as the agent gets the consent of both the buyer and the seller. But as the box on Section 4.1.2 explains, dual agency can lead to conflicts of interest.

Note: Dual agency can also occur when two agents who work for the same broker represent both parties in a real estate transaction. The box on Section 4.1.2 tells you more.

As a homebuyer, you should work with a buyer's agent. You want to be sure that your interests are represented in negotiations and that your agent keeps your confidential information to herself. Later in this chapter, you'll find out how to choose a good buyer's agent.

Note: If a real estate agent fails to let you know that you're in a dual agency situation?that is, the agent represents both you and the seller or both your agent and the seller's agent work for the same firm?you may be able to revoke the purchase agreement you signed and sue the agent for concealing the relationship.

What a Real Estate Agent Does

Real estate agents are experts in local real estate: They monitor the market daily and look for housing trends (in prices, inventory, location, and so on). An agent tells you about available houses in your price range and takes you on tours of homes that interest you. Much of an agent's day is taken up by phone calls, meetings, and home tours.

For sellers, a listing (seller's) agent:

• Researches recent sales of comparable homes to help determine an asking price
• Helps sellers prepare their homes for sale
• Lists the home with the Multiple Listing Service (known in the trade as the MLS, a searchable list of homes for sale within a particular region)
• Advertises the home through various channels, which may include the Internet, classified ads, real estate magazines, and on-site advertising (the latter usually comprising a "For Sale" sign on the lawn and takeaway information sheets about the home)
• Takes other real estate agents on a walkthrough so they can tell their clients about the home
• Hosts open houses
• Presents offers from interested buyers
• Negotiates the terms of the sale

As a buyer, you can expect a real estate agent (either the seller's agent or your own) to work with you in these ways:

• Listen to your priorities in looking for a home, including your price range
• Contact listing agents to check availability and schedule showings
• Show you suitable properties
• Notify you as new properties appear on the market
• Suggest sources of financing. Tip: You're not bound to work with any lender recommended by an agent. Section 8.2 has tips for finding the best mortgage.
• Help you write a purchase offer and present that offer to the seller
• Negotiate with the seller on your behalf
• Write a purchase-and-sale agreement (Section 10.2.1)
• Set up and attend the home's appraisal and inspection
• Review disclosure statements and let you know about problems with a property. Tip: Agents know what to look for in disclosure statements and other documents. Although it's important to find an agent you like, the most important quality an agent has to offer is his expertise.
• Deal with contingencies (Section 10.2.3)
• Provide information to your mortgage officer, real estate attorney, and escrow officer
• Coordinate with other parties to schedule the closing
• Attend the closing

Note: There are some things a real estate can't tell you by law. If you have questions about a neighborhood's character, diversity, crime rate, or schools, you have to look elsewhere for the answers. Federal fair housing laws prevent real estate agents from "steering" clients toward one neighborhood or away from another one. The idea behind the law was to prevent discrimination?to prevent real estate agents from deciding whether a client is a good or bad fit for a particular neighborhood. Despite the law's good intentions, it can be frustrating to have basic demographic questions go unanswered. Chapter 3 suggests ways to find those answers.

--------------------------------------------

Sidebar #1: Frequently Asked Question: Real Estate Agent vs. Realtor

What's the difference between a real estate agent and a Realtor?

REALTOR® is a registered trademark of the National Association of Realtors. Any real estate agent who claims this title must be a member in good standing of the NAR. To join the NAR, agents agree to abide by a code of ethics that includes honesty, putting clients' interests ahead of their own, and disclosing all relevant facts about a property.

--------------------------------------------

Sidebar #2: Up To Speed: Dual Agency

You're just starting to look for a new home and haven't yet selected a real estate agent. One weekend afternoon, you drive through the neighborhood where you want to live and see an Open House sign. You stop to take a look. Inside, everything is perfect. The house has the right number of bedrooms and bathrooms, the kitchen is a cook's dream, and the place is in move-in condition. "I love it!" you tell the smiling real estate agent who's hosting the open house. "I want to make an offer."

"Great!" she replies. "Let's write up the paperwork."

She looks nice. She's friendly and helpful. She's eager to help you buy the home. But there's just one problem. She's already representing someone: the seller.

Real estate agents have a fiduciary duty to their clients. That means that a real estate agent?whether a seller's or a buyer's agent?is legally bound to represent your best interests in any transaction. But when you start negotiating with a seller's agent, your best interests don't always line up with theirs. Yes, you want to buy the house and the seller wants to sell it. But you want to buy the house for the lowest price possible, and the seller wants to sell it for the highest price possible. See where the conflict comes in? In that situation, how can the same agent have the best interests of both of you at heart?

Most states allow dual agency, on the condition that the real estate agent tells both you and the seller that she's representing you both?and all parties sign a document agreeing to that. But before you agree to dual agency, think long and hard about whether you want the seller's agent representing you, too. For example, you might tell your agent confidentially that you've been preapproved for a mortgage of up to $250,000, but you don't want to bid more than $230,000 on a particular home. The agent knows that the seller wants to get at least $245,000 for that same home. Although a good agent always keeps your confidential information confidential, it may be tempting in this situation to try to convince you to raise your offer.

Dual agency also comes into play when a homebuyer and seller are represented by two different agents who work for the same broker. This kind of dual agency may be called designated agency, and if your state allows it, you'll probably have to sign a statement saying you agree to have the same agency represent both you and the seller. Some agencies pay agents a bonus for selling in-house listings because the agency makes more money in such transactions?conflict of interest, anyone? If you want to buy a home that's listed with your buyer's agent's brokerage, make sure that your interests come before the broker's.

The following is an excerpt from Personal Investing: The Missing Manual.

You can't avoid risk no matter how you invest your money. You worry that your nest egg will spoil from stock price gyrations or mayhem in the markets. At the same time, you know inflation is picking away at your boiled nest egg every moment. Some risks decrease over time, while others get worse. Here's a quick review of the different types of investment risk and how you can manage them:

• Inflation risk. Chapter 1 showed just how dangerous inflation (the steady increase in prices) can be. It's the one investment risk that gets worse with time. The higher returns of owning stocks long-term are the sure antidote to inflation risk.

• Economic risk. This is the risk of losing money in investments because the economy tanks. The economy tends to cycle up and down every 5 years or so. The down cycle, known as a recession, can last from a few months to, occasionally, a few years. As with inflation, owning stocks for longer than the typical economic cycle helps overcome economic risk. You can also avoid economic risk by keeping near-term spending money in safer investments like short-term bonds or a savings account.

• Market risk. Sometimes, perfectly good investments go down in value just because the market as a whole goes down. And sometimes, mediocre investments go up because the overall market goes up. The key to managing market risk is researching the investments you buy and sticking to your plan as long as those investments are still fundamentally sound.

• Equity risk. Many investors are afraid of losing money on a bad investment, which is called equity risk. True, companies can go under, taking your investment with them. But equity risk is easy to manage by diversifying your portfolio, that is, by buying several different investments to dilute the effect of one underachiever.

• Holding period risk. This is the risk that you have to sell an investment when its price has fallen. It's a good idea to keep some money in short-term investments so you don't have to sell long-term investments when their values are down.

• Reinvestment risk. When you invest in bonds, bills, or even certificates of deposit and hold them until they mature, you face reinvestment risk, the risk that interest rates are lower when your fixed-income investment matures and that you have to reinvest your money in a new investment with a lower interest rate. Unfortunately, reinvestment risk is a fact of life with any kind of fixed-income investment you hold to maturity.

• Interest rate risk. If you buy a bond and sell it before it matures, you face interest rate risk, the risk that the bond price drops because interest rates rise.

• Currency risk. If you invest in foreign stocks or bonds, currency risk comes into play. If the dollar falls compared to your investment's currency, your investment loses value. Currency exchange rates work in your favor when the dollar is strong compared to other currencies.

Tip: When your portfolio grows large enough or you're well ahead of your plan, you may yearn to gamble on higher-risk investments, such as micro-company stocks or high-yield bonds. As a rule of thumb, the average investor shouldn't invest more than 10% in high-risk investments.

Let's start off with a reminder: FMF is on Facebook. Every weekday I post a couple pieces that usually aren't on FMF. It's a great way to connect and get some extra money advice/news if you're on Facebook quite often.

Here are some of the carnivals Free Money Finance was in this week and my posts that were included:

• The Wealth Builder Carnival - Three Myths About Earning More Money 
• Carnival of Personal Finance - How to Hire a Home Inspector 
• Festival of Frugality - Where You Buy Something Makes a Big Difference in Cost

Enjoy!

P.S. Carnival Hosts -- If my post is in your carnival in a given week, please send me the URL to the carnival and I will include it in my weekly roundup.

The following is a guest post from Squirrelers. It's a bit heavy on the economics side of personal finance, but I know many of you like to discuss those sort of topics, so I'm going with it. For those of you who prefer only true personal finance posts, stay tuned -- a new one will be up shortly, as usual. ;-)

Many of us who take an interest in personal finance understand the concept of ?a dollar today is worth more than a dollar tomorrow.? We realize that the present value of money today exceeds the present value of the same amount of money at some point in the future. This is due to inflation, which erodes the purchasing power of money over time. Looking at it another way, if you buy a cup of coffee for a dollar today, it might cost you more next year ? say, $1.05.

Lately, the financial news has brought us discussion of a completely different concept: deflation.

When you first think about it, deflation sounds like a good concept, in that it?s the opposite of inflation. A dollar tomorrow will be worth more than a dollar today, even if stuffed under the mattress. Pretty good deal, eh?

No. In reality, deflation is not good for the economy, and the effects can wreak havoc with the ordinary investor?s portfolio.

Downward-trending prices may seem great initially, but this leads to pressure on businesses. The response is often a reduction in workforce, which in turn causes a reduction in demand as incomes drop. That?s not good for stocks. Thus, the spiral begins.

Governments may try to lower interest rates to stimulate spending and counteract these deflationary effects. Looking at our current interest rates, they are at remarkable lows compared to long-term averages. The issue is that there is only so far these cuts can go.

Japan saw remarkably low interest rates for years, as it has been in a longer-term deflationary cycle. That country was rocked by a sharp decline in real estate prices about 20 years ago. Does that part sound somewhat familiar to those of us here in the U.S?

Now, I can?t predict whether or not this will be long-term economic cycle we are in. Who knows, we could very well be headed for an inflationary period after a few years. 

Regardless, I suspect that while extended deflation may not by any means be a sure thing, it?s certainly a real possibility at this point.

In light of this, it?s interesting to consider what would be a good hedge vs. deflation. Some people are proponents of gold as a hedge; I had a recent discussion with a friend who suggested gold. This same friend correctly called the real estate collapse, despite many people ? including me ? thinking he was way off base. I?ll give him credit ? he was right. The thinking is that if the money supply increases, inflation could be around the corner. In that case, gold would be a hedge.

That said, my take is that thinking purely about deflation, the following are good defenses:

1. Cash. 

2. Short-term Government Bonds

My questions are as follows:

1. Do you think we are beginning a period of deflation that is at least short-term, if not greater ? or are these fears unfounded?

2. If deflation takes hold of the economy, how would you reallocate your investments? Would you hedge with cash/short-term government debt, gold, or other vehicles?

As I noted in Update on Our Shopping List, we recently got a new door. We went through quite a process to shop for the door and the company to install it that we felt worked best for our family, home, and budget. It took us several months from start to finish, but in the end we completed the process with a door we love (and it makes the front of our home look so much better!)

When the installers were set to come and place the door, my wife got a brainstorm -- why not call Habitat for Humanity and see if they could use the door? It wasn't in the greatest shape, but it still had some life in it. In addition, it was a nice, glass, double door that someone could get for a steal because it was used.

Unfortunately, the local Habitat for Humanity chapter didn't even return our calls (my wife did finally speak to someone who said she'd have a contact call us, but we never heard from anyone.) But my wife talked to the guy we got the door from and he told her about a local charity that accepted and needed door donations. My wife called them, and the day after our old door was taken out, they stopped by our house and picked it up.

My wife asked for and they gave us a tax receipt for the contribution. She then asked our door person what he estimated as the value of our door since we had no clue. He said $400.

If we were, say, in the 28% tax bracket, the simple act of finding a charity that wanted, needed, and would take the door saved us $112 in federal income taxes. Not a fortune, of course, but it's $112 we didn't have before and that we earned for little effort. I'll take it!!!!

Lesson for today: before you throw anything out as trash, ask yourself if there's a charity that might want it. If so, make it a contribution, get a receipt, and save yourself some money by reducing your taxes.

As of right now we’re looking at about 30 hours before Hurricane Earl blows past our latitude.  It reminds me of something that happened during the aftermath of previous hurricanes:  price gouging.  Price gouging is a disparaging term given to the practice of hiking prices of demand items after some disruption has occurred that would normally clear out the existing supply.  Gasoline, food, water, ice, and toiletries are good examples of items vulnerable to price gouging.

There was a discussion over at GaryNorth.com about this topic.  In Gary’s response to the discussion, one sentence of his jumped out at me:  “Envious people hate the highest bidders.”

I’ll explain.  A few years ago I attended an estate auction.  There was a house full of very nice furniture.  I bid on one piece that would have gone very well with our decor at the time.  I was outbid.  The same gentleman who outbid me on that piece outbid everyone else for most of the rest of the furniture in that house.  I later found out that the furniture belonged to someone close to him and he was buying it back.  (He could, and he did.)  When I was talking with other people at the auction, some of them were incensed.  “He can’t do that!  The auctioneers should stop that kind of thing!  How is anyone else supposed to get any?”

Envious losing bidders hating the highest bidder.

I didn’t sympathize with the losing bidders at all.  That’s why it’s called an auction: highest bid wins.  But it’s this same kind of envy that brings about anti-gouging laws.

At the estate auction, anti gouging laws would have prevented the auctioneer from going any higher than a reasonable price for that used furniture.  If the rich guy didn’t get in the last bid, too bad!  Even if he were willing to pay more, too bad!  After a disaster zone is declared, in a majority of states it’s all of a sudden illegal to roll in with a semi full of 3,000 watt generators that would normally go for $500 and sell them for $1,500.  It’s all of a sudden illegal to charge $10 for a gallon of gas or $4 for a gallon of spring water.  Why?  Because the people who (a) didn’t prepare for the disaster until everything was gone and (b) can’t afford the items at anything except the pre-disaster price get ticked off at the people who can afford the high prices (the high bidders) and want to make sure that they can’t buy the stuff either.  They do this by punishing the people trying to sell the stuff.  The result?  Fewer people get the things that they want or need, and the sellers won’t try again the next time the disaster hits.

Doesn’t make a whole lot of sense, does it?  Gouging goes on in other contexts, though.  Airplane flights.  Amusement parks.  Ball games.  But somehow it’s OK to charge three bucks for a little bag of peanuts during a flight.

If I don’t have enough gas for my generator by the time the hurricane comes, that’s my own stupid fault.  But if the gas station around the corner were to hike their prices to $10 per gallon — high enough to keep the gas in the pumps long enough for me to get down there — I’d be more than happy to get gouged out the wazoo.  I’d much rather pay $50 more to keep my generator running than to lose everything in my basement because my sump pump wouldn’t work, and lose everything in my freezer because it thawed.

Gouge me until it hurts.  Let what’s left of the free market work to everyone’s benefit and let buyers and sellers meet at a price that’s beneficial for both.

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Related Posts:

• Why absolute real estate auctions are big deals
• Price Gougers: Mercenaries or Life-Savers?
• Would gas prices have to go up another buck?
• Why absolute real estate auctions are big deals
• How to comparison shop on eBay

It’s a little embarrassing that I’ve seen so many advertisements and blogs for things related to “forex” and I never bothered to look up what the heck that meant.

Thankfully, it turned out that I had heard of what it means, just not by that word.  “Forex” is an abbreviation for the (huge) foreign exchange market, also known as the currency market.  It’s the place where you can take your United States dollars and buy Japanese yen, pounds Sterling, Euros, Canadian dollars, etc.  Or the other way around, of course.  The bid and ask prices for a currency pair (Euros to US Dollars, for example) determine the “exchange rate” that people pay when they travel abroad from one country to the other.

Of course, there are many more reasons to buy and sell currencies than just to get vacation spending money (or, on a larger scale, because you have employees in different countries that you need to pay).  All of these boil down to the following:

“I think Currency A is going to get stronger (or weaker) relative to Currency B because … “

Traders buy a currency that they think will appreciate relative to the other, so they can buy more of it back later.  There are lots and lots of people who think they know how to complete that sentence.  Many of them want to charge you to find out how they complete that sentence.

I don’t know a whole lot about currency trading beyond what I told you, except that some of the sharpest traders on the planet are currency traders.  (I can’t remember where I heard that.)  Given two different strategies, I couldn’t tell you which one is more sound.

This is a great example of something I shouldn’t try for the simple reason that I don’t understand it. This is probably the clearest, and best, rule of investing.  If you don’t understand an investment vehicle, it’s too easy to be sold on it.  To add insult to injury, the person selling you on it (or some service related to it) makes money regardless of whether you do or not.

This isn’t to say I’ll never invest in foreign currencies, but I shouldn’t now.  I barely understood the lingo!

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Related Posts:

• How the US Dollar Index shows the strength of the dollar
• Travel need not be troubling
• Bread for gold
• Inflation and rising prices aren’t the same thing
• Liberty Dollar headquarters raided

(This is a guest post from ThinkingMoney.org.  If you like what you’ve read, consider subscribing to their feed.)

When going on holiday one of the biggest worries is money. Having a budget and overspending is done far too often as we get carried away.

Traveling abroad has special challenges.  It doesn?t help that for some bizarre reason we seem to think that we are not spending as much if the note is not in the currency we are used to.  (I?ve often referred to Euros as a form of Monopoly money!)

Unfortunately, these notes are what make the world go round. Without them, the closest we?d get to our dream locations is through travel brochures. Thankfully, finance companies understand this need and see the opportunity to make some money as well.  The result?  Travel related credit cards.

If you?re anything like most people, you?re going to be so excited about a holiday, getting currency or sorting out your finances will be one of the last things you?ll do. You may even end up paying exorbitant rates at the airport, or if you?re like me, not bother with currency and just take your credit card with you.  However, I must stress how important it is to research the various credit cards available before you fly.

Here’s a case in point.  One my first holiday I decided to do this without researching and was effectively slapped in the face when my card was declined trying to pay for my dinner that night.  (Surely there was some mistake?  So I tried it again. Declined.)  Embarrassment aside, I had no cash, and no way to pay for the rest of my time on holiday.

Thankfully I was with friends who loaned me money for the rest of the holiday.  Once I returned home I immediately inquired about my card declining, only to find it was the card itself that wasn?t compatible to be used abroad for purchases, but I could have used it at an ATM. As I did not know this I ended up borrowing money from friends and feeling guilty all holiday.

So I decided to tell my story and make sure others don?t have the same issue I faced.  Here are a few tips and points regarding travel credit cards:

• Apply for a travel credit card which earns points the more you travel. For example, one of the best value I?ve found is the BMI American Express Card, which gives you 20,000 bonus destinations miles. Pay for your holiday with this card, use this card whilst on your holiday too, soon enough you will have enough points to go on another holiday for free!
• Make sure you read the small print on every card you think about getting. You may think you know the withdrawal fees to use the card abroad, but there are certain companies that charge different fees depending on the country. If you?re unsure in any way, be sure to call them.  A little tip: record the call.  Make sure you tell them you are at the start and then record.  (MBH note:  Check to see if you actually need to inform them if you’re in the US.  In many states only one party needs to know that the call is being recorded.) This way if they charge you when they said they wouldn?t, you have proof, and they don?t have a leg to stand on!
• Find out whether you can load money onto a travel card at a fixed exchange rate. Major travel companies like Thomas Cook offer these types of cards, and if the rate offered is good enough, you?re laughing, however if you use all the money on there and try and reload, you may find the rate is substantially higher. This is why I?ve found credit cards to be a better option.
• It?s always a good idea to take a backup source of funds with you. Keep one card on you, and the other card back at the hotel in a safe place.
• Let your card provider know that you are going on holiday. You may think why should they know? However the more you think about it, the more you may think that it makes sense for them to know. If unusual activities (transactions from another country) start occurring on your card, they will block the card, unless there is a note on the system advising them it is okay, they may even call you to verify but make sure you call them back instead of giving personal details over the phone to someone who has called you!

Then it?s just a case of enjoying a stress free holiday, leaving all the worry for when you return!

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CLEARANCE is the word that will give you 80% off of your Restaurant.com dining certificates!

For those of you who aren’t familiar with Restaurant.com, here’s a quick rundown.  Restaurant.com sells dining certificates for thousands of restaurants across the US.  A $25 dining certificate gives you $25 off of qualifying expenses at that restaurant.  Normally, a $25 dining certificate costs $10, so if you buy one and use it, you just netted $15 off of your meal.  Nice, right?

Through August 31st, 2010, it’s even better:  using the coupon code CLEARANCE at checkout will give you 80% off of your order.  That’s 80% off of the cost of the certificates, not the face value — so that same $25 dining certificate goes for just two bucks with this coupon code!

Here’s what I recommend you do if this sounds cool to you:

Enjoy the sweet rewards of CLEARANCE price meals at Restaurant.com!

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Fresh after posting on whether small credit card charges are shameful or otherwise to be avoided, I got a comment on that post.  “Paul” asks:

“Wasn?t a provision of the financial reform bill that passed this July that store owners are now legally allowed to not accept a credit card charge for less than $10? I?m almost sure it was.”

I hadn’t gotten wind of this at all, but I dug around to try to verify Paul’s claim.

Sure enough, Paul got it.  Payment card networks are no longer allowed to demand that merchants accept all payments, regardless of total amount.  They can only demand that merchants accept all payments not less than $10.

The bill Paul was referring to is  HR 4173:  Dodd-Frank Wall Street Reform and Consumer Protection Act, and was put into law on July 21st, 2010.  Section 1075 of this law (beginning on page 693 of this printing of the new law) amends the Electronic Fund Transfer Act of 1978.  The part that restricts payment networks as to the minimum charge they can force merchants to accept (which, up until about a month ago, was $0.01) is detailed in Section 920(b)(3)(A)(i)(II) of the amended EFT Act.  Beginning with the amended section 920(b)(3) (page 698 of the new law, for those of you who are following along):

(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS.  (A) IN GENERAL.?A payment card network shall not,
directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability (i) of any person to set a minimum dollar value for the acceptance by that person of credit cards, to the extent that (I) such minimum dollar value does not differentiate between issuers or between payment card networks; and (II) such minimum dollar value does not exceed $10.00 …

That is how the law is now.  In the amended section 920(b)(3)(B), it further goes on to say that this amount may be increased under certain process.  Meaning: There are avenues for making the allowed minimum greater, so down the road merchants could require $20, $30, or more before I can pull out my credit card.

If that was a bit hard to follow, I don’t blame you.  Here’s a simpler way of expressing the impact of this.

Let’s say a merchant has a sign next to the cash register that says “Minimum Credit Card Charge $10.”  Prior to July 21st, 2010, he would be violating both Visa’s and MasterCard’s merchant agreement, and could face heavy fines from the issuers if he refused to accept a smaller payment, and the customer reported it.  After July 21st, 2010, the merchant doesn’t have to worry about a customer ratting them out, because the issuers can’t demand it.

This is a game-changer, and not a good one, I’m afraid:

• It’s not at all a win for consumers, even though the law is advertised in part as “consumer protection.”  Ten dollars is not a particularly small amount.  I can easily get lunch out for less than $10.  It ultimately places restrictions on credit card use.  It forces consumers to carry debit cards, or cash, for some small purchases.  Payments may become more inconvenient.  Do you pay $10 at the pump for the $8 worth of gas you use to fill your motorcycle, simply because the merchant isn’t obligated to accept your $8 credit charge?  Or do you have to walk in to pay cash?  It’s more costly, less convenient, or both.
• It might be a small win for businesses that are not payment networks, as they have protection against merchant account agreements that demand that the merchant accept payments so small that they are a net loss for the business.  But if the merchant opts to avoid these kinds of transactions to the full extent of the law, then they could be turning away more profits than what they’re saving in losses by avoiding the small credit transactions.
• It’s a clear loss for payment processors. Their total transaction volume will go down, and along with it their fees.

This regulation hasn’t hit the stores a whole lot yet, but it will.  The law is barely a month old.  As a former eBay seller, I know how much these fees can run, and it’s likely not much different for brick-and-mortar stores.  I’m sure store owners will take secret pleasure (and relief) in being able to turn away customers that have been abusive with small credit card transactions.

The only advice I can give is to carry around more cash for the little things so you’re not caught by a nasty surprise when a store won’t accept your credit card.  Sorry!

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Visa and MasterCard have very clear rules with regard to requiring a certain minimum amount before accepting credit card as payment.  They can’t. MasterCard will fine the merchant up to $20,000 for the first offense of this type.  They take it seriously.  (Side tip:  If a merchant is obstinate about enforcing a minimum charge, the proper question to ask them is “Do you know you’re violating your merchant account agreement?”  If they don’t care, then the number you need to call is right on the back of the card that was just refused.  If you’re using a MasterCard, you already know the dollar amount of the fine, and can convey that to them.)

Update:  The “no minimums allowed” rule is no longer legal in the US. Here’s what went down.

It’s clear that the TJ Maxx where J. Money charged $0.10 to his card understood this.  They certainly lost money on that little transaction; the fixed fee per transaction is almost certainly double that.  But setting aside the risk of huge fines for not accepting it, the store gains in the long run, as credit card purchases are typically 12% to 18% higher than cash purchases at a given merchant.

But what struck me more was seeing the kinder, more sensitive side of J. Money.  He was “not proud” of doing that. He took it as a bit of unpreparedness that he didn’t have enough cash to cover the purchase.  And that’s all well and good, because I’m not about to deny him his moment of self-loathing.

But seriously, though in my meaner years I would have enjoyed making a sport out of that.  Now that I understand the costs of running a business, and in particular the cost of accepting credit cards, I try not to charge less than a dollar unless I absolutely have to, especially at places where I go often.  It isn’t worth being put on an unofficial black-list of evil below-zeros (customers that cost the business rather than bring money into it).

So what do you think?  Is charging a 50-cent candy bar good or bad cardsmanship?

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(This information is given courtesy of Accrued Interest.  Be sure to check them out, and if you like what you’ve read, subscribe to their feed!)

Since Congress created the VA Loan program in 1944, more than 18 million people used it to help purchase a home. Expressly designed for honorably discharged veterans and active-duty personnel, the VA loan program includes favorable borrowing terms, refinancing options and underwriting procedures.

Financing your home with a VA loan comes with a number of advantages. The immediate and future financial benefits of the Veterans Affairs Home Loan Guaranty program dwarf of those of any conventional loan.

Not every veteran is eligible for a VA loan. Those who may qualify include:

• Military members who served on active duty for 90 days during war time, or 181 days during peacetime
• National Guard or Reserves personnel who served for six years
• Spouses of service members who died in the line of duty

Completing a Certificate of Eligibility (COE) is the first step in getting a VA loan. COEs verify your eligibility with the VA and/or a VA-certified lender.

Immediate benefits

For qualifying borrowers, VA loans come with no down payment. That means you could buy a residence worth up to $417,000?or higher in certain markets?without spending a cent. Few borrowing programs can boast this major advantage, thanks to the mortgage crisis and credit crunch.

On top of that, there?s the likelihood that sellers pay up to 6 percent of closing and concessions costs.  Again, this is a way to let those who served our country keep some money for life?s other expenses.

From the start, choosing a VA mortgage over a conventional one will likely save you money. With conventional loans requiring down payments as high as 20 percent and expecting borrowers to pay appraisal fees and origination costs, it?s obvious how VA loans help borrowers save. Other monthly costs and borrowing terms add up quickly with conventional options, but the VA loan program eliminates several of these to ease the home-buying process.

Future benefits

Interest rates on VA mortgages tend to compare well to conventional loans? interest rates. Since the VA insures up to one-quarter of every loan, lenders are willing to offer VA mortgages with lower rates. Active-duty members get the added perk of interest rate caps.

Even though interest rates hover around record lows, conventional loan borrowers struggle to meet the credit expectations that qualify them for those low rates. Although VA guidelines for credit scores don?t exist, VA loan lenders usually look for scores no lower than 620.

With a lower interest rate comes a lower monthly payment.  Throw in the absence of a private mortgage insurance (PMI) and monthly payments shrink even further. Should these monthly payments for your VA loan become so small that you can prepay, don?t fear a prepayment penalty, another cost eliminated by the VA loan program. Instead of paying the small VA funding fee, borrowers could contractually get sellers to cover that in the closing costs.

Refinancing a VA loan is also a benefit of sorts. The VA Streamline (a.k.a. interest rate reduction refinancing loan) lets borrowers refinance to a lower interest rate or switch from an adjustable-rate to fixed-rate mortgage. To get a VA Streamline, borrowers need to be current on mortgage payments, and cannot have made more than one 30-day late payment in the last year.

Qualifying made easy

Even with a bankruptcy in your past you can still qualify for a VA loan. It is required that you wait one year after the date of discharge for Chapter 13; two years after Chapter 7. Prospective homebuyers with a foreclosure in their history may still qualify, too. As mentioned, credit scores don?t need to be perfect to get a VA loan, but lenders? expectations may vary.

For those who qualify, now is a great time to capitalize on the great rates, instant and future benefits of a VA loan.

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If keeping your day job is the cake, then investing in yourself outside of your day job is at least the icing, or maybe even another four or five cakes’ worth.

But if that sounds like way too much work, there’s always the chance you can hit the jackpot by suing the entity that consumed most of your time for an obscene amount of money.  That’s what Craig Smallwood is doing to NCSoft, creator of Lineage II, a 3-D massively multi-player online role-playing game.  Allegedly Mr. Smallwood spent 20,000 hours playing the game from 2004 to 2009, and is now suing NCSoft for damages under the guise that he wouldn’t have started playing the game had he known that he would have become addicted to it.

First, let’s break this down a little bit.  How much time is twenty thousand hours?  If we take the time span (generously) to be six full years (January 1st, 2004, to December 31st, 2009), 20,000 hours is over nine hours per day, seven days a week, 365 or 366 days per year, for six full years.

That’s mind boggling, but not nearly as mind boggling as (a) his allegations that this stupendous waste of time wasn’t his fault, (b) the fact that this lawsuit wasn’t thrown out immediately, and, most importantly, (c) how far ahead he’d be now if he even played that game just five hours a day and invested the difference in himself. Five hours a day is still way too much time, but there’s a whole lot someone can learn in about 9,000 hours.  It’s enough time to not only become proficient at, but completely master a skill, or maybe two skills!

What’s the alternative to hoping for a misguided jackpot judgment like this guy is?

I’ll let you in on a little secret.  I have a very addictive personality.  I’ve spent more than my fair share playing mindless games and surfing sites that I really shouldn’t be surfing.  The only thing that’s really helped me battle the game sites and other junk was installing a content filter and having my wife be the only one who has the password to change the permissions and delete the surfing logs.  Before, I could pretend like I wasn’t spending all of this time, but now I can’t.

What’s even better is that the best one I’ve found is free:  Blue Coat K9 Web Protection.  In addition to categories aimed at protecting children from content related to violence, drugs, hate, adult content, etc., and categories that should be limited or controlled (chat sites, social networking, peer-to-peer, etc.), it also can filter a whole bunch of (potentially costly and/or damaging) time-waster categories:  gambling, shopping, and games.  In addition to the bad sites, I block the game sites.  I know that how I spend my time is my own responsibility, and that I have to ask for help if I can’t use it productively.  Suing MiniClip.com for my lost productivity makes about as much sense as suing McDonald’s for not telling me that I could burn my legs if I spilled their coffee on them while I was driving.

So, the main point is this:  If something is eating up a lot of your time and affecting your finances and even your life, don’t blame or sue someone else.  Own up and get it out of your life.  Get help if you can’t do it yourself.  Those who depend on you and love you will thank you.

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Nine years ago when I got a 30-year mortgage for my first house, people said that I got a really good rate:  5.875%.

Now, if I still had that mortgage, it would almost be a no-brainer for me to refinance to a 15-year mortgage.  I saw that rates were 3.875% for a fixed 15-year mortgage!  Refinancing my 30-year mortgage with the principal balance at what it would have been at the beginning of year 10, to a 3.875% 15-year mortgage, would have been only $35 more per month!  It would knock six years’ worth of payments off just like that.  That’s telling, because I didn’t have a bad rate to begin with.

You may have seen advertisements in the past for similar low rates (in the low 4% range or even less) but those loans were likely adjustable-rate mortgages.  The advertised rate was a teaser rate, and it was subject to change after a certain number of years.  People with these kinds of mortgage were shouldering interest-rate risk.

The low-4%, even below-4% mortgages available now are extraordinary because they’re fixed-rate.  The difference between fixed-rate and adjustable-rate mortgages is just that:  fixed-rate mortgages cannot vary over the life of the loan!  There is no tease in that rate.  It is the rate!  Fixed-rate mortgages haven’t been this cheap in my lifetime, and I was born in the early 1970s.

Now, this shouldn’t be an excuse to run out to get a house as fast as you can if you aren’t in the market.  But if you are in the market, or if you’re in the market for a refinance, comparing mortgage rates now will likely be very pleasant.  It’s a fixed-rate gift from the cheap money fairy, if you will.

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Smithee, a staff writer over at Consumerism Commentary, gave his opinions on the positive opt-in that’s now necessary for banks and credit unions to enroll customers in overdraft privilege services.  In a previous life as a Bank of America customer service representative, he had to tell customers that they couldn’t opt out of the overdraft service privilege — a fee-based service that amounts to providing a short-term loan to cover an overdrawn account.

Smithee was celebrating this law.  Part of his celebration revolves around perceived greater consumer choice:

From what I could tell, there should?ve been a third option between paying overdraft fees several times a year and carrying some kind of man-purse [to carry around a check register and receipts]. That third option is now here: you can turn off overdraft protection. Even better, it?s being turned off for everybody unless they turn it back on. All the law does is give consumers more options.

Our credit union has had a similar overdraft privilege for a while.  I was opted in automatically, but I had the ability to opt out at any time should I not want it.  It wasn’t mandatory like Bank of America’s.

So, in a way, Smithee’s cause for celebration is a bit off.  The consumer choice was always there — just not necessarily at every financial institution.  If my credit union allowed customers to opt out, then I’m sure others did as well.  If a customer really had no use for overdraft privilege, then they could simply part ways with Bank of America to choicier pastures.  Banks can’t be all things to all customers.  So what?

Now, though, banks and credit unions aren’t free to enroll their customers automatically into overdraft privilege.  They must get positive opt-in.  It’s a business restriction.  It gives banks and credit unions fewer options for offering service to their customers.  Because banks and credit unions must get permission from each and every customer — even current ones — it will affect banks’ bottom lines negatively.  It has to.  Having overdraft privilege service arrangements with only a quarter of your customers can’t be as profitable as having that arrangement with all of your customers (or most of them, if they were allowed to opt out).  (Hat tip to Sun’s Financial Diary for the Huffington Post link.)

Every bank and credit union is taking it on the chin, and that means that it will be bad news for all banking customers.  The frequent fliers — the users of overdraft privilege services who are most profitable to the bank — may or may not opt in, and that revenue will be gone, which in turn will affect the level of service that it gives to all of its customers.  Fees go up, customer service wait times go up, ATM fees go up, credit card rewards go down, minimum balances for interest-bearing checking go up, etc., etc.  Everyone loses, because every financial institution is less able to treat its customers like the adults that they are:  free to choose how they manage their money, and responsible for the consequences of how they manage their money.

Mandatory overdraft privilege, may you rest in peace. You weren’t for everyone, but people didn’t have to run too far to get away from you.  You were a fixture of a freer, less regulated time.  What you stood for will be missed.

With your passing, a little bit of the free market died.

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Katie writes in:

The article on budgets was *great.* I’ve long felt guilty for not doing the whole formal budget thing, especially since I always liked and did well at math. (Like you, however, spreadsheets cause my eyes
to roll back in my head.)

But here’s a question/comment on one bit. You said: “First, this doesn´t work if you´re already spending more than you make. That type of behavior is not sustainable. If your credit card balance is going up each month, no amount of budgeting or planning matters until you´ve reached a point where that credit card bill goes down each month.”

We don’t have ANY credit cards, so that’s not a problem. To be honest, I doubt if any credit card company would give us the time of day. (I do want to get a secured card at some point, with the goal of rebuilding a bit of credit.)

But we’re currently at a stage that’s a variation of what you described. Since we can’t use a credit card, we often wind up playing a sort of “musical-bills” game with such things as our electric, water, gas, trash, phone and so on. By this I mean that we will either skip a month of paying one of them, or make a short payment on one or more. The next month, we try to catch those up, but sometimes then need to repeat the process with another bill going short.

Occasionally we get a small windfall: selling something, or a gift of cash for a birthday, or the like. This usually goes into making sure *everything* is 100% current… which is a wonderful feeling! But then comes a month (such as this one) where the power bill is extra-high, or gasoline prices spike just as I need to make several trips into the city for doctors’ visits. When that happens, all too often the following month begins the cycle once again.

Beyond the standard advice on cutting back as much as possible, or earning more, do you have any particular suggestions to help get us off the merry-go-round? I know the best solution is to have more coming in, and I am hoping (now that my medical issues are being dealt with properly!) I can get back to writing and actually SELL something again. But meanwhile, treading water has gotten rather old.

Many people find themselves at this “treading water” stage and are unsure how to get past it. Basically, it amounts to spending almost exactly what you earn, with the irregularities from month to month causing trouble.

The solution here is usually just a few pebbles on one side of the balance or the other, just enough to cause the tipping to begin.

Where can you get those pebbles from?

A bit of extra income This is the perfect type of situation for some small-scale earnings online doing things like Mechanical Turk (see my notes about it) while you’re watching television or relaxing in the evenings. You’re not really looking for a job per se, but something that can earn a little bit whenever you have a few spare minutes to work.

A bit of extra diligence You don’t need to make radical cuts. You just need to be a little bit extra diligent when it comes to your spending. When you’re standing at the checkout line, make the conscious choice not to buy a pack of gum or a People magazine, for example. Get just a sandwich and a water cup without the value meal – you don’t need the fries anyway. Then feel good about the little choices you made – and watch as they slowly add up to a better balance at the end of the month.

A bit of sharing Go in with a friend or three and get a membership at a bulk-buying warehouse. Go there to buy your toiletries and split the cost on jumbo packs. Buy a four pack of deodorant, each of you take one of them, and reduce your deodorant cost by about 30%. Do the same for paper towels, toilet paper, milk, garbage bags, and countless other things. Go beyond that and share larger things with your friends – you don’t both need a toolkit. Just put tools in one kit and pass it around as needed, for example.

A bit of self-improvement Spend your evenings learning about the things you’ve always been curious about. Check out books from the library on it, or surf through Wikipedia on the topic. Try doing the things you learn about. Learn about a topic – and learn how to learn, as well. You’ll come out of it with more knowledge and perhaps more skill – and it won’t cost you a thing for entertainment.

A bit of mutual support Support your partner when he does things that are financially smart. Reinforce the idea that spending less is the good thing to do. You’ll find that with people around you supporting this kind of behavior, particularly the people you spend the most time with, it becomes more natural to spend less money.

A bit of friendship This attitude spreads to your closest friends as well. Don’t be afraid to admit that you’re having financial challenges. Be willing to talk about money with them and encourage each other to make better choices. Engage in non-expensive activities together – most activities are made fun by the people you do them with anyway.

Many situations are made a lot better by doing just a little bit of a lot of different things.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. 401(k) profit sharing
2. Online job application tips
3. Illness and challenges
4. College freshman advice
5. Mortgage decisions
6. Annuities for retirement?
7. Refinancing questions
8. Universal life policies
9. Using self-help advice
10. Getting started with credit

Two readers this past week wrote to me asking if I would detail what I would like to have in our dream house. I’d like a five bedroom house (one for the parents, one for each child, one for guests) – we currently have four. I would like a larger kitchen than we have now, but most of the other rooms are fine. I would like to have an office/library (right now, I’m using one of the bedrooms in our house for this) but this isn’t vital. I estimate we’d add about 500-600 square feet to our current house.

The biggest change would be the land. I’d like to live in a place that had forested land nearby and was not positioned close to a major road. I’d also like a barn and the possibility of raising chickens.

That’s really my dream – and it’s very pastoral.

My husband and I have $30,000 in credit card debt. My dilemna is that I was laid off and am now making 2/3 less than I was, and my husband’s employment in the construction industry right now is spotty at best. I have $60,000 in a 401K/Profit Sharing Plan at my old company, and I’m wondering if I should take that money and pay off the credit cards, even though I know I will pay prepayment penalties on that amount. The pressure of the debt right now is killing us, and it’s a matter of the worse of two evils, leave the retirement funds alone and risk losing the house, or pay off the cards and be able to make our mortgage payments . . . what would you do?
- Laurie

The number one thing you need to do is adopt some new spending patterns. If you racked up $30,000 in credit card debt when you were making three times as much and your husband was fully employed, you’ve got to be in the hurt locker now. Burn the credit cards. Do not use them.

The next step is to call your creditors right now. Call those credit card companies and explain your employment situation and money situation. Offer to prove your situation with pay stubs if they’re interested. Ask for special help in resolving this. Don’t get enraged at what they say – after all, you borrowed their money.

When you’re talking, make sure the person you’re talking to has the power to change your rates or terms. If they do not, politely ask to speak to someone who has that ability.

Remember, it’s not beneficial for them to enter into a situation where they have to chase you for the money and eventually have to sell your debt at a loss. Take action.

I am finishing up my college education this summer, and am simultaneously applying for jobs. I need any job I can get because my parents aren’t exactly chomping at the bit to let me come home. My question is, I’ve been applying mostly online for all these jobs and I haven’t received any responses at all. Since they’re sent online, I receive confirmations that my application has been received, but I can’t help the feeling that I should be calling and checking in on the stores/companies to see if they’ve received my application. Is this rude, considering I get email confirmations? Also, my very nicely formatted resume’s and cover letters get ruined when I have to copy and paste them into online resume builders and text boxes.

any suggestions or good resources for how to apply to jobs with online application services? Is everything I learned about paper resumes moot?
- Michelle

Many online employment applications are utterly deluged with entries from people out there just spamming everything. People will see thousands of applicants for a particular job, and 90% of them aren’t even qualified for it or have submitted junk.

So how do they do this? They usually do some harsh filtering on the applications, looking for people in certain age ranges, certain locations, and so on. Most of the time, this filtering eliminates quite a few good applicants, but because of the huge numbers involved, they don’t have the time or resources to look at each one.

Your best bet is to try to apply for jobs that are close to where you’re at and ones you’re qualified for. This won’t guarantee a thing, of course, but it does improve your chances of getting some sort of response. Calling the place you applied to for follow-up certainly doesn’t hurt, either.

I. Have a disease. And I wish not to disclose what it is; but to say the least, I work at Wal*Mart and sift through financial issues and debt because I can’t afford medical insurance. My boyfriend can’t find a job because we’re 15 miles out from any real place to work. We live in the middle of nowhere. I need treatment, and I need to get my life on track. I’ve had jobs where I’ve had to walk five miles there and five miles back- and trust me, I don’t mind, because I feel like it empowers me to do something for myself.

Basically, is there any advice you could give me on how we could go about improving our lives? Also, to avoid further downfall. No one can, or will, or ever has, had the time to teach me how to drive. I’m 21, and have a permit. There’s nothing I can do about this. I have tons of artistic talent. I’m great with music, painting, whatever… Massive amounts. And I want to get into college… My fear is affording it, and transportation. But as smart as my boyfriend and I are, we’re so far behind in what we should be doing due to poor families and background history that it’s disgusting, and I’m really just trying to keep my chin up, here.

Ontop of my own issues, my parents are falling into a 50 thousand dollar medical debt trap. My mom is sick, and doesn’t work, and can’t work. And the things that come out of my father’s mouth scare me sometimes. He talks about the money I would get if he died… I don’t want to hear him say things like this. So as you guess, they often ask me for money. (As I said before, I have a part time job. At Wal*Mart. In other words, I make the absolute crap of money.) I’m in a complete hole, in the middle of nowhere, with no transportation except to work. I want to help them, but I can’t just keep giving them all of me, or else I’ll end up just like they are.

I NEVER wanted to have kids. I hated the idea of having kids. I’ve always been the tomboy. Always. Until I met my boyfriend. And I’m so afraid to have kids, due to debt, that I just don’t know what to do here. I don’t want my kids to live the way I do. I want them to grow up with positive attitudes and the ability to learn and maintain themselves- and above all, prosper.

This is basically my issue. If you can take the time, can you heed any advice?
- Sara

I think you’re in a bad location with bad influences all around you. My honest suggestion would be for you and your boyfriend to move to a different area for a while, preferably a place with lots of opportunities. I would suggest a city with a low cost of living, like Des Moines, IA or Omaha, NE.

Go there. Find some work. Use mass transit to get there. Use every service you can get for low income people in the city. If you feel the need, send some money back to your parents.

Look for opportunities in the city to share your artistic skills. Volunteer to produce art for community groups so that you’re seen in a popualted area. Share your talents so that people see what you’re capable of.

I know that you feel strong family ties and responsibilities, but the longer you stay there, the less likely it will be that you’ll ever actually do the things you dream about.

I’ve read your blog for a little while now, your posts are very helpful and make for an enjoyable read. But what further advice would you give to a college freshman? For instance, I just turned 18 and set up my own Checking and Savings accounts apart from the savings account previously held under my parents’ account. What specifically can I do right now to set myself up for financial success? Because of college bills, I won’t have much money to use but I’d like to get some kind of “head start” on my future finances. I’m trying to read a few financial blogs to at least get informed on personal finance but I’m still unfamiliar with many terms and processes. I’m going to a private school with about 1/3 paid for by scholarship, and the rest to be covered by myself and my parents — without loans. What would you advise?
- Christian

Your best move is to educate yourself. Pick up a few well-rounded books on personal finance, read them slowly, and absorb what they’re saying. Use the internet to look up terms that you’re having a hard time understanding.

I’d suggest starting with two books (and these are linked to my reviews of them): Your Money or Your Life (puts personal finance in a whole life context) and The Bogleheads’ Guide to Investing (drier, but more information-based). From there, you’ll know enough to figure out what directions you should go in next.

The best solution for your problem is education, pure and simple.

My husband and I purchased our first loan last year. Since my husband had been self-employed for roughly 8 months at the time, we only qualified for an in-house 5/5 arm loan at a local bank at 5.7 %. The adjustable rate loan is very reasonable (tied to prime, can not adjust up or down more than 2 percent, etc), but we are looking at refinancing now that rates have dropped and my husband’s work history would let us qualify for a 30-year in a few months. Our bank will do a refinance for $1200.

Unfortunately, if we refinance we have to pay PMI, which will be about 90 bucks a month. If we refinance into the 30-year at 4.75%, it will take us over 3 years to see a savings at all. We also have an option to refinance into a 7/1 ARM at 5.1% and NOT pay PMI. We would break even with the cost of refinancing after 15 months, however we still won’t be in a 30-year mortgage. AND, I am wondering if the 5/5 loan is better since it can only adjust every 5 years.

I love the security of a 30-year mortgage, but the reality is that I have four more years in my PhD program, so the longest I could see us staying in this town is 4-6 years (if I took time off for some reason). Should we just get the 7/1 arm?
- Amanda

I almost never think an ARM is a good idea. It will often look like a good idea at a certain point in time, but it looks like a good idea because it locks in well with what your plans happen to be at this given moment.

If there’s anything that’s certain right now, though, it’s change. Your plans today will likely not match what you’ll be doing in five years, and if you’re in a situation where your mortgage is about to adjust and you’re made to either refinance at a higher rate or suck up the adjustment (because rates are going to go up).

If I were you, I’d get the lowest rate with the PMI – the 30 year mortgage. Focus on getting that debt paid down to the point where you don’t owe the PMI. That way, you’re not stuck in an adjustment or refinancing choice if your plans don’t go exactly as you think they will.

I’m trying to help my fiance sort out her retirement benefits at a new job, which offers two plans. The first is a pension-type account they make the entire contribution for, but the second is a 403(b) Tax Sheltered Annuity Plan, either traditional or Roth, offered through one of three companies. I’m completely adverse to the idea of investing in annuities; everything I’ve read indicates they’re much more expensive than general mutual funds, and since we’re only 25 I think the extra growth potential in index funds makes more sense. Her company does not match her contribution to the annuity account, so I don’t see much benefit to it.

Currently I fund my 401(k) to get the entire company match and max out my Roth IRA contributions. My fiance has minimally funded her Roth IRA in the past. Given my aversion to the annuity option, the other route I see is to direct all the money she would have steered there into her Roth IRA. If there’s money left after this, we could increase my 401(k) contributions.

Should I be giving more consideration to the annuity plan?
- Jeff

It really depends on the specifics of the plans. What kind of fees are involved? Are the companies stable? Are the annuities insured?

As a very general rule of thumb, you’re probably right in saying that your current investing plan is superior to the annuities because annuities often have heavy fees with them. However, if you’ve got that much money to sock away, it helps to do some research.

I’m willing to bet that her best move is to just fully fund her Roth, because it’s probably a stronger investment. If there’s still money left, upping your 401(k) is an option, but she may balk at that because it leaves her funding your retirement, which would be a raw deal if you ever got divorced.

I owe 530,000 on my mortgage.I’m currently paying back at 5.125 %.If I refinance, which is a better choice?A 5 year fixed at 4.25% from ING or a 30 year fixed from another company at 4.875%?
- Phil

I’m going to guess that you meant a 15 year fixed.

If that’s the case, the 15 year fixed is the better deal. You’ll pay a lot less interest over the life of the loan. The drawback is that your monthly payments will be a bit higher, but you’ll also be done paying them 15 years earlier than you would be with the 30 year.

If you can afford the monthly payments easily, take the 15 year loan.

A friend sold us a universal life insurance policy for each of us. We have 3 children and the premium per month is about $1500 for the 5 of us. My husband is the only breadwinner of our family. the friend who sold us the policy showed us some complicated math about all the money we will receive if we wait so many years, how it is a great gift to give our kids when they are 21 etc. I have been paying $1500 t for 8 months now.My question is ,is this a good investment as he says it to be or is a term life insurance better? My husband is about 40 years old. Kids are around 12,7 and 5 yrs old.
- Penny

Whole life insurance is way better… for the person who sold it. They earn a lot more commission on whole life insurance than they do on a term policy and thus salesmen often become true believers in the greatness of whole life policies.

To put it simply, whole life policies don’t earn well enough to make up for the fees and expenses tied to them. Yes, over the long run, you will see some returns from it. However, it’s not as good as simply buying a term policy and then putting the money you save away in an investment account elsewhere, like a Roth IRA.

Doubt me? Dave Ramsey says the same thing.

I regularly read a lot of self-help stuff, from books and online resources. I subscribe to many blogs, including yours, that talk about how to live a better life and self-growth. And, since I´ve been doing that, I feel I know more about me, my problems and what must be done to solve them. But the thing is that I have a hard time making the transition between theory and the actual application of all I´ve learned, I can´t seem to make it work. It´s like I can´t effectively “internalize” all the information to make it useful. For example, recently I finished reading this great book, Mastery, by George Leonard. It talks about a lot of things that make so much sense to me (I had a lot of “A-ha!” moments during the reading), and is full of practical tips that are key to improve many things that I´ve been struggling with. At the time I finished it I felt really energized with all the wise words and so, and managed to apply that through the whole day. But as the days went on, I apparently forgot all that, and got back to the normal state from before the reading, feeling only an itch of the amazing sense of flow that I had experienced. I wish I could really retain all this good stuff and make it a part of myself, going beyond the knowledge by making it functional.

I know you are an avid reader, so I would like to know how do you go about this. How do you take the wisdom you come across and turn into positive changes in your life? What´s the best way to do that?
- Liana

Many self-help books have hundreds of suggestions for behavioral changes. They talk about many, many things you can do to improve your life, and they’re often inspiring.

The problem comes when you try to apply lots of changes at once to your life. The more changes you try to execute at once, the easier it is to utterly fail and wind up making no changes at all. It’s like going on a “diet” and eating nothing but lettuce for a week. That will fail, almost always.

The best solution is to take a self-help book and try to apply one specific principle at a time to your life. I can’t comment on the book you mentioned, but if you read Getting Things Done, you can get started by simply having a “collection” weekend or carrying a notebook in your pocket and jotting down everything in your mind. If you try to do the whole system all at once, it’ll be tough.

Take life changes one step at a time, especially changes that are easy to backslide on.

I have a couple of questions concerning credit and the need for it. Just for some background I am currently engaged and will be getting married next month. I have been out of college for almost 6 years and have a well paying job and have a mortgage on a duplex. I have no other debt than my mortgage and have a nice credit score. I have had a credit card for the past 10 years and I have never carried a balance. My fiancé on the other hand has never had a credit card and has always used a debt card since he didn?t trust himself when he was younger. He feels now that he can handle using a credit card wisely. He has tried to look into get a credit card but is having difficulty with the way credit card companies are being picky on who they lend to now and he doesn?t have a credit history. This wouldn?t be an issue but we are worried that in the few years after he completes a program to become a physician?s assistant that we will start having kids (and I will stay home) and want to move into a single family home and keep the duplex. At that time he will probably be the only income besides rental income. I am hearing that they are now taking the lowest credit score of the couple into account vs. they used to take the higher one. This could create an issue with my husband?s lack of a credit score if it is true. If it is true how would you recommend him getting started with a credit score? He has checked his bank but even though he has had accounts with them (a national bank) for awhile they won?t even give him one since of the lack of credit history. How does one get a credit card if they are past college age and have no credit history? Does applying for any and every credit card in hopes of getting one hurt you in the long run? We are trying to get one that will not have an annual fee so there will be no financial impact on our end. We own both of our cars and do not plan on replacing them in the near future. Thank you so much for you help.
- Alison

There are a lot of benefits to establishing credit for your husband and you outlined some of them above.

The simplest way to get started is to co-apply or co-sign for a new card for your husband. Don’t worry if it has a low credit limit or other such drawbacks – the purpose of the card is to raise your husband’s credit.

Use the card for some very routine purchases, like gas, and pay off the balance of that card in full each month. Over time, try raising the credit limit of that card – call and ask for a credit limit increase.

You may also inquire about adding him to the mortgage you have on your home. Call your bank and ask. This can do nothing but help his credit if you’re diligently making payments.

In short, use your credit to prop his up in the short term.

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.

In my recent post about cultivating your own knowledge for fun and profit, I mentioned that you should hit yard sales, consignment shops, estate sales, and so forth as a way to put your knowledge to work for you and take advantage of underpriced items. A few commenters thought that this was unethical, so I thought I’d look at that particular point a bit more deeply.

I’ll start off by giving you a specific example of a situation where I did this in the past. As a teenager, I collected Magic: the Gathering cards (I still play with my wife using a handful of remaining cards). I had a very good idea of what some of the valuable ones were, including a few that sold for hundreds of dollars and a good number that could net $20 or more apiece.

In 2002 or 2003 (I’m not entirely sure which – I was out of college, but it was definitely before children and possibly before marriage), I visited a yard sale that was just a block away from the apartment I was renting. The couple that was running the yard sale was selling off a lot of stuff that obviously was previously owned by a teenage boy with a bit of a nerdy streak. One item was a large box full of trading cards, mostly Magic. The sticker on the box said $5. Within thirty seconds of looking through the box, I found one card I knew I could resell on eBay for $20 and a couple more that I thought could net me at least $5 each – and I had suspicions of finding some of the real valuable ones in the box.

I asked the couple if the box was really available for $5. They said it was and that much of the stuff was items their son had said he didn’t want when he went away to college. I immediately paid $5 and walked away.

I netted a nice profit from selling some of the cards, but I also kept many of the cards and some of them make up the handful of cards I still have.

Here’s the question: was I ethically obligated to tell the people running the sale that their items were potentially worth much more than $5?

My opinion is that the buyer never needs to say such a thing. The seller has the responsibility of setting the price for the item. If they want to set an accurate price, they should investigate the item they’re selling.

This is particularly true today, in the age of the internet, where you can find the value of almost any item you have. An eBay search for those cards would have quickly revealed, even after searching for just a handful of them, that the individual cards had significant value. Even just searching for “Magic: the Gathering” on eBay would have shown that such cards often have value.

To me, the question really comes down to this: should knowledge of the value of an item be the responsibility of the seller? I absolutely think so.

When I’m trying to figure out if I’m doing the right thing in such a situation, the first thing I do is put myself in the seller’s shoes. If I were the seller in this situation, would I consider it ethical and fair for the buyer to tell me that I had grossly mis-priced an item?

In a word, no. If I were the seller, accurate pricing is my responsibility, not the buyer’s. If I put something on a table at a yard sale with a sticker on it, that means I’m agreeing to sell the item for that price. If a buyer thinks that’s a good deal – and in this case, the buyer certainly did – then the buyer has every right to pay that price and attempt to turn a profit on it.

I did a similar thing with Nintendo Wiis back in 2006. During that Christmas year, you could easily resell new Nintendo Wiis in the box for $350-400 online after buying them in the store for $250. When Target or Wal-Mart put a Wii out on a shelf for $250, should I have grabbed one and ran for the checkout or should I have informed the manager that they were worth $350 before buying them?

Now, here’s a separate but connected issue: should a buyer tell a seller if they think an item is radically mispriced? I think it’s a kind thing to do, but I don’t think it’s a required thing to do.

If I had it to do over again, I would probably walk up to the seller and say something like, “This box seems like a really good deal. I think there are some cards in there that I could sell to the right buyer for more than what you’re asking.” Then, I would probably offer them more for the box than the sticker price, but I wouldn’t offer them the hypothetical resale value of the cards, either – probably $10 or $15.

Now, if I were a seller and someone did this to me, I’d refuse to take more than the $5 stated on the sticker. After all, I view the sticker price as the seller’s responsibility, not the buyer’s.

That’s my full take on the issue.

After the universal positive response to my idea of doing a chapter-by-chapter discussion of David Allen’s Making It All Work, I’ve decided to go ahead with it. Expect it to begin in a few weeks (I usually like to have several posts already in the bag for series like that before I start posting them).

Meanwhile, here are some interesting articles I’ve read from around the web this week.

Professionals, Amateurs, and the Great Unwashed Which are you? And which one would you be most likely to hire? I think it depends on the job, but I agree that enthusiasm and passion make up for a lot. (@ seth godin)

How To Get Hired & Get The Job You Want By Volunteering The people that do this kind of thing are the people that stand out from the crowd and get hired. At the same time, the people who do this kind of thing are people who have enough financial stability in their life to pull it off. (@ the digerati life)

Can?t stand the heat? Get into the kitchen ? but only long enough to make iced tea. My wife and I are enormous fans of tea. We almost constantly have a sun tea jar sitting out on our deck during the summer. It’s incredibly inexpensive and tasty. It’s just our beverage of choice, hands down, and it has a lot of health benefits, too. (@ surviving and thriving)

Preparing for a Baby ? What Do You Really Need? I’m linking to this because it’s a great example of how two frugal people think differently. She thinks that a changing table “is the single most important piece of furniture in the nursery.” I thought it was basically useless – we just have a “portable changing table” with a towel and the stuff we needed in a bag, meaning you can change the baby pretty much anywhere. (@ cool to be frugal)

Big Difference Between Average and Median Net Worths “Average” means you add up all of the net worth in America and divide it by the number of people. “Median” means you line everybody up in order of their net worth and ask the person in the middle what their net worth is. The two numbers are vastly different. (@ free money finance)

Advice from Financial Planners for Members of Generation Y I’ve never been quite able to determine whether I’m part of Generation X or Generation Y – or why it really matters. (@ gen y wealth)

If you’ve read the reader mailbags for a while, you’ve noticed that I often get messages from people who have worked their way into a good financial place and now have some money to invest, often for the first time in their life.

They look around, watch CNBC, read investment advice online and in books, and still aren’t sure exactly what to do. Should they keep the money in cash, or buy a CD from the bank? Should they invest in stocks, and if so, should they buy individual stocks or put money in a mutual fund? What about bonds? What about real estate?

The options seem overwhelming, as do the potential risks and rewards. I’m going to offer a few ideas that I’ve learned over the years that will help anyone that’s just starting to invest.

First of all, there is nothing that will guarantee you a great return. If anyone is guaranteeing you a large return – and by large, I mean more than a couple percentage points higher than what you’re getting in a savings account – be very, very wary. Such investments usually have some sort of giant drawback, like losing all access to your balance for a very long period, hidden and/or extensive costs, or hidden risks that aren’t being directly revealed. Leave such “too good to be true” investments for people who are actually skilled investors – and they probably won’t be investing either.

Instead, most investments beyond a savings account or a CD offer potentially strong gains coupled with risk. That’s just part of the equation. What usually happens is that the better the estimated returns on an investment, the greater the risk.

Let me spell it out for you in detail using a specific example. The Vanguard 500 is a long-established index fund that essentially invests in 500 of the largest publicly traded companies in the United States. If you look at the returns on this fund, you’ll see that (for the quarter ending June 30, 2010) money invested in the fund has earned 14.33% over the previous year. That’s a very nice return.

At the same time, though, money invested in the fund has earned an average of -9.84% the last three years. Yes, each year (on average), an investor has lost almost 10% over the past three. Even over ten years, the average is -1.67%. Over the lifetime of the fund, though (since the mid-1970s), money in the fund has returned an average of 10.10% per year.

So what does that mean for you? It means that over the course of some years, you’ll have a 15% positive return. Other years will have a -30% return. Over some decades, it’ll average out to a nice positive – 10% or so. Over other decades, like the ’00s that had two economic downturns, it’ll average out to a very low positive or even a negative.

Sometimes you can afford that kind of risk. If you’re many, many years from your goal, that kind of risk is fine. If you’re 25 and investing for retirement, you’re going to get enough great years between now and retirement that you’re pretty likely to make up for the losses of the bad years. The key is to just ignore the year-to-year losses and gains and just be patient.

However, if you’re closer to your goal, you can’t afford that kind of risk. If you’re saving for a goal that’s going to happen in five years and you need to have the balance you’ve already saved up, you’re making a big mistake to put it at this kind of risk. You need to keep it safe, even if you’re losing the potential to have a big year.

You also have to look at your debts in comparison. Right now is a great time to pay down debt. Why? The “return” you get from debt repayments is equal to the interest on that debt. So, if you have a debt that’s costing you 8% interest, an early payment on that debt essentially earns a guaranteed 8% return. Why? If your balance is lower (and that’s what an early payment does), the lower balance will generate that much less interest that you’ll have to pay. It’s important to note, of course, that actually acquiring new debt is really, really bad – I’m looking at debts here as water under the bridge and merely a problem to be solved.

Also, you can never, ever have too much money put away for retirement. It is never bad to over-save for retirement, because you can always use that money during the early years of your retirement for whatever things are most important to you knowing that you’re secure for life.

Thus, here would be my very general suggestions for someone with a chunk of money to invest.

The first thing I would do is aim for debt freedom. Why? Paying ahead on debts is probably the best stable investment that people have right now. Get rid of your debts – all of them.

If you’re debt free, I’d sit down and look at my life goals. Are there any big goals that I want to achieve in my life? Am I going to buy a house? Do I want to start a business, or launch a new career? Maybe you’re really happy with how things are right now. If you have a strong overriding goal, keep the money in savings and have it help you reach that goal a lot sooner. Most likely, the goal will be short term enough that you shouldn’t put it into stocks or other risky investments, for the reasons discussed above.

If you don’t have an obvious overriding goal, open up a Roth IRA and put the money in there. A Roth IRA is a simple retirement account that anyone can open – you just sign up for one with an investment house like Vanguard, much like signing up for a savings account at a bank. You put money in the account from your checking account, then tell the investment house how you want the money in the account to be invested. The best option for most investors is a Target Retirement fund that matches your estimated retirement date. You can contribute $5,000 a year to a Roth IRA – if you have more than that, put it in a savings account and make contributions each year.

There are two things that people virtually never regret: freedom from debt and plenty of money saved for retirement. If you have money just sitting around, you’ve got two good things to do with it, right there.

A final tip: read. Pick up a well-regarded book on investing (here’s my pick) and read it at your own pace. Go slow and make sure you understand every sentence. Use Wikipedia and Google to help you understand terms. This is perhaps the best thing you can possibly do with your time as a beginning investor.

One of the biggest things that’s changed in my life since my financial turnaround and subsequent career changes is that I’m constantly involved in a lot more self-evaluation than I used to be. I’m constantly looking at how I do things, looking for ways to improve the quality and value of how I spend my time and energy and money.

Something I’ve noticed quite a lot lately is how much of my life seems to move along with a particular rhythm. I don’t necessarily mean that things are the same day-in and day-out, because they’re not. What I mean is that I go through periods of heightened efficiency and mindfulness. I get ahead on my work. I write lots of posts. I find lots of quality time to spend with my family and for my other hobbies.

How do I fall out of these periods? Usually, it’s a series of unexpected events that triggers a change. One of our kids is sick during the night. I go on a lengthy trip of some kind (more than a few days). Something breaks in our home and I have to repair it. There’s a serious illness or death to someone close to me.

And, boom, the rhythm is interrupted. I feel tired and my mind is cloudy. I have a harder time working. I’m not as mindful of my spending and I make a few awful spending decisions. I get upset with myself – and with others – much easier than before. I’m less productive and less energetic – and it shows in every aspect of my life.

I have a lot of techniques for finding my rhythm again. Usually, it involves spending a couple of days resetting everything. I get my organizing system back in order. I go to bed early a few nights and don’t set the alarm, allowing my body to wake up naturally when it’s rested. I play with my kids a lot. I clean the house. I spend some time with my friends. I directly address any things that are causing ongoing stress, like a relationship that’s not as strong as I’d like it to be.

And, gradually, I get back into the rhythm of things. My productivity and energy go back up. I begin to feel more fulfilled about everything in my life. My spending discipline is stronger than ever. I feel like I’m doing better work in every aspect of my life.

Over the past few weeks, I’ve had some conversations with a lot of people in my own life and several readers about this phenomenon – and I’ve found that most people feel the same way, although they don’t articulate it as well. They have a “rhythm” in their life that they’re sometimes in touch with and sometimes out of touch with. The amount of “rhythm” seems to vary from person to person quite a lot, though – some people seem to find it a bit of a rarity, while others seem to rarely find it.

I will say this much: one universal thing that everyone has said is that the times in their life when they’ve found their rhythm are much richer than times where they’re off of their rhythm.

Obviously, I’d like to move in a direction where I’m in touch with my rhythm more than I used to be. I’ve found several techniques for doing this that really seem to work.

Know some sure signs that your rhythm is out of whack. For me, the biggest signs are that my office is messy, my GTD inbox has a buildup of stuff in it, my “article buffer” (articles I have written in advance) is low or depleted, and that I feel tired in the middle of the day. When I see two of these things, I usually take it as a sign that my rhythm is out of whack.

If you see any sign of falling out of your rhythm, stop and recharge as soon as you can. You might not be able to do it immediately, but you should do it as soon as you can. I find that when I force myself to do things when I’m out of sync, I make many more mistakes and am much slower about things than when I’m in a good rhythm. In other words, the time I spend keeping myself in sync pays great dividends over time.

If you don’t feel that you’ve had your rhythm, or have severe difficulty reclaiming it, get a medical checkup. There are a lot of little things that can hold us back from feeling great and knocking it out of the park. Many of them are very simple – a vitamin deficiency or something like that. I have an underactive (bordering on inactive) thyroid and if I miss out on my daily thyroid medication, I can quickly get out of rhythm.

Certain routine activities help me maintain my rhythm. For me, a daily walk of about three miles, a daily 20 minute meditation session (where I try to empty my mind for a while in the quietest room in the house), and a daily gaming session help me keep in my rhythm. I try really hard to accomplish these things every day. A piano practice session seems to be creeping into the picture here, as well.

If you’re out of rhythm, put off buying decisions. I find that, time and time again, my judgment when it comes to purchasing decisions is out of whack when I’m out of rhythm. If I put the decision off until I’m in a better frame of mind, not only do I end up making a better decision over the long haul, I usually have created some additional incentive to focus on what I need to do to get back in the swing of things.

Good luck!

Naomi is trying to get a good picture of her actual spending and is using a very good process to get there. She’s run into a bit of a snag, though.

I have reached a month of collecting receipts and preparing to organise it all in an Excel spreadsheet. Categorising by what type of expense will not be the difficult part for me, however deciding weather it was a ‘necessary’ spend is. I’m finding too many grey areas. For example; it was necessary to eat lunch but instead of having an at home sandwhich, i grabbed one on the go. Or, i needed some new clothes for work and brought a nicer dress than was necessary. Maybe I am overthinking such a simple exercise a little too much, but I would appreciate any direction you could provide.

This is a classic problem that people run into when they’re first getting a grip on their finances. What exactly constitutes a necessary expense? If you don’t buy the low-end garbage bags and instead buy the ones that Consumer Reports calls a “best buy,” is the difference in cost a necessary expense? If you’re caught in traffic and can’t stop at home for dinner before an evening meeting, so you stop at a fast food restaurant, is that a necessary expense?

I can certainly give you my opinion on a lot of such buying situations, but the truth of the matter is that it’s my opinion. I’d call the garbage bags a necessary expense. I’d call the fast food an unnecessary expense, a cost that results from poor planning. And on and on and on…

Here’s the truth. Every single one of us is going to spend money on something that we view as necessary and that others view as unnecessary. Almost all of us are going to spend at least some money on things that we view as unnecessary upon later reflection.

What matters isn’t that we eliminate all unnecessary spending from our budget. That’s impossible. It’s the equivalent of eating nothing but lettuce for a diet – eventually, you’ll either wither or fail.

What matters is that we get a grip on our unnecessary spending, however we define it.

I usually encourage people to be pretty tight with their definition of what a necessary expense is, because the real value in budgeting is to figure out where all of your unnecessary expenses are going. What areas are you dumping money into that, with some forethought and changes in routines, you could improve?

Here’s an example of what I mean. Let’s say you’ve decided to count lunches eaten out as an unnecessary expense. You make a category in your accounting of your spending called “lunches eaten out.” At the end of a month’s worth of receipts, you look at that total. $250? What?

You can reclaim that $250 (or at least most of it) by simply changing one behavior. Stock your desk with the materials for some lunches on the fly, for one, and then get in the routine of brown-bagging it. If things don’t work out with the brown bagging for a day, you have some food in your desk as a backup. Boom! Suddenly, you’re not dumping that money into eating out all the time.

That’s how budgeting is supposed to work. You group all of your expenses into categories and look for ways to sharply cut some of the areas of unnecessary spending (like the lunches) while also looking for ways to reduce the costs in necessary areas (energy efficiency, for example). It is much easier to identify ways to cut your spending if you’re looking at the exact dollar amounts you’re spending in a specific area and are focused on that specific area.

In other words, don’t focus so much on what’s necessary and what’s unnecessary, at least not at first. Just try to group things into piles that make sense to you. Budgeting books often offer suggestions of categories, but don’t be afraid to go beyond them and have categories like “lunches eaten out” or “comic books” or “makeup” or “video games.”

Then, when you’ve got those specific categories and how much you spent in each of them each month, focus on those categories one at a time and ask yourself, “How much of this is necessary? How much can I trim from this?” Different people will come up with different answers here, but the more you cut without significantly altering your standard of living, the easier it will be to find financial freedom.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Adding partner to credit cards
2. Partners and rentals
3. Healthy use of emergency funds
4. Services you’re not knowledgable about
5. Short-term investment choices
6. Low-income money advice
7. Pre-tax or post-tax retirement
8. Outspending your income
9. Mortgage prepayment at low interest?
10. GTD without a partner

My two oldest children are enjoying two new experiences this week.

First, their fall soccer league is starting and they’re both on the same team in that league. They’ll be competing against other preschool aged children in some friendly three-on-three soccer matches in the coming weeks. Our four year old has participated before, but this will be the first time for our daughter.

We also enrolled both children in a private preschool. In Iowa, the state funds private preschools up to a certain limit, meaning that the cost of a private preschool is minimal or nonexistent (depending on the specific school). We’re both happy with the school we’ve chosen and next year, when we have to make choices about kindergarten and so forth, we’ll revisit what we want to do for education (likely public schooling, because our local school district is incredibly strong).

I’m recently engaged, but we won’t be getting married until after I finish graduate school (2 years). Currently I have 2 credit cards that I’ve had for a couple of years. I’ve never carried a balance, always pay on time, etc. and though I have a relatively short credit history, what I have is good. I was thinking of adding my fiance as an authorized user on these cards because I was thinking it might improve our collective credit scores for down the line when we’re looking at applying for a mortgage. He wouldn’t even be using the cards, but this would be more in the interest of adding his name in order to improve his credit history (what he has is good, but since we’re both fairly young, it’s not much). My questions for you are: do you think this is a good move? is it worth it to do this now, or would the effects be negligible? can you add someone as an authorized user if they’re not related or married to you?
- Kelly

Most cards allow you to add anyone you wish as an authorized user, provided you give permission for it.

The thing I would make sure of is that you’re both using the card wisely, because this card is tied to both of your credit scores. If one of you makes a “mistake” with the card, it hurts both of you. I would encourage you to actually use the card a bit, but be careful what you do with it. Use it to buy gas and things like that and keep track of what you’ve put on it.

A note: at various times, FICO has considered dropping authorized users from their credit score calculation formula. Although it hasn’t happened, it may happen at some point in the future. Also, some credit companies don’t report authorized users at all when reporting credit information to the credit bureaus, so this may not help your partner’s score at all.

I am planning on moving in with my boyfriend within the next few months. This has been a long time coming and we are not taking it lightly. We’ve been together for nearly 5 years and have talked about doing this for years, but don’t want to rush or do it for the wrong reasons (saving money is the wrong reason, it had to be about our relationship). Of course money does come into the discussion because we’ll both free up some money. We each own our own homes and we’ll be living at his place because we both vastly prefer his neighborhood to mine and my place will attract more stable renters. The agreement we both think is fair is that we’ll each pay our own mortgages and we’ll split the rental income 50/50. So if my house is ever vacant, then I don’t give him anything in rent, and when I do have renters I give him 50% as my rent to him. It seems perfectly fair and like a great solution. But now I’m not so sure. Moving to his house is across a state line for me, and my income taxes will go up 8%. Also, I set aside some money each month in a targeted savings account for home maintenance, with renters I feel I should increase those savings since any repairs must be done more urgently and more professionally than with me living there. Based on other rentals I’ve seen in my neighborhood, I expect to rent my house for around $1000 (mortgage payment is $1450 – housing bubble hit hard around here) so bf and I would each get $500, but the net income for me would be closer to $300 plus the stress of being a landlord. Suddenly our agreement seems less fair and I find myself a bit resentful. Any suggestions? (These numbers don’t count any of the significant savings we’ll both enjoy from not driving back and forth 20 miles each way several times a week, having only one set of utilities between the two of us, no more pet sitter to medicate my cat when I have to travel for work, and likely much less eating out.)
- Jackie

It seems like you have a very strange arrangement.

In my eyes, the fair way to do this would be for you guys to let go of the idea of “mine” and “his” and look at this as a mutual situation. You have a shared pool of money. From that pool comes all mortgage payments. Into that pool comes all rent checks. You’re responsible to each other for what comes in and out of that pool.

In the end, if you’re that serious about the relationship, these things are effectively both of yours. If one of you is in a financial situation, the other one is in it, too.

My husband and I are both 25 and working to get our finances under control. We currently have about $5,500 in credit card debt, and $2000 in an emergency fund. Every month, we contribute approximately $1,000 towards erasing our debt, so we plan to be out of debt in the near future. However, the unexpected expense pops up every now and then. This month, it is a $300 dentist bill. Do you suggest paying for expenses like these out of an emergency fund, or paying less on our credit card for the month? (At this point we have no “regular” savings account, and won’t until we are debt-free.) We just arent sure which is the lesser of two evils: depleting a very modest emergency fund or putting off complete debt freedom.
- Lauren

If I were you, I’d just have a certain amount – a small amount – going into the emergency fund each week or month. Let’s say it’s $50 a week.

Whenever you hit a speed bump like an unexpected dentist bill, you certainly can pay it off from your emergency fund. If you’re adding constantly to your e-fund, you don’t have to worry about replenishing it and you also don’t have to worry about that bill.

The reason for doing this is so that if a big emergency hits you, it doesn’t force you to backpedal into more debt. That’s the exact kind of situation that halts the forward progress people make, over and over again. They begin to believe it’s impossible to pay it off because they see every step forward being met with a step backward.

Don’t fall into that. Keep an emergency fund.

Recently, my kitchen faucet handle came off. I could put it back on but when I looked under the sink the faucet was leaking and I found black mold around the pipe.

I don’t know how to repair plumbing, have no equipment, and I can’t get under the sink because of arthritis and knee replacements. I don’t know any local plumber so I called one with a big truck comes to your house with everything including the kitchen sink in it.

Last year I had a friend put in a laundry sink that cost about twice as much as I was expecting.

These truck people quote you a price. It was more than $400, so I had him put it in. Then he asked about the water heater. He said it had a pinhole leak in the intake valve that had calcium around it. He said it could spring a leak at any time. Since all my books are in the same room, I told him to replace it. (He did show me the pipe old pipe). So my bill was adding up.

I had a $35 off on phone book magnet. If my bill was over $500 I could pay $50 service contract and get a 10% discount and a free inspection in 6 months.

Confusing? What options do I have if a semi-emergency plumbing incident again.
- Linda

$400 to replace a kitchen faucet and a pipe under the sink? That seems high to me, even if you’re in an urban area where plumbers charge an arm and a leg. That’s a pretty simple repair.

Your best bet is usually to get estimates from multiple plumbers for non-emergency situations like this, especially the second one.

For most people – those who are able to get under the sink – I would usually suggest having some plumbing tape at home so that when such a leak occurs, you can wrap the leak thoroughly in plumbing tape for a short-term fix before calling around for estimates. However, in your situation (with arthritic knees), that may have just been an emergency you had to deal with.

I recently received a severance package from a layoff and am re-employed. From this severance, I paid off credit card debt and my car and now have $33,000 remaining in savings. I would like to ear-mark this for my 16-year old son’s college education which is coming up in a couple of years. Where should I put this money in the mean time? CD’s are earning awful returns!
- Jenny

Cash is probably the best place to keep it if you want to retain the balance.

There are no conservative investments that are returning very well right now, for various reasons. Thus, it’s not surprising that people are trying to find a better return for their money than would be offered in cash or CDs or bonds.

The problem is that the options that have the potential to return more are pretty unstable, especially over the short term. I would not put my money into stocks or real estate if I had to pull the money out in just two years – the risk is too great.

Your best bet is probably to open a 529 college savings account, put the money in there in something conservative, and wait.

I just graduated from school in May. I’m trying to make it as a writer because it’s what I love to do. At least to start, I’m not going to be making a lot of money. I have about $1,800 in my checking account. I’m still living at home, but will be working full time for a magazine, where I’ll get $750 dollars a month for 6 months. Then, the position hopefully will turn into a salaried one. I just opened a checking and savings account with ING. How much money should I keep in each account? Also, is there any way I should be saving for retirement now? I have about $4,000 in stocks and bonds from my grandparents, as well as $2,000 in another account from them. Would you recommend moving this money anywhere? I’m kind of lost right now. I’d really appreciate any advice.
- Ryan

Writing – especially early in a career – has extremely uneven income. There’s just no way around it – you’re not a known entity, so you’re going to have a heavy luck factor when it comes to finding work. You might get a bunch of it – or you might get nothing for months.

Because of that, I wouldn’t jump the gun on retirement savings until I had some sort of income stability. Instead, I’d hold the cash as an emergency fund.

As for the other assets, since you’ll probably be needing them for living expenses in the next year or two, your best bet is to move the money to someplace safe. I’d put all of it into savings for the time being, then perhaps move it into retirement or elsewhere if you find yourself in a stable financial position.

I am 23 and I started working at a new job, straight out of college and I am maxing out my retirement account contributions. My question is, should these contributions be going in pre-tax or after-tax? My income is very high for my age (~75K), so I am not sure of the benefits of pre-tax vs. after tax. I am currently contributing pre-tax money. I have heard this is a greatly debated topic. I also have a Roth IRA that I have maxed out since I was 18. I would like to take the money out tax free when I retire, but would that hurt me since my tax bracket may be a bit high right now?
- Eric

My gut feeling is that if you possibly can, you should be putting the money in post-tax accounts, like a Roth IRA. The exception to this is if you are getting matching in your 401(k)/403(b)/TSP at work, in which case you should get every dime of that before contributing to a Roth.

Why? Every indication is that income tax rates are at historic post World War II lows. There’s really nowhere for them to go but up. Our nation’s budget has an emormous annual deficit and at some point, it’ll have to be repaid. Social Security will have to be propped up. The way to do that is simple. Raise income taxes.

Thus, I’d always bet on post-tax investments right now so you avoid paying taxes on the gains later on.

My dearest childhood friend is in a situation that makes her miserable. She and her long term boyfriend both work less than 40 hours a week at low paying jobs. They want to have more money to spend, but they are both unwilling to seek a second job or find work on the side. Although they have a lot of free time, all of the things they want to do cost money. When we go out together, I try to make suggestions of cheap or free things to do, but they are not interested.

I don’t want to see my friend unhappy, but she and her boyfriend have unrealistic expectations. They don’t want to work more hours. They don’t jobhunt for a higher paying positions, and they are not interested in going back to school or otherwise improving their earning potential. Yet they are constantly strapped for cash and are not interested in a frugal lifestyle. They live hand to mouth with no savings, and they will finance any unexpected expenses on their credit cards. They are frequently depressed and feel trapped. How can I help my friend in this situation?
- Sara

I don’t think there’s anything you can do to help them. They feel depressed and trapped by their own actions. At some point, they have to come to the realization that they’ve created their own problems through overspending.

Your best option is to just be supportive. Don’t fight them on how they choose to spend their money – just make wise decisions about your own.

One move you could make is to just drop a copy of a strong personal finance book on their laps, something like my own book or Your Money or Your Life. You’d want one that discusses people extracting themselves from tough situations and finding financial freedom. However, it’s up to them to drink from the water.

I recently refinanced my mortgage (Just over $100k) to an adjustable rate mortgage that won’t change rate for 5 years. This gave me a very low interest rate (in the 4% range) and a monthly payment of $500, a $230 per month savings (and I was actually paying an additional $100/month toward the principle, so in reality, I have an extra $330/month). My plan with the mortgage is to pay it off in 5 years, which I think is a very manageable goal for me at this time. (My annual salary is around $110k, I already have $40k that I could pay toward the mortgage at this moment, and I have no other debts.) In retrospect, I should probably have paid the $40k and just remortgaged $60k but for some reason that thought did not occur to me until too late. Should I pay toward the principle bit by bit or save the money myself in an account that I would not touch until the time comes to pay it off? I’m leaning toward the 2nd option because I’d get to keep any interest generated from the money, rather than allowing my mortgage holder have the money early. I am very disciplined and do not think I would be tempted to use the money for some other purpose. If I should save the money myself, what do you see as the best way to do so? I think I could put the $40k somewhere and deposit $1000/month for the next 5 years and that would make my goal. (This $40k is basically money I’m not needing for anything else, I wouldn’t consider a part of my emergency fund or retirement funds, and I don’t have another use for it at the moment)
- Laura

There’s nowhere out there that will return 4% to you without taking on significant risk right now. So, if you just want a riskless 4% return on your money, prepaying the mortgage is a good idea, especially when you consider that the rate will adjust in the future.

The big benefit of being rid of the debt is the monthly cash flow. It eliminates a huge monthly required bill, which gives you a lot of freedom, career and otherwise.

Don’t second-guess or dwell on missed opportunities. It’s really a waste of time. Just learn what you can from it and move on with life. Dwelling on past mistakes means your vision is looking backwards, not forward to the opportunities ahead of you.

The one thing I?ve struggled with since adopting the Getting Things Done tools is that I really struggle with watching my wife NOT using these strategies and knowing that many things she agrees to will slip between the cracks and never get done, or if they do get done, it will only happen when it?s an emergency (i.e. car maintenance, paying bills, etc.). Do you have any suggestions on enjoying the benefits of GTD but not allowing frustrations with others in your life not using the system to boil over into arguments? I would love to help her adopt the system, since she is incredibly busy and could really benefit from the lower stress level that results from using GTD, but she doesn?t seem to have any interest. Any advice would be appreciated.
- Matt

You have to determine which one of you is responsible for which things within your marriage, then use GTD to take care of the things you’re responsible for. You can’t both pay the water bill, for example.

Then, focus on taking care of the things you’re responsible for. Leave it up to your spouse to determine a plan for the things she’s responsible for.

Obviously, if you’re bothered by her inability to complete some of the tasks she’s responsible for, you need to sit down and have a conversation about it. The best solution may be to trade responsibilities around a bit.

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.

Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest.

One of the most interesting parts of being a popular internet writer that reviews a lot of books is that, over time, I’ve wound up on the mailing lists of various publishing companies. They send me piles of books that might be of interest without me even asking – and most of them aren’t bad, but aren’t particularly exciting, either. I usually end up giving away most of them, passing them on to people who will get some use out of them.

When I’m going to invest the time in reading and/or reviewing a book for The Simple Dollar, I usually look for a book that has one of two things (or, ideally, both). It either must challenge or deeply entertain me in some way (a la Your Money or Your Life) or it must offer some very specific advice that’s not entirely duplicated in other works that I’ve read (a la The Complete Tightwad Gazette). If a book doesn’t seem to have either, I either don’t read it or, in the case that I’ve discovered this while reading the book, I don’t usually review it. Again, it’s not a matter of a book being bad, it’s just not a rewarding read.

This brings us around to the book I’m reviewing this week, 9 Steps to Work Less and Do More by Stever Robbins, who podcasts at Quick and Dirty Tips as Get-It-Done Guy (a podcast I listen to semi-regularly). This book was one of those “random” ones sent to me by the publisher and, after leafing through it, I quickly placed the book in that second category – a nice collection of very specific advice and tips that offers a few new ideas and some encouragement on things I should already be doing. In this case, the focus is on time management and efficiency, a subject area I find goes deeply hand in hand with financial success.

Step 1: Live on Purpose
A successful day is any day where as many of your actions as possible have purpose. In other words, the less time you spend in idle activity – doing nothing, or merely doing something to “burn time” or out of boredom – the better off you are. Many people equate this with having no leisure time, but I wholly disagree. I engage in a lot of different hobbies, but even within those hobbies, there’s purpose. I want to finish a certain book or a certain reading list, which builds my understanding of a certain topic. I want to master a video game, improving my ability to think under fire and my hand-eye coordination. I want to master a piano piece, improving many levels of cognitive ability. It’s all about goals leading the way, particularly big goals broken down into small bits that fill your day with purposeful activity.

Step 2: Stop Procrastinating
I reallly liked Robbins’ suggestion for beating procrastination in this chapter. It borrows a bit from Getting Things Done, but it’s really clever. For every short-term and medium-term project you have going on (everything less than a few months down the road), perform an action related to that project every single day without fail. He calls it an “action pack” – I call it a pretty good idea. Just keep a list of your projects with you and each day, come up with an action you can take that moves you along for that project. Write a page of that paper. Clean out that closet. File those papers. Whatever little step it is, take one of them every day.

Step 3: Conquer Technology
Technology can make communication much easier. That’s simultaneously a benefit and a problem, because when it becomes easy for someone to send you a message, you wake up to an inbox with a thousand messages in it. Sometimes, I’m basically forced to follow the advice in this chapter and just declare an email bankruptcy – I just empty my inbox and start over after reading as many as I can, as much as I try to keep on top of things. Why? The deluge is just too great to deal with at times – if I dealt with every single message, I would literally get nothing else done some days. Robbins’ argument is that if something is really important, you’ll be contacted another way.

Step 4: Beat Distractions to Cultivate Focus
For me, the best practice here is to just shut off distractions. I often turn off my cell phone and my internet access when I’m trying to write, simply to minimize distractions (and to make it harder to distract myself). Distractions slow down the writing process, not only due to the interruptions, but the time it takes to re-focus after an interruption. This is true of any process that requires focus. Multitasking simply means you’re switching your attention back and forth (with a little bit of re-focus time between each switch), which means that if you’re multitasking between two things, you’re giving less than 50% to each of them. This might work if the things are extremely simple, but you’ll just end up producing subpar work if you multitask with important things on the table.

Step 5: Stay Organized
Once you have a system in place, it’s worth a bit of time each day to make sure that your system keeps running, because the consistency of that system is what makes it worthwhile. One of the “shocking” things about GTD (a system I mention often) is that you spend time each day maintaining the system by processing your inbox and so on. It can feel like time lost, but when you actually take in the breadth of what you’re able to accomplish by having a truly trusted system that works, it far more than makes up for itself.

Step 6: Stop Wasting Time
Here, Robbins seems to distinguish between the various categories of things we have going on in our life – “not important, not urgent;” “important, not urgent;” “urgent, not important;” and “important and urgent.” Take note of the times when you find yourself doing things that are “urgent and not important” because they are the ultimate time wasters. For me, many phone calls fall into this category – they’re urgent (the ringing phone) but not important (a telemarketer or some other needless call). Thus, I’ve trained myself to basically ignore the phone when working.

Step 7: Optimize
The real key to this entire chapter is to never stop polishing what you’re doing. You should always look for better ways of doing the things you need to do, whether it saves time or saves money or allows you to accomplish more with the same resources. Robbins offers several ways of doing this, but for me, the best key is to just listen to myself and observe what I’m doing. If I’m not doing something or something isn’t working, I don’t beat myself up over it – it just means I need a better solution for that problem.

Step 8: Build Stronger Relationships
I am a huge believer in stronger relationships. A core set of relationships in your life can sustain you and help you with anything that goes on in your life. Spend some time figuring out who the really important people are in your life, then go the extra mile to cement each of those relationships by reaching out regularly to those people, helping them when they need help, and involving them in your life. The more you do it, the stronger the core group around you will be and the more they’ll support you during your crunch times.

Step 9: Leverage
The book concludes with an encouragement to use the skills that you have to every advantage. If you’re exceptionally good at something, use that skill as often as you can. Trade using that skill. Negotiate with that skill as a bargaining chip. Share that skill with friends. Barter using that skill. If you can accomplish something easily that’s very difficult for someone else, you’ve got something valuable there. Use it – and often.

Is 9 Steps to Work Less and Do More Worth Reading?
9 Steps to Work Less and Do More is a very solid and easy read with a lot of good little tips and ideas strewn throughout – much like the podcast, in fact.

It’s not an all-encompassing time management system, nor will it solve all of your problems. Instead, it’s just a collection of specific tactics that you can pull out and use in your own life, a piece here and a piece there, to make your situation stronger. Some of the ideas are excellent, too, like the “action pack” concept.

I enjoyed the book. If you’re thinking about time management, you probably will, too.

I get a lot of emails from people with the above statement, usually followed by some sort of plea for help. I have a lot of sympathy for their situation. I can’t even imagine how painful it would be to not have a steady income, have no luck finding work, and have others depending on you to provide an income.

Whenever I see an email like this, though, I usually respond with many of the same points (often tailored to a specific situation, of course, but the ideas are constant). What follows are the things I almost always tell people who are having difficulty finding work right now.

First of all, don’t waste another second passing blame for this situation. Yes, the economy isn’t particularly strong. Yes, depending on your political beliefs, it’s all the Republican Party’s or the Democratic Party’s fault. Yes, the president (Bush or Obama, choose one based on your political ideas) is/was a horrible individual who is trying/has tried to destroy the country.

Guess what? All of that time and energy spent thinking about or fretting about who or what to blame only reduces your own chances of finding work. You have an immediate problem on your plate that needs a solution. That solution requires all of your energy and your focus, and burning away that energy and focus by passing blame off to politicians or government or employers or former coworkers just takes away from what you need to be doing right now. Save that spitfire for the next election cycle, when you’ve got a good job. If you’re unemployed, don’t waste your energy on it – spend it on getting employed.

Remember, no one owes you anything. People don’t “deserve” things, they earn them.

The same thing goes for activities you do that help you “unwind” or “escape.” So often, I hear from people who say things like “I can’t find anything, so I spend all day at home surfing the ‘net.”

Yes, it’s good to relax a bit, but treat your unemployment like it’s a job and spend at least forty hours a week specifically looking for work. If you need to unwind, do it in the evenings. I like to unwind with a glass of wine and a game – maybe for you it’s a television show or a movie or surfing the ‘net. However, I also know that I should only be unwinding if I have something to unwind from.

So, how can you spend that time searching for a job?

One big thing you need to do is expand your search horizons in several different directions. You need to look for jobs outside of your local area and accept that you may need to move to find work. Look nationally – and even internationally – for jobs that match the skills you bring to the table.

Similarly, you may have to seek out a job that’s “beneath you.” No job is “beneath you.” I always think of that snippet from National Lampoon’s Christmas Vacation when I hear that someone won’t apply for a job that’s “beneath” them…

Clark: “How can they have nothing for their children?”
Ellen: “Well, he’s been out of work for close to seven years.”
Clark: “In seven years, he couldn’t find a job?”
Ellen: “Catherine says he’s been holding out for a management position.”

If it came down to a choice between picking vegetables for minimum wage or losing the house my children have lived in since they were born, I’d pick green beans from sunup to sundown, go home, and work on job applications. The same goes for flipping burgers in the kitchen at McDonalds or any other job that might be “beneath” me – because, frankly, they’re not.

At the same time, you should always be searching for jobs in your field of expertise. Start by polishing that resume until it shines. Go over it and over it again. Have friends review it. Submit it to resume experts – even bloggers who might use it for a post on their site. Get it perfect – and make sure it highlights the best of you very clearly, so that you stand out.

You should also keep your skills sharp and, at the same time, promote yourself. How do you do that? Get involved in the community of people online. Dig into projects that utilize your skills. Never stop learning new things. Open a Twitter account and join in the conversation in your field (and link to your Twitter feed everywhere you can so that it comes up first when people Google you). This is not only part of the job hunt, it’s part of what will make you successful in your field.

The final key piece of advice? Don’t give up. Never, ever stop searching for the perfect job for you. Yes, you might find yourself working in something that you don’t believe matches your skills, but that doesn’t mean you don’t spend your spare time getting yourself ready to find that perfect job.

Good luck.

When I was sixteen, I bought a cigar box full of 1960s baseball cards for $5 from someone who was cleaning out their mother’s attic. I sold one single card in the box – a 1965 Topps Mickey Mantle in excellent condition – for $200.

Several years ago, I was at a yard sale. The person running the yard sale had a box full of trading cards sitting there that her son had left behind when he went to college. I offered $5 for the box and proceeded to resell them on eBay, netting almost $1,000 in the process. (The cards were Magic: the Gathering cards from the Unlimited and Arabian Nights sets.)

About a year ago, I bought a pile of used video games at a yard sale. I picked them up for $2 apiece – 15 games for $30. Several months later, I piled these up and traded them at a local gaming store for approximately $200 in store credit, which (in combination with other traded-in items) I used to pick up a Playstation 3.

What do these little stories have in common?

First, in each case, I took advantage of a hobby of mine to turn a substantial profit. I’m familiar with the value of many types of trading cards, video games, and other certain types of collectibles because they’re hobbies of mine. Thus, when I notice these items, I can inspect them carefully and often evaluate their prices.

Second, I routinely put myself in situations where I’ll stumble across these items without a proper valuation. Yard sales and garage sales are a great start, but there are lots of places to look: going out of business sales, estate sales, and so on.

Third, I knew how to re-sell the items. There are many collectibles and other items that have theoretical value, but if you don’t know how to re-sell them for that value, they don’t have any value at all.

Let’s look at how you can use each one to not only have a lot of fun enjoying a hobby of yours, but also turn a profit sometimes, too.

Know Your Hobby
This is the easiest part of the three. Almost every hobby involves some sort of equipment or materials. From rock collecting to gardening to more obvious things like movie collecting, hobbies usually involve the acquisition of certain items.

Simply by being involved with the hobby, it’s often easy to be aware of the values of many of the items associated with the hobby. Keep your ears and your eyes open and you’ll soon have a grasp of the value of many items within the hobby, as well as good resources for identifying the value of items you’re unsure of.

Know Your Situation
It gets a bit trickier when you’re looking for ways to find such bargains. Above, I named several avenues for finding such items. Here’s some specific notes on these avenues.

Yard sales and garage sales These are almost always my best bet for finding huge bargains on hobby-related items. The trick, of course, is knowing how to separate the junk from the valuable. If the price is cheap enough, I’ll often jump on board even if I’m not 100% sure of the value of the item because the profit potential is so high.

Going out of business sales I never miss these, particularly for independent non-chain businesses. Often, items are priced as a discount off of MSRP – and often they’re cleaning out everything they can find from their back rooms. Sometimes, this means older and rare items that have a lot of value are out there for less than they should have sold for new. If you know what you’re looking for, this can be a treasure trove.

Estate sales and auctions This is similar to a yard sale. It can work well for certain types of items. Your best bet is to simply peruse listings in advance to decide if the sale is worth your time.

Odd jobs Whenever you have the chance to perform odd jobs for independent businesses – or even do things like help someone clean out the house of a deceased family member (which is a nice thing to do anyway) – you can just stumble upon all kinds of great things. I’ve found great items in the back room of an independent coin shop and in the closets of a deceased cousin of a friend.

Know Your Outlet
Of course, just because you find an item that has significant theoretical value, that doesn’t mean that you’re going to make a profit. Thus, I only pick up items if one of these two statements are true.

The item must immediately be resellable at a profit. Can I go list this item on eBay and turn a profit on it? Or, can I take this item to some sort of trader or retailer and immediately get more for it than I paid for it?

The item must have immediate use. An item I might use doesn’t cut it. I must be able to immediately put the item to some reasonable use within my hobby. Ideally, the item continues to retain some value as well.

If I can’t immediately validate one of these two statements, I don’t make the purchase.

Knowledge Is Money
In simplest terms, knowledge is rewarded here, as is participation. The more you know your hobby, the more likely it is you’ll be able to identify potential bargains. The more you participate in events where such bargains appear, the more likely you are to find it.

That’s why my wife and I often go to garage sales on weekends – and why we often go away empty handed. We usually go only to look for specific items – things we need, like children’s clothes, or things we know we can profit from.

Good luck!

Many newer readers of The Simple Dollar haven?t been exposed to the hundreds of great articles in the archives of the site, so this is a weekly series that highlights the five best posts from one year ago this week, two years ago this week, and three years ago this week. I call it ? the Time Machine.

One Year Ago (August 22 ? August 28, 2009)
Eating What You Have On Hand My wife and I do these kinds of “pantry dives” every once in a while. We do it to go through the stuff we’ve bought in bulk before it gets too old – things like dry pasta and the like.

Are Poor People Lazy? First of all, let’s distinguish between “poor” (people who don’t have money because of external influences) and “broke” (people who don’t have money because of personal choices). I have a lot of sympathy and desire to help the poor – not so much with the broke, because they can help themselves (though I will give them advice because lack of knowledge can be at work there).

That?s Just the Way It Is? Very few things are “just the way it is.” You can make choices to impact almost everything in your life. It’s really up to you and what you make of it.

Eleven Things You Can Do Today to Fall Behind Financially Yes, fall behind. These are common things that people do all the time.

Cultural Divides There are so many cultural concerns that change the choices we make as adults. The more we can learn from other cultures and adapt our own choices, the better off we are.

Two Years Ago (August 22 ? August 28, 2008)
Starting a Bulk-Buying Co-op with Your Friends, Family, and Neighbors You’re never going to use those 36 rolls of toilet paper at Costco? Why not split the cost of the jumbo pack with three friends – each of you paying 25% – and keep nine rolls each at a much lower cost than you’d get elsewhere?

Personal Finance 101: Money Market Accounts Versus Normal Savings Accounts There are some differences – they’re subtle differences, but worth knowing.

Is a Positive Attitude Enough? A positive attitude alone won’t change the world, but a positive attitude is often the difference between success and failure.

Buying Things Because They?re on Sale Is an Awful Way to Save Money This is a big reason why I don’t use general coupon sites. I don’t want to wind up buying stuff I don’t really need or don’t really want just because it’s a “sale.”

Nine Things to Do When the Going Gets Tough There comes a time for everyone where tightening the screws makes all the difference.

Three Years Ago (August 22 ? August 28, 2007)
Evaluating My Magazine Subscriptions: Which Ones Are Worth It And Which Ones Aren?t? I do this on a regular basis – and over time, my subscriptions have changed. When I “retire,” they’ll change again (because there are several periodicals I love to read, but I simply don’t have the time to keep up with).

Having A Second Child? Seven Frugal Tips For Getting Ready I remember these days fondly, when we just had our oldest child.

Getting Over The ?Taboo? Of Generics And Store Brands I really like the idea of just taking the labels off of stuff. It helps a lot with resisting brand imprinting.

The Real Scoop On Rewards Credit Cards They work … if you’re careful with them.

The Lawn Care Dilemma: How Much Time And Effort Should You Spend? I don’t think there’s an absolute formula for everyone. However, I also think it’s one of those things that’s worth thinking about, because lawn care has both a time and a money cost.

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

Ten Ways to Get More out of The Simple DollarUpdated!
This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are ten 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. Become a fan of The Simple Dollar on Facebook. I put up questions and other materials about once every week or two on Facebook (so you won?t be flooded with Simple Dollar updates). Join in the conversation with other Simple Dollar fans and occasionally get some interesting freebies, too.

4. Follow me on Twitter. I post 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.

5. 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.

6. 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.

7. 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.

8. 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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This summer, I?m going to be posting a series of fifteen low-cost, tasty, and easy-to-prepare meals that are literally straight from my own kitchen.

First, right off the bat, I apologize for the strong green color of the meal in this post. Ratatouille is typically pretty colorful, but the vegetables we chose for this particular instance of it were very green, resulting in a very green looking meal with some specks of red (the tomatoes). Ratatouille is a very flexible dish and can turn out a lot of different colors depending on the specific vegetables you use. If I had it to do over again, I’d probably include some red, orange, and yellow bell peppers to add more color… but it’s all tasty, nonetheless.

So, having said that, what is ratatouille? Aside from being a Pixar movie, it’s a French stewed vegetable dish, to put it simply. You can use it as a side dish or as a main course (like we did), accompanied with bread or rice if you so choose.

So, yes, this is an all-vegetable meal, acceptable to the vegans out there. You could easily accompany it with a protein if you wish – a chicken breast would go great with it.

What vegetables are in it? Pretty much anything you have on hand works in ratatouille – garlic, onions, crepes, zucchini, squash, eggplant, bell peppers, tomatoes, carrots, radishes, and pretty much anything else that comes from the garden works in ratatouille. You can include the ones you want and exclude the ones you don’t want.

The “easy” way to do ratatouille is to simply stir fry them in order using olive oil. You want to start with the vegetables that require more cooking (onions and bell peppers) and follow it with vegetables that require less cooking (tomatoes). This is the way I’ve typically done it in the past.

So, all you need to do is put a quarter of a cup of olive oil in a heavy pot over medium heat. Then, cut up and add the vegetables in this order: two onions, three bell peppers, two eggplants (in cubes), two zucchini (in cubes), four garlic cloves (minced), two pounds of tomatoes (chopped), and a tablespoon of fresh thyme and two tablespoons of fresh basil. Add each vegetable before you cut up the next one and stir regularly. Then, turn down the heat until it’s just barely simmering, cover the pot, and let it simmer for about forty minutes.

Of course, we didn’t do it the “easy” way. Instead, we broke out our copy of Julia Child’s Mastering the Art of French Cooking and decided to try her method, which was decidedly different. Her method of making ratatouille involves cooking each vegetable separately, then layering them in a pot. This actually looks more like what was prepared in the climax of the movie Ratatouille when done by a person with a lot of visual flair. In the actual movie, the dish prepared was confit byaldi, which has its own look but is basically the same thing.

We based our procedure for making ratatouille on Julia’s method, so here’s what we did.

Above, there’s onions, tomatoes, an eggplant, a zucchini, and two green bell peppers (again, I should have used yellow or orange or red to make a more colorful plate…). There’s also a garlic bulb (you could use garlic powder instead), salt, pepper, parsley, and olive oil. That’s pretty much all you need.

The vegetables above are a mix of ones from our own garden plus items purchased at the Ames Downtown Farmers’ Market. Our total out-of-pocket cost was $5.25, according to my count (we were buying in cash at the farmers’ market and although I’m pretty sure I recorded everything, I’m not 100% positive of that).

First, we chopped up the eggplants and zucchini. We peeled them both, then cut the main bodies of each into strips that were about six inches long, 3/4 of an inch thick, and about an inch and a half wide. We then sauteed them over medium-high heat with a tablespoon of olive oil, a bit of salt, and a bit of pepper for about twelve minutes, setting these aside when finished.

While these were sauteeing, we chopped up the peppers and onions into thin strips.

We also blanched the tomatoes. Blanching is simple – you’re just sticking the tomatoes in boiling water for about 20-30 seconds, then dipping them immediately in