The Simple Dollar Reading Guide: Prison Made of Plastic

tsd book Every Sunday morning for the next few months, I’m going to “riff” on a chapter from my book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams by reflecting on particular pieces of it that I’ve had further reflections on or particularly excite me, including some elements that were removed from the final draft. You can find out more about the book by reading some of the life-changing experiences the book has given readers or reading the Amazon reviews.

The book opens with a chapter on debt repayment. In my original draft, this chapter was in the middle of the book and the book actually started with the second chapter, What’s Missing?, which focuses on the fact that we all have problems in our lives and that success comes not from laying blame on those problems but from accomplishing what we can in spite of those difficulties.

Why talk about debt first, then? The real reason is that overwhelming debt is incredibly scary. It’s the most challenging and frightful topic I discuss in the book. My book is largely optimistic and forward-looking – debt, on the other hand, causes people to feel fear and hopelessness. I know – I’ve been there. I open the book with this little anecdote from my own life:

I began to quickly realize that the pile of bills I just received not only wouldn’t be covered by the current balance of my checking account, but that my next paycheck would not cover them either – and that was if I spent absolutely nothing on food, gasoline, or anything else. I sat there completely stunned for a moment; then I got up and went into my son’s room, closed the door behind me, and sat down in the rocking chair across from his crib. He was so tiny lying there, less than six months old, and sleeping so peacefully there without a worry in the world. As I watched him lie there, gently breathing, emotions poured through me. Guilt. Shame. Embarrassment. Pain. I was failing this wonderful little boy, this child who had already brought incalculable joy into my life. He relied on me for everything, and because of my poor decision-making and my selfishness, I was letting him down.

That’s an incredibly hard thing to write even in your own journal, let alone in a book that hundreds of thousands of people will read, a book that has copies sitting in most of the bookstores in the United States right now.

Long time readers will recognize that I’m essentially retelling the story I talked about in an earlier post, The Longest Night (in fact, my first draft largely was a quote of that post).

When I’ve discussed debt repayment in the past, I’ve usually stated that the first step of the process is to come up with a debt repayment plan and sell off items that you’re not actively using in order to start funding that plan and get the creditors off your immediate back.

What I really neglect to say in those articles is something I cover intensely in the book: if the people in your life that you’re financially responsible for aren’t also on board with this plan, you’re wasting your time. To put it simply, if you can’t get your partner on board, the absolute first step you need to undertake is fixing your relationship with those people, because such a relationship based on divergent goals and behaviors isn’t working.

I was extremely lucky to find that Sarah was a more-than-willing partner in getting our financial lives straightened out. I originally wrote a description of how exactly we came to be on the same page that was excised from the book in later drafts, but I’ll share it with you here.

For us, this meeting of the minds was quite straightforward. We set aside an afternoon and simply went through all of our finances together. We talked about our dreams and our goals. We looked at our full debt situation seriously – nothing hidden or secretive – and we came to some very strong conclusions about what we needed to do with our money in the future. Our only real difference of opinion was how far to take our cost-cutting measures and over the following months we worked through those on a case-by-case basis.

The key to success wasn’t in that first meeting, though it did lay the groundwork. Our success was built on discussing and revisiting and refining all of this over time. We talked about what didn’t work just as much as we talked about what did work.

Another key was recognizing that we are both flawed people who make mistakes. Neither one of us is going to be perfect and a mistake isn’t a reason to argue or disrespect each other.

Much of the rest of the chapter focuses on what I would describe as the “nuts and bolts” of debt reduction: coming up with a debt repayment plan, reducing interest rates, and snowflaking are covered, among other topics. This is the type of basic personal finance stuff that shows up in almost every personal finance book. Why? It’s vital information to those struggling to overcome debt.

Yet, the idea that this book somehow focuses heavily on debt repayment strategies is basically false. In fact, debt repayment is scarcely mentioned again in the book. It’s merely one tool among many for building the life that you want.

Continue reading The Simple Dollar Reading Guide: Prison Made of Plastic …

From The Simple Dollar.

July 25, 2010 | Filed Under Frugal Living | Leave a Comment

5 Tips on Credit Card Consolidation

5 Tips on Credit Card Consolidation
Here are some great tips on credit card consolidation to help you manage your debts more effectively.
1. Draw up a financial budget. Yes I know it is boring but you will never be able to get out of debt until you know exactly how much you earn and what you [...]

Continue reading 5 Tips on Credit Card Consolidation …

From Frugal Simplicity.

July 13, 2010 | Filed Under Frugal Living | Leave a Comment

The Simple Dollar Is in Bookstores Today… And Here’s Some Free Bonuses for Buyers!

tsd book My new book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams, is now available in bookstores (I just saw it at a Barnes and Noble in the Des Moines, Iowa area and at the Borders in Ames, Iowa)! You can also buy it right now at Amazon.com or order it from Barnes and Noble.

I’ve already shared a big collection of reader stories from people who have already read the book and made positive changes in their lives because of it.

Now I want to add a little bit more value to those people who have already purchased the book – and those who are on the fence about it.

If you buy the book before July 14, I’ll give you all of the Simple Dollar downloadables… free.

You’ll get 31 Days to Fix Your Finances, The One Hour Project, Twenty Big Ideas, and Building a Better Blog all for free. Each one of them is like a small book, delivered electronically for you to print and do with what you please.

Even more, I’ll also send you my upcoming fifth downloadable, tentatively titled The Simple Dollar Cookbook, for free. Like the others, it’s an electronic book, but this one will include dozens of the best recipes from The Simple Dollar with pictures, formatted so that you can easily print out any individual recipe you wish from the book.

All you have to do is send a picture of your receipt from buying The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams to simpledollarbookdeal@gmail.com before July 14. If you bought it from a web retailer, just forward the email receipt they gave you (you can edit out personal info if you wish).

So, if you’ve already bought the book, just send along the receipt (if you’ve lost it, just take a picture of yourself holding the book and tell me where you purchased it). If you’ve not picked it up yet, now’s a good time to do so.

Once I’ve received all of the emails and checked them all, I’ll start sending out the e-books back to the address that sent me the receipt. (This may take a week or two, depending on how many people take me up on this offer.) When the cookbook is released, I’ll email that one separately (I’m hoping to finish it in September after the Summer Meal Series has finished).

This is mostly just a perk for loyal readers of The Simple Dollar who have picked up the book, too. You guys are awesome.

Continue reading The Simple Dollar Is in Bookstores Today… And Here’s Some Free Bonuses for Buyers! …

From The Simple Dollar.

July 7, 2010 | Filed Under Frugal Living | Leave a Comment

Living “The Simple Dollar”

tsd book As many of you know, my new book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams is due to be released at the end of this month and should be available in bookstores all over the United States in early July. If you’d like, you can preorder the book at Amazon.com or preorder it from Barnes and Noble.

To put it simply, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams tells the story of how I got into financial trouble and how I escaped from it. Intertwined with that story are the details on how exactly I did it, along with some really fascinating research into the deeper causes of my mistakes and how others make similar mistakes. Each chapter ends with five specific steps you can take to move forward in your own journey in line with the focus of that specific chapter – getting your debt under control, reassessing your career, figuring out what life you’d like to have and setting tangible goals to reach it, and so on.

Rather than just tell you all about how wonderful I think the book is, I decided instead to share the book with some readers of The Simple Dollar and let them tell you about their experience with the book. A few months ago, I sent an email to all of the friends of The Simple Dollar asking for twenty five volunteers to get a free early copy of the book. All I asked is that they read it, they tried out the ideas at the end of one of the chapters of their choice, and after a couple of months, they let me know their thoughts on the book and how the tactics worked in their own life.

So far, I’ve received 12 stories – a nearly 50% success rate, which is unheard of considering the effort I asked of the readers. I was hoping for three stories, not twelve, to tell the truth – that was the response rate that my publisher seemed to think that I would get in response to such an effort.

The variety of the stories really inspired me, too. Most of the people chose different chapters and came at things from entirely different angles, with all of them getting something out of the book. The stories peeked into such a wide variety of lives – different ethnicities, different stations in life (from fresh out of college to retirement age), different ambitions, different life goals, and different beliefs. Yet they all were able to find value from stepping back and re-evaluating where they were heading – and perhaps looking at it through a new light.

I have done no editing (with one minor language exception and one misnumbering of a chapter from the book in the middle of a paragraph) to any of these stories aside from editing a few personal greetings and other such notes from the beginning and end of them.

Here are the stories I’ve received. I hope you find some of them as powerful (and often poignant and sometimes humorous) as I did. Click on the name to jump down to their story.

Natasha discusses playing the “why’s” game from Chapter 17 which helped her effortlessly trim money from her food spending.
Sheila rethought her shopping experiences based on Chapter 8 and started planning more carefully for them, saving hundreds of dollars.
Rafal used five different tips from five different chapters to reinvigorate his career and build a personally valuable community of people around him.
Jaclyn used the advice in Chapter 8 to not only re-evaluate her money, but to minimize some negative relationships in her life.
Tonyre-establish a much deeper relationship with his wife using the advice in Chapter 13, starting with a intimate discussion about personal finance.
Christina, a married blogger, used Chapter 17 to seek out positive motivators in her own life instead of the negative ones which were sapping her energy and spirit.
Paul, a recent divorcee, used some of the ideas in Chapter 8 to add freedom to his life, including stepping up to the plate and tackling a triathlon.
Jess used the ideas in Chapter 17 of the book to address the personal, psychological, financial, and physical clutter in her life.
Mary used Chapter 13 as motivation to sit down with her boyfriend, only to discover they’d both been “secretly” lending money to the same person!
Brenda used Chapter 3 to get control over the chaos in her life – along with a realization that not everyone else has their life figured out, either.
Jessica used Chapter 14 to help her get a grip on the idea that retirement is coming, but that it doesn’t have to be doomsday for her life.
Michael used Chapter 10 to launch himself into an entirely new career path once he realized what the common thread between his passions was.

Natasha
… on Chapter 17, “Holding You Back”

My husband and I are in graduate school (and therefore aren’t earning much money while racking up student loan debt) but our goal is to buy a house when we’re all done, so we need to pay down our student loans and also save up for a down payment.

We’ve kind of kept a budget but not really done much other than track our spending and shrug when we go over. But we started to cull everything we could from our budget. No more cable television, no Netflix, no video game subscriptions, nothing superfluous. And from there, we started seeing where we could save money elsewhere, starting with our cell phones. We dropped our expensive plan (and phones) for a pay-as-you-go option, and are saving $60 a month that way, which I’m auto-depositing into our savings account. Taking Trent’s advice from this chapter to declutter, we’ve gathered together piles of books to sell online, which is on track to earn us about $250, which will go right into our savings. The biggest problem for us is food, not only for the money, but for the time and energy it costs. As I mentioned earlier, we have a budget, but food is where we consistently go over. And when we go over, we just…keep going over. So to address this barrier, I played the “Why’s?” game Trent mentions in his book.

Why do we spend so much on food?
Because we like to eat out.
Why?
Because cooking is hard.
Why?
Because picking recipes and getting all the ingredients together takes too long.

And this is where I had my A-ha! moment. We did make a huge production out of meals and grocery shopping, and had built our own barriers to make eating out much more attractive. So, we established a meal plan. I’ve planned a menu that we’ll recycle every week (same thing every Monday, etc.), with the proviso that we’ll refresh the menu when we get sick of it. This works in a couple of ways. #1: We always know what we’re going to eat, and there’s always something planned with all the ingredients in the pantry so there’s less temptation to eat out. #2: Shopping is way faster because it’s just the same list each time and we don’t have to worry about cobbling together whatever we have to make dinner; it’s all there and ready (utilzing the second tip in this chapter to establish a passive barrier). So, now that I’ve addressed the food budget barrier, we’re putting it into practice, and will at least hopefully stay on budget (saving us an average of $100 a month) or maybe even save money if we can streamline errant shopping trips and frequent meals out (saving potentially $400 a month).

Sheila
… on Chapter 8, “Frugality as Framework”

For my “test drive” of The Simple Dollar, I chose to work on Chapter 8, “Frugality as framework.” It seemed like a natural place to start, since frugality has become necessity for my husband Steve and I. I lost my job in June 2009, just three months after we married and some months before my husband would earn his provisional green card. With neither of us able to find work and having fallen victim to a (hopefully temporary) glitch that has caused me to lose my unemployment benefits, we find that we are having to rely on savings and need to stretch every dollar we can.

The first action step in this chapter is “Don’t give up the things you love.” Sadly, I’ve failed miserably at this one — we’ve had to give up nearly everything that we have enjoyed. My husband has had to sell most of his trap shooting and reloading equipment and I have stopped horseback riding, unable to afford the dressage lessons and fearful of hurting myself and generating additional medical bills. My husband is a real foodie, so we have tried to maintain quality of life in that department. After all, eating good food will keep us healthy and will help to keep Steve happy.

The second action step Trent suggests is “Find inexpensive ways to enjoy the things important to you.” We have had a bit more success in this area. Although Steve can no longer afford ammunition and shooting fees, he has been spending more time coaching the son of a friend. Our friend is more than willing to provide a huge back yard for a range, some ammunition, and boxes of clay birds in exchange for expert coaching for his son, who has been struggling academically and is finding better focus in his studies since he has been doing trap shooting. Steve also loves movies, and rather than going to the theater (too costly even for matinees), we have begun in the last month to borrow movies from friends and from our public library. We enjoy snuggling with our dog on the bed and watching a good film. We both enjoy the outdoors, and we take more frequent trips to area parks for hikes and to stroll through the botanical garden. Steve is getting better about suggesting free and cheap dates, since I planned the first few, and we’ve had a really good time.

Trent’s next action step for this chapter is to “cut back hard on the things that matter less.” When all my jeans ended up being more holey than godly, I re-read this chapter for Trent’s suggestions. I went to the thrift store to look for replacements, but I didn’t find any that fit me, so I found inexpensive carpenter jeans ($15/pair) at Target, and later I found a pair of imperfect jeans at another store for about the same amount. Steve and I began making our own laundry soap last year, using instructions provided by Trent on the Simple Dollar website, and it works just as well as the Seventh Generation detergent we had been using. As an added bonus, we’ve started to make batches or laundry detergent more frequently, swapping bottles of it with friends in exchange for homemade breads, gourmet dog treats, and other things.

Action step #4, “Never go shopping without knowing exactly what you want,” has been a lifesaver. My husband has always had a difficult time restraining himself at the grocery store, sometimes spending up to $500/month for the two of us. I started using a slow cooker and the book Fresh from the Vegetarian Slow Cooker this past month, and I began to plan meals for the week and build a shopping list accordingly. I am good at sticking to a list, and so I do nearly all the grocery shopping now, and we’re down to about $300/month in grocery expenses. There is still some room for improvement, as Steve did pick up some snacks and protein drinks that put the total up a bit. But we are doing much better, and Steve has loved nearly all the dishes I have prepared.

I laughed at Action step #5: “Use the thirty-day rule for any unplanned purchase.” Being unemployed, we have to put nearly everything on a wish list for when one of us is employed, not a 30-day list. That means parking the second car that now needs repairs, since we can certainly make do with one. I put off buying new clothes and getting a haircut (I trimmed it myself) for over 12 months. If there is anything that isn’t an absolute necessity at this point in my life, I have just given up on having it at all. If and when one of us finds a job, I will appreciate the income so much more, and it will be so much easier to say “no” to impulse buying — not only because of having been through a tight spot, but also from the great practical tips in this chapter.

Rafal
… on five tips from five different chapters

It was extremely difficult to take 5 action steps from one chapter. So I did not. You will ask – why? You have sent me that book in the very special time for me. It is my second job – I’m here for 3 months – after 4 months unemployment. I had to quit my last job due to economical breakdown. However I am living alone, debt free, trying to implement life hacking & personal finances tricks for a while. While I had my first job for little over year – I was keeping track on my income and expenses using Buxfer. As long as I was earning good money for my hard work it was a pleasure to take care about finances. Then it got complicated – and I’ve lost the track – some of the actions you’ve suggested were already taken and I had a lot of them in mind all the time – but I made some decisions which from financial point of view were terrible – I’ve moved again to the another flat with bigger rent – but I don’t regret It. Still… there were 5 actions to be taken.

The first thing that looked like something I always wanted to do was “unwinding” 5th point of 5th chapter . After I come back I try to do the laundry and dishes. It’s terrible thing to start, but as soon as you get your hands wet – it’s mechanical activity. It was also connected with one of the New Year Resolutions – simple sticky note attached to my kitchen with “Keep counters clean” reminder. Every night before the sleep I used to prepare counters for the next day.

Next chapter – about communities – I think that I’ve made my homework long ago – in Poland we’ve got Blip.pl – very similar to Twitter – but the local community in my city is really strong. We meet for a beer once in a month or so, we also travel to other cities to meet other members – it’s a great network of people having fun and helping each other. That’s how I’ve found this month my next flat. I’m moving out from the expensive one ( I’ve also got the place from a friend from that network) to cut back costs to the flat with a friend of mine who is moving to my city – pretty good deal as it will be twice cheaper. To be honest major part of my friends I hang out with were met on Blip during last two years –we are having a good time, and if there is a need – we support each other. Countrywide.

Chapter 7th “Minding the gap” is something I think was doing for a long time – maybe not exactly that –but still I was doing my budgeting in 60%’s style. Now I’ve decided to get back to Buxfer. I’ve imported statements from accounts ( pretty messy thing, as I was not writing down expenses for about half a year) – but after weekend spent on it – It was clear what I was spending money on. Mostly bills, food and investment vehicles I’ve signed up during my first job. I’ve swept dust away from several banking accounts ( I’ve got my own System for keeping separate money for current month and rest of them) and got back to use it as I used to. Good thing is that after short analysis of my bills I’ve found out that I got used to being frugal and there were only small amount for cost that could be reduced. The biggest one is my flat that I’m changing right now. That decision was clear for a long time for me, that it has to be taken, but now I was even more motivated. When I’ve jumped back into fixing and changing – It was logical next step.

And now for something completely different – what was my System? I had several accounts – one for Income, two for Current month – main account (only this was supposed to be used with debit card and ATMs), backup money for that month, and savings accounts (goals dedicated and “regular savings”). It was working well as long as I had motivation to make the money transfers between them. Now – I’ve got one.

What else I can say? I’ve managed to sell some slogans I was writing on Blip.pl to be used on t-shirts in a shop owned by a girl I’ve met on Blip.pl. That not a big income – but to be honest – I’m very proud that I’ve signed that deal as it will be my first passive income. I’ve already decided that money will be split equally – half for the fun and the second half for the investment. I always wanted to learn how to trade stocks – and I thing I can use that small amounts to buy some.

The book was very motivating for me, because of the author – which for me is an example, that if you try, other also tries to help you. Right now I’m thinking about switching my jobs either to the other company, or starting something own. Pretty though decision, but right now I’m having savings good enough for 3-4 months of living and I guess I’m about to use it.

Jaclyn
… on Chapter 8, “Frugality as Framework”

The opportunity for me to read and write a story about my experience with your new book could not have come at a better time in my life. I am 27, a recent University graduate (for the second time) and about to get married in September, and also horribly in debt.

About 6 months ago I decided I needed a change in my life. I was buying things to fill a void in my life and I realized that things could not fill that void. Having the latest clothes, the newest gadgets and the fanciest home furnishings did not bring me joy. I was burdened by all of theses things and the incredible amount of debt that came with them. Unfortunately I have lived like this for so long that letting go of my attachment to things has been quite difficult.

I decided to start my journey with the chapter on frugality, mostly because I thought that this would take me most out of my comfort zone. My fiance and I set up a budget together and it was pared down to only the most basic of necessities. Any extra money remaining at the end of the month was going to go against debt. We were already putting $2,500 of our monthly disposable income (a total of $6000 a month) against debt but I wanted to see if we could do better. We had already focused on big wins so it was time to delve into the details. We followed the steps at the end of chapter 8, here was our experience.

1. Don’t give up the things you love: This was really important to me, I knew that if I wanted to continue my new behaviors I would have to enjoy my life! We decided on a $200 a month each for spending money, which might seem like a lot but from how much we were spending it seemed impossible to me. I thought about that things that bring me true joy and decided that I would have to spend carefully on only those things if I wanted to be able to enjoy them. I decided to keep up my quilting class, which I love, and also my exercise group. These things were important to me and have a fixed cost so if I wanted to continue I had to keep paying.

2. Find inexpensive ways to enjoy the things important to you: Aside from the quilt class and my exercise group I could find ways to cut costs on everything else that was important to me. I like to go out for coffee with my girl friends so I made a rule that I could only have tea rather than an expensive specialty coffee. I like to read books so I made a rule that I couldn’t buy any books, I could only request them from the local library for free. It became a challenge I quite enjoyed to focus on the important things and drop all the unnecessary spending on those things.

3. Cut back hard on things that matter less: Cable television is not important to me at all so it was cut out completely. I also do not enjoy going for lunch with some of my negative coworkers so I started packing my lunch every day. I was no longer going to spend money on things that did not bring me joy. I thought about every purchase and wondered if I could find a way to hold off, or eliminate it completely.

4. Never go shopping without knowing exactly what you want: I became the master of lists. We sat down on Sunday night and planned our meals for the week, only necessary things went on the grocery list. Likewise with household items, a running list was kept on the fridge of things we needed. I did not browse stores for the sake of shopping, I had a purpose or I didn’t go. It was actually freeing.

5. Use the thirty day rule for any unplanned purchases: As a recovering shopaholic I used this quite frequently. Often I would find myself wanting something and would think of many reasons why I needed it. As these things came up I told myself that I could put them on a list and at the end of the 4 weeks if I still needed them I could purchase them. I just looked at my list again today and not one thing on these is necessary, I am so happy I didn`t spend my money on any of those things!

So how did we do? Well we managed to save an extra $1000 in the past 4 weeks, I also had $25 remaining of my $200 spending limit. Overall I feel lighter, like a weight has been lifted and I am so excited about the future!

Tony
… on Chapter 13, “The Personal-Financial Boundary”

When i got the book i started to look at the chapters to see what would be the most important one for me at this time. I decided that the best thing was to find one that would work for my wife and i. I settled on chapter 13, The Personal-Financial boundary. The reason that i picked this chapter is i have always struggled talking to my wife about financial matters. I tend to hold things back and not let her worry about things. I am the type that i like to just take care of it. The thing that helped me out a lot was the ability to have certain things to discuss, and not just we are screwed and we got to do something. Those are the times that i tend to get to and that will in turn come to a lot of yelling and hurt feelings. With Trent giving his own story about talking to his wife Sara it helped me see a connection with me and my wife. I thought it was wonderful that you were not afraid to give us true feelings and exactly what went on with your relationship with your wife. At the end of the chapter you give five steps to Getting Our Relationship on Track, Here is a break down of what we did.

1) Set Aside time to talk to your partner about money and about life.
This was a great chance for us to just talk. With having a little one around we find it difficult to just talk about us. We have been married for almost 4 years and we take time regularly but this time it was different. We were able to see goals that we both have in mind and how we want to accomplish them. We were able to see what things we can improve on and what things we are doing great. To share with you one goal that we both have set is we want to get into a house, we currently live in a condo, in two years. We have a lot of things that we both want to accomplish to see that happen, but being on the same page now is a great help.

2) Recognize that your partner is human and makes mistakes, just as you do.
This was the most important aspect for me. Looking at myself and trying to put myself into my wife’s shoes with things helps. I try on my part to not spend money but at times i struggle when my wife wants to spend something. It is easy for me to say no to things, but often times i give in. My wife is much better at saying no to items but i am the one who says to just get it. By looking at myself with the mistakes i am the one who needs to change.

3) Confess mistakes to your partner and work with your partner to fix them.
This past month there have been somethings that i wished i had not done, but my wife was there to say we can get through it, together. This chapter made me realize that we must work together to get through things and doing it together is the only way to do it.

4) forgive the debts and misdeeds of those who we care about and attempt to re-establish a connecting with them.
When i read this i found it interesting that sometimes money or other items, can get in the way of our relationship. We do not have anything that gets in our way with relationships in this matter, but the key that helped me realize is when you are in a position to help someone who you love that is in need you should do it, with no strings attached.

5) Set aside time to build and rebuild the relationships most important to us.
This past week i received a text message from a friend that i worked with for a very long time. We had lost contact with one another for some time. He is getting married and asked for our address. We talked how we need to get together and do lunch. Reading the book realized that over the years that i have cut short good and long friendships, do to my lack of not keeping in touch. We both agreed that it had been to long and that we both need to get together and do something. I have realized since i have been married that i often put my family way above others, which is good, but i often looser other ties i need.

Trent, i enjoyed reading what i have with your book. With reading tons of finical blogs and books this one i feel ranks near the top and one that i plan to read and refer to friends. Most books i have read go into numbers and how to just get yourself out of the debt you are in. I feel some books need to go into a mental thinking of getting out of debt. Your book hits this criteria on the head very well. I feel that getting out of debt the first step needs to be a behavioral charge first, then start crunching the numbers. This past month has been wonderful for my wife and i. We take more time to talk financial matters. When we are out shopping we always ask if items are needs or just a want. My wife always asks if we have the money for a particular item. I have come to the point where i need to be honest with her and not cover things up. I plan to re read the book again and continue to apply the principals that you have given to help with our journey out of debt. Your story has inspired my from the beginning and it is my wish that i can start to see changes in my life to see great things and take control of my life.

Christina
… on Chapter 17, “Holding You Back”

My husband and I made the pledge to get out of debt back in 2001. For the next couple of years, we tightened our belts and slogged through car loans and student loan debt.

We became debt-free except for our house, and it has opened so many doors for us. We were able to build the home of our dreams near our family. We’ve been able to purchase two vehicles with cash. We’ve been ready for emergencies and been able to fund home improvement projects with cash. We’ve been able to afford for me to stay home with our three boys. We’ve been able to give to others and save for retirement.

Some people think that frugal living is about deprivation. I see it as a tool to get to the life you want to lead.

So why would someone like me, who now has a frugal living blog called Northern Cheapskate, be interested in Trent Hamm’s new book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams?”

The answer is simple: Because we’re not finished yet. We’d like to get rid of our mortgage, do some traveling, and secure our retirement. That means we still have more work to do.

If there’s anything I’ve learned from our journey to being debt-free, it’s that there is always more to do and always more to learn.

The “Holding You Back” chapter of Trent’s new book really resonated with me. I’m a stay-at-home mom raising a 5-year old and twin 3-year-old boys. I’m the “chief financial officer” in our home – the keeper of the budget – the one who clips coupons and watches for ways to pinch pennies so that we stay on top of our goals. I started the blog to keep me focused on those goals and have been surprised to be able to earn a little bit of money from it – as well as getting the chance to explore writing opportunities.

Despite all these blessings, I still find myself slipping into a negative attitude about things. I can clearly identify goals for myself and my family, but I catch myself replaying negative tracks that stop me from making them happen: “I don’t have time.” “I’ll get to do that when the boys are in school” “I don’t have xyz thing that would make this such-and-such task easier.”

Trent’s book reminded me to ask myself why I’ve set up these impediments to my success. I realized that it’s not enough to make goals if I fail to take the action needed to complete them. I need to break these tasks into smaller ones and string them together to reach the bigger goals.

One of the things I’ve started doing since reading this book, has been to try to focus more on all of the positive things in my life. Each night before I go to bed, I try to think of three positive things about my day. This has really helped me stay positive and to focus on what matters most to me: my family.

I loved The Simple Dollar book just as much as I love The Simple Dollar blog because Trent is constantly challenging me to think about what things my family and I place value on. There’s no point in achieving financial success if you don’t know what you’re doing it for.

Paul
… on Chapter 8, “Frugality as Framework”

As I am a recent divorcee trying to get my life back in order, I felt that Chapter 5: Frugality as a Framework would be a good one to attempt to implement this first month. It has helped change how I do things and makes me regard each purchase I make more carefully. It has helped me purchase with a purpose, rather than on a whim.

For example: the fourth principle, to shop knowing exactly what you want, has forced me to be more purposeful in my food shopping. I have been making meal plans and food lists, not necessarily written down, but at least in my head. I know what I am buying and why I want that and how much to get before I enter the store. This has kept me from making unnecessary purchases, but also speeds up my shopping, as I don’t waste time wandering around the market trying to figure out what to get. It also simplifies things at home, as I know what I’m going to eat and how much I will refrigerate or freeze for later.

As another example, I have recently started training for a triathlon. This can be a very expensive sport. However, by applying principles 2 and 5 from this chapter, I have been able to not only distill the sport to what its essentials are for me to meet my goals, but also to put off purchases that I can save for, lessening the impact of choosing this ambitious goal.

By setting up a framework of frugality, by making that my mindset, I approach most purchases in a new light. I see things not as needs but as competing wants and take into account the impact on my fiances each want might have. For example, when mapping out my meal plan for the week, I acknowledge that I need to eat but what I eat is based on my wants, not my needs. I weigh the costs of certain meals and will perhaps decide to eat something fancy next week while eating more frugally this week, or try to find a cheaper way to make that meal that is normally fancy but costly.

All of this will impact me in the long term both by helping me save money but also by helping me feel like I require less money to begin with. It’s easy to live life fully without living it as a spendthrift. By taking these steps, I can see even more how to live each thing, even small regular things like eating lunch, with purpose. By adding these purposes up, I find that I am designing a lifestyle that will help me to live a fuller life in the long run. The framework of frugality is freeing: it frees us both from the demand to make more money because we use what we have wisely, and it frees us by allowing us to live a decisive life rather than in the captivity of circumstance.

Jess
… on Chapter 17, “Holding You Back”

The action steps in the chapter “Holding You Back” were really influential in shaping my mindset financially and personally. While my finances have improved leaps and bounds since reading your blog (and others) two and a half years ago, I occasionally stumble across a financial dilemma. Should I go out with friends for dinner, or should I stay in and cook? Where are my financial pitfalls?

Asking myself “why?” makes me pause and contemplate the options. Nine times out of ten I pick a choice that is financially smart, and occasionally I splurge—a friend’s having a bad day, I’ve had a bad day, a celebration, just because. The chapter reminded me that this questioning can be applied to the personal realm too. Why do I feel bad about a conversation that just occurred? Why do I feel so tired this morning? Why did I do x instead of y? Doing this, mostly subconsciously, has made me pick and choose smarter, go to bed earlier, and think positively.

It’s amazing how re-framing of something from the negative to the positive really influences our behavior. I have subtly become a much more optimistic person because of this effect. Instead of telling myself, “I can’t” or “I don’t,” I tell myself the reverse. Instead of, “I can’t run,” I told myself, “You can run. You need to take it slow and steady, and you can walk some too. You can read on how to prevent injuries.” It was just a matter of understanding my capabilities and expanding them. Today I ran 3.17 miles for the first time in my life, and I’m running my first 5K on June 26. The power of positivity is incredible! I already want to begin training for a 10K and beyond.

This chapter is an excellent reminder that we have choices. Sometimes choices can be overwhelming if we have too many options. But we always have a choice between being happy or being frustrated or sad—to some extent—and we almost always have a choice between spending and saving. I’m amazed to see how many people have convinced themselves that they “need” certain goods or amenities, though a change in perspective would really highlight the unimportance of those material goods.

On a final note, I address the issue of decluttering. I despise clutter. That being said, I still have piles of books, piles of papers, things that need to be addressed and taken care of. But decluttering matters in the long run: is this essential? can I cull it? what purpose does this serve? I even went so far as to declutter my book collection—something I never thought I would do. Instead, I have kept only the books that are most important to me and that I pick up again and again. I have culled expensive bookstore trips altogether and check books out at the library or retrieve them through PaperBackSwap.com. It’s really a matter of prioritizing your space, your life, and your sanity.

Mary
… on Chapter 13, “The Personal-Financial Boundary”

I put in to action the five steps from Chapter 13: The Personal-Financial Boundary. My boyfriend and I have been dating for two years and had yet to ever talk about money. We just went about doing our own thing; paying what we needed to, when we needed to. We never had extra money to go out to dinner or have a date night, let alone save for our long term future goals of a wedding or children. After reading The Simple Dollar I got the courage to sit down and have “the talk”. We talked about where we were financially, what we wanted to do short and long term. We talked about things we could do to increase the gap between what we were spending and what we were making. We discovered that we both had been borrowing money to a mutual friend of ours, that we both had some old debts. Getting past the fear of the conversation was the hardest part, and the tips in The Simple Dollar helped us get on the road to financial freedom!

Brenda
… on Chapter 3, “A Visit from the Black Swan”

I have been a regular reader of the Simple Dollar blog for over a year now. I have found incredible utility in many of Trent’s tips, tricks, and insight, and this book is no exception. There is a lot of material that has the potential to make my life easier and more financially secure, and that is incredibly valuable. However, I think that the most striking passage in this book is not a suggestion or an action item at all. I was most influenced by the anecdote where Trent details his darkest hour—the day he realizes what a financial mess he is in and the effect it will have on his infant son.

As an avid reader of personal finance literature, it very often seems to me that the person giving the advice has everything figured out. If you check your thermostat, negotiate your interest rates, and cut your cable subscription, you too can have all of this and more! Unfortunately, we all know that it doesn’t quite pan out so simply. Oftentimes, I have found myself despairing trying to negotiate the difference between the way I am and the way I “should” be. I think my acute perception of that gulf is what made this particular passage so meaningful to me.

See, by sharing the guilt and the embarrassment and shame of being in that situation, I realized that Trent didn’t always have it all figured out, either. At one point, he was in as bad of a financial state (if not worse!) than many of us. Many times, it feels like there is something essentially different about me—some sort of hubris or flaw—that put me in this situation. I think that maybe I am just not one of those people who can figure it out. But seeing Trent and reading about HIS despair and seeing what came of it tells me that that simply CANNOT be true.

The essential difference, as far as I can see, is merely effort and will. I am sure that Trent’s path to financial success was not easily envisioned during that fateful night. There was not a ten step plan that arrived on his doorstep the next day, and there was no “quick fix” to the situation. But what this book has shown me is that there is hope. The road will be messy and I will have to find my own way, but if Trent could feel that way and figure it out, I can harness my effort, and my will, and my ingenuity to figure something out, too. And that, honestly, is more inspiring than I can express.

More than anything over the past month, I focused on building a personal notebook. In the chapter “A Visit from the Black Swan” there is an action item that suggests carrying a notebook with you to collect information. I am the kind of person that navigates life via post it notes and I am constantly losing them and anxiously digging through my stuff for crucial information. I thought a pocket notebook would be a perfect way to cut that bit of chaos out of my life. In the same chapter, Trent suggests a focus on eliminating debt and automating savings. I thought that implementing a notebook would help to remind me that I am working on this in my life and focusing on where I spend my money. Also, Trent suggests using a 30 day list for any larger purchases in the chapter “Frugality as Framework,” and this notebook is the perfect place for that list to live.

The notebook I designed has several different sections. Primarily, I have been using it as a place to track purchases and keep track of my budget, my automated savings, and my bills, so I can make sure that I am paying everything on time, and so I have the information to process where my money actually goes. It’s pretty hard to change the way you spend your money if you don’t know where it is going in the first place. To start, I have just been writing down everything I spend my money on rather than trying to adjust spending habits. I have found that it is very helpful for me to observe myself before I start making massive changes. Having a predetermined place to write everything down allows me to do that.

Also, the notebook has a notes section for a variety of different information. I have a place to put books I encounter that I would like to read, and a place for long term projects, and a little calendar and a section for ideas. I am apparently too married to the idea of post it notes to rid myself of them, but the front of my notebook is a handy place to put a post it note with all the short term things I need to take care of. Plus, it’s been really nice to have someplace to check every time I need to hit the paperwork and it has saved me from having to take multiple trips from the library because I have all the books I wanted to check out in one place!

Overall, it’s been pretty simple to implement something like this into my life. I already carry a purse, so a small notebook isn’t a huge addition to my regular accoutrements. I love having one place to go to for everything, and even when I DO forget and write something down on a post it, at the very least, I can shove it in the notebook and it doesn’t get lost in my purse! This has been a GREAT way to see where I am spending money, and I like the fact that I can look back at my habits over the past month and try to adjust or eliminate superfluous spending.

Over the long term I expect to continue to use this notebook. I am trying to develop the habit of putting all receipts into it as I purchase things and then doing a notebook check every evening to eliminate any crucial to do items and update my register. In the scheme of things, this was a very easy fix for my information management needs! And portable, to boot!

I think that it would be fair to say that I have been on a personal quest for financial and personal integrity over the past year. After wallowing in my dead end job for a couple of years after college, I woke up to the fact that my 90k of student debt was going nowhere fast on my 30k a year salary. Over the past 12 months, I haven’t fixed things, per say, but I am at least heading someplace. I think the next step in my journey is to define “someplace” and start to design a lifestyle and a career that appeals to ME. I am hoping to tackle the chapter “The Power of Goals in a Random World” over the course of the next two weeks and do some serious and concrete planning from June 18-July 1 in order to round out the first half of the year 2010. I think that my efforts will be much more effective if I am working to get somewhere besides “not in debt.” I have found that I have been much more successful when I focus on the positive goal (i.e., focusing on being healthy and fit instead of losing weight) and I think that if I start working towards goals that will satisfy me, challenge me, and grow me as a person, some of the financial barriers to my debt repayment will ease as I open up new avenues for income and for community in my life. At any rate, I plan to use Trent’s action items in this chapter to start thinking about what the “ideal” someplace is for me and to start identifying things I can do to make that happen over the next six months to a year!

Jessica
… on Chapter 14, “Recasting Retirement”

In chapter 14, “Recasting Retirement,” Trent explains that life doesn’t end at retirement – it is truly a chance to put more time and effort into the hobbies and skills you didn’t have time for before. Sufficient planning for retirement is a necessity if you want to take full advantage of its opportunities. Here are the steps Trent recommends we take towards retirement, and how they’ve impacted me in the past month.

1. Spend some time thinking about what you would do with your time if you had a small supplementary income to help you live the life you wanted to lead as long as you stayed productive.
This idea was immediately valuable to me, simply because I hadn’t considered it before. Personally, if I had a supplementary income, I would put my efforts towards helping others. I enjoy organizing, and would love to start a side-business helping people declutter and get organized in their homes. I am also very passionate about helping parolees rejoin and become contributing members of society. I would love to set up a half-way house, and work very hard on helping ex-cons find employment.

2. Plan ahead for your second act.
I am a librarian – which means that I have a knack for organizing things, as well as multiple opportunities not only to network with other professionals, but also to expand on my communication skills. In order to plan ahead for my second act, I need to excel in my career and make as many contacts as possible. Already, this action item gave me the incentive to form a much-needed plan for working on the skills I’ll need during retirement. I’ve been able to come up with a list of opportunities I’ll need to jump on if they’re ever offered to me in the future, such as attending and/or presenting at networking events, conferences, and workshops. I’ve also started looking into becoming a prison librarian, because I feel very strongly that if a convicted felon has adequate access to an education, it’ll put them on the path to becoming contributing members of society once they have been paroled.

3. Take advantage of all matching funds in your 401(k)/403(b).
Thankfully, I already had this one covered.

4. Open a Roth IRA for additional retirement savings.
At the present time I’m not in a position financially to open or contribute to a Roth IRA, but I intend to do so as soon as my husband and I have the extra income. Right now we’re focusing on padding our sad little emergency savings account, as well as paying off some medical bills.

5. Make a master information document.
For the past month I’ve been working on this master information document, trying to pull together any and all information needed in case I were to pass or be severely incapacitated. In the long run, I know my husband and I will be very glad to have this information readily available to our family members. We plan on purchasing a fire-proof safe, so that we can keep this information protected in the event of a catastrophe.

Overall, I feel that these steps helped me to overcome some of my fears about retirement. In training your mind to always look forward, and try your best to be prepared for whatever life throws at you, we can feel secure in knowing that we’ve done all we can to deal with the inevitable bumps in the road. After reading this chapter, it is so nice to imagine what my life might be like when I retire – I look forward to a time when I can put my heart and soul into helping people with my passions and skills.

Michael
… on Chapter 10, “The New Career Rules”

The chapter that resonated with me most strongly was “The New Career Rules.” I put the chapter’s Five Steps into action for a few weeks and was really pleased with the results. The step that benefitted me the most was to discover what I am passionate about. I already engage in a wide range of activities, so that part wasn’t hard. The challenge was finding the common theme, which turned out to be writing. I want to be a writer. Step three was to join my passion with the transferable skills I already have. I was able to combine my GIS skills with writing to join a tech startup part-time as a marketer and publicist, something I’m really excited about. I also have been diligently pursuing freelance income as a writer. Finally, I’ve been writing every day, and I’m already improving. That’s really exciting for me because I wasn’t sure if I would be able to go from “good to great.” That’s step four. Step five, to turn my passion into a career, has not happened yet, but I have more options now. Because I’ve taken these steps, I’m more likely to be ready when I’m given a great opportunity.

Continue reading Living “The Simple Dollar” …

From The Simple Dollar.

June 17, 2010 | Filed Under Frugal Living | Leave a Comment

How to Sell Off a Media Collection

Back in 2006, when I hit financial bottom and realized I had to do something, one of the first things I did was clean out my closets and shelves and sell off a large portion of my media collection. Piles of CDs and DVDs and video games went flying out the door in an effort to simultaneously de-clutter (and make our tiny apartment more livable) and bring in some money to quickly beat back the debts facing us down.

At that time, I really didn’t have a good grasp as to how to optimally sell the items. I simply sold most of the individually valuable items on eBay (like DVD sets and CD box sets and the like) and the rest of the bulk went to a pair of used media shops.

Over the ensuing years, I’ve sold off more items myself and helped others sell off portions of their media collections. Here’s what I’ve found: there is no best way to get rid of these items. It all depends on your goals, how much return you want, and how much time and effort you’re willing to invest for those sales.

Here are six avenues I would happily follow to eliminate a media colleciton. The difference between them is more a matter of how much time you wish to invest in the sale, because the more time you invest, the greater your return will likely be.

If you just want it gone as fast as possible and don’t care about any return…
… take it to Goodwill.
The fastest way to get rid of a media collection is simply to box it up and drop it off at a Goodwill store. Get a receipt from them for the donation and use it for your taxes – it really won’t give you much money back at all per item, but it’ll give you at least a few pennies per item. Considering this will only take you a few minutes, it’s the fastest approach.

If you want a small return and have other stuff to sell…
… have a yard sale.
You’ll get more return per item at a yard sale than you will at Goodwill. Plus, you can sell other items. If you work with your friends, you can turn it into something of a social event as well. The drawback? It’ll eat a good portion of a weekend and you likely won’t sell all of the items you have available there.

If you don’t mind burning an hour to get at least some return…
… stop at a used media store.
Most cities have stores that will buy used DVDs and books and video games (and sometimes CDs as well). Selling them is often as easy as stopping in and getting the entire collection appraised, which can take thirty minutes to an hour. The offer will be more than you’d make at Goodwill but less than you’d make with the bottom two options on this list, but it won’t take too long.

If you want it done fairly quickly but don’t want to leave the house…
… list items on Craigslist.
The advantage here is that you can essentially sell all of the items without leaving the house. Just make a detailed list, post them on Craigslist, and see what you get. You’ll likely have to sell them in bulk as a collection and you’ll get yard sale level returns, but you’ve got a good possibility of finding a buyer who will come to your house, take the stuff off of your hands, and leave cash.

If you want a pretty good return, don’t mind spending some time now, but want the hassle over with in a few weeks…
… sell items on eBay.
I used Ebay to sell many of my individual items in 2006, earning a very solid return. There was a very significant time investment in doing this, as I had to create auctions for each item I wanted to sell, deal with questions from buyers on many of the items, deal with getting the payments for everything, then packaging up all of the items and shipping them out, then dealing with feedback. It was a big time suck, but it was all finished within about three weeks of listing the first item on eBay and I got a solid return on the items, much better than I would have received for the above items.

If you want the best return and don’t mind some significant time investment and some serious waiting…
… sell items on Amazon.
If time isn’t a constraint at all and you don’t mind selling tomorrow or six months from now, Amazon will get results that top even eBay on many items. Again, it takes a lot of work up front in listing all the items you’re trying to sell, dealing with buyers, and so on, but the return is the nicest. The only disadvantage over eBay is that with eBay, the item is gone in a week. With Amazon, the item can sit there for months, but you’ll have to deal with it, pack it up, ship it, and leave feedback for it whenever it sells. If you have a lot of items, you’re spreading out the hassle over a long period of time for another 20% or so more than you’ll likely get from eBay.

What’s the right answer? It’s all about the time you want to commit. The more time you’re willing to commit to it, the more you’ll get out of your items (how much more depends entirely on your items, of course).

Continue reading How to Sell Off a Media Collection …

From The Simple Dollar.

May 31, 2010 | Filed Under Frugal Living | Leave a Comment

How to Sell Off a Media Collection

Continue reading How to Sell Off a Media Collection …

From The Simple Dollar.

May 31, 2010 | Filed Under Frugal Living | Leave a Comment

How to Sell Off a Media Collection

Continue reading How to Sell Off a Media Collection …

From The Simple Dollar.

May 31, 2010 | Filed Under Frugal Living | Leave a Comment

How to Sell Off a Media Collection

Continue reading How to Sell Off a Media Collection …

From The Simple Dollar.

May 31, 2010 | Filed Under Frugal Living | Leave a Comment

How to Sell Off a Media Collection

Continue reading How to Sell Off a Media Collection …

From The Simple Dollar.

May 31, 2010 | Filed Under Frugal Living | Leave a Comment

Reader Mailbag: You Vote With Your Dollar

If you like a particular film and want to see more like it, see that movie in the theatre or buy the DVD or at least check it out from the library or watch it on a streaming service like Netflix. If you like a particular type of music, pick up a legal mp3 of it from Amazon or at least listen to it streaming on Pandora.

To put it simply, if you just complain about what’s available and buy nothing, you can’t realistically expect it to get better. In fact, if you put even a cent towards supporting stuff you don’t like (like going to a really bad movie), then you’re going to definitely get more of the same.

Your purchasing dollars are also a vote for what you want to see/hear/enjoy more of. Keep that in mind the next time you consider seeing an awful sequel or remake. Instead, go buy a discounted DVD of a really great movie from a few years ago and watch it at home with some friends.

So here’s my overall situation first. I am 26, unmarried, work for the Navy in a secure job as a GS-11. I’ve been here for almost three years now, and I enjoy it, but I’m not planning for this to be my job forever. Back in 2007, about a year after I had the job, I bought a small but comfortable house (~1000 sqft) with the extra cash I had saved for a 3% down payment. I have a decent interest rate (5.95%), no other debts (no school or car), put 5% of my check towards my TSP (with matching employer contributions of 5% as well, putting me around ~$10,000 there), save at least $600 a month, with a comfortable $13,000 in my “emergency fund” as of this month (in ING at 1.1%).

My question relates to my house. I am not sure if paying more towards the mortgage is a good idea at this point, since I doubt this house will be my final house. I do really like it, and it’s a good place for the moment, but all improvements I’ve done are with resale value in mind. I have plenty of other things I could think of to save for, or spend the money on. I’m sure you’d say Roth IRA, but I’m pretty hesitant and ignorant about investments/retirement stuff at the moment. Give me a break, I’ll get there eventually! I just worry that if I put money into my house, via payments towards principle on my mortgage, I won’t recoup it when I sell the house in a few years. Suggestions?
- Melody

Generally, when you make a mortgage payment, you don’t ever recoup the interest portion of the mortgage payment. Check out your statements – each payment you make has some portion going to interest and some portion going to principal. You’ll likely recoup the principal (assuming the housing market stays steady); you won’t recoup the interest.

I usually view mortgage interest as being roughly equivalent to rent on an apartment or other similar housing. In each case, you have a cost that’s not recoupable, but in exchange you do have a roof over your head for the next month. Thus, I usually encourage people to compare the interest on a mortgage against the cost of the rent and live in the place that is cheaper.

Don’t worry that much about how you specifically save. You’re far better off saving $100 in a savings account than saving $80 in virtually any investment in the world (at least for timeframes less than 10-15 years). What’s important is saving.

Should you sell? I don’t know for sure what your housing situation is from your email. If I were you, I’d look at rental options (living on the base, perhaps?) as compared to the interest portion of your monthly mortgage payment. Your decision will probably follow from there.

I am an avid reader of TSD. How do you generate such article volume? I know you are a writer. I also know it takes time to create the quality and quantity that you post.
- Peyton

Part of it is practice. I simply write a lot of words each and every day, so over time it just becomes familiar and natural to me. It’s much like a person who jogs several miles every day – it’s easy and routine for them, but incredibly difficult for a person not in good shape.

Another part of it is that I intentionally write for The Simple Dollar in a conversational tone, which is easier to write. I make an effort to write in a way that is similar to how most people speak, more or less. This makes writing seem friendly and familiar, but not always highly authoritative. It does have the advantage of being quicker to produce than a polished, finished article a person might find in, say, The New Yorker. I get criticised for this sometimes, but I know why I write with this style and who I’m writing for, so I don’t really care about that criticism. I could certainly write such polished pieces (and sometimes I do), but I think this style works much better for a frequently updated blog called “The Simple Dollar.”

Another piece is the routine of writing. I keep a notebook (or some kind of note-taking equipment) with me constantly. Whenever I have an idea, whether it’s at the grocery store or at the doctor’s office or after waking up in the middle of the night after a dream, I jot it down immediately with as much structure as I can give it. Later, when I sit down to write, I usually have more ready-made ideas to choose from than I can write.

I’d also add in the fact that I read voraciously. I read two or three books a week. I read tons of articles and magazines and newspapers. Whenever they give me an idea, I jot it down somewhere and I usually follow up on those interesting ideas. If I see a word in print I don’t know or an idea I don’t understand, I write it down and look it up later. Simply put, I keep a fairly high flow of information going through my head and it certainly helps when it comes to writing as much as I do.

Currently because of costs associated with my son’s autism therapy (which we had to pay for out of pocket until just recently), a couple of cross-country moves and some plain stupid spending in the past we are in alot of debt. Right now we have approx $55,000 in credit card debt, $26,000 at 12%, $21,000 at 14%, $4,800 at 16% and $3,000 at 24%. We also have a personal line of credit with my credit union of $20,000 at 12%. Plus I have a $1000 mortgage payment and a $300 second mortgage payment. At this current time we are about $800 in the hole every month. I have been covering this by getting money from my parents. My wife will be hopefully be getting a teaching job this August which will really help things out. My concern right now is my parents really can’t afford to keep giving us money for the next 3 months and I really don’t know where it will come from. My credit is ok because I do not have any late payments on any of my debts but of course I get killed on the fact that I have so much credit card debt. I have called the credit card companies and asked for lower rates but keep getting turned down. I have tried to get a new card with a low rate to do a balance transfer but have been turned down. My question is if I can’t make some payments for a couple of months should I call the credit card companies and explain the situation or will they not care? I basically just need to survive the next 3 months until my wife gets a job. I am desperately trying not to ruin our credit and want to be able to start paying down this debt.
- Chris

If I were you, I would simply be late on one of the credit card debts for a while, perhaps on a rotating basis to preserve my credit as best as I can. Your credit is already suffering because of your large amounts of outstanding debt (I’d imagine that your debt-to-credit ratios aren’t good).

Remember that a late payment is usually not reported to the credit agencies until you’re thirty days late on a payment. So, one method for doing this might be to keep most of the debts up to date (to avoid late fees), but allow one or two of them to be 20-25 days late before paying it. Yes, you’ll incur late fees, but it shouldn’t affect your credit.

You might also want to try stopping by a local credit union, laying out your entire situation, and seeking a personal loan to help consolidate your debt. This would work better if you had some form of collateral on the loan.

I really struggle with how much I should spend on an engagement ring for my girlfriend. We have dated for just over two years now and I’m starting to feel like the time is right. We live together, and I feel like she is the one. The thought of buying the engagement ring is overwhelming given the cost. How much is appropriate to spend? I have heard the conventional “norm” is three months of your gross salary. Which for me, is about $14,000 (Salary-[$55,000 / 12 months * 3 months] =$13,750). I think this is ridiculous quite honestly. On the other hand, I don’t want to be the cheapskate and I think something in the vicinity of $4,000 to $7,000 is pretty cheap. I want my girlfriend to be proud of the ring, but also realize that we can certainly “upgrade” it as time goes on. What do you think is appropriate?

I recently got done paying cash for my MBA program which I completed last spring and I also came up with a 15% down payment for my home. I was fortunate not to have any student loan debt from my undergraduate studies and my only current debt is a $160,000 mortgage loan and a $5,000 car loan which I plan to have paid off by this time next year. I have steered clear of credit card debt and plan to stay that way. I know I am still pretty young, but I am honestly a little tired of monthly payments and want to avoid debt at all costs. Given my current liquidity situation outlined below, I think I’d almost have to finance this purchase. I know of a couple of places with zero interest financing for two years. I’d clearly like to avoid financing, but I just don’t see how I can avoid it. I have $10,000 in an FNBO Direct account which I rarely touch ($8,000 from the First Time Homebuyer’s Credit plus a little extra), another $2,500 in a savings account at my brick and mortar bank which I contribute about $200 per month to. I consider this my “emergency fund” that I tap for car repairs and other unexpected expenses. I have about $25,000 in my 401k plan (which I think is pretty darn good considering my age and how bad the market has been) and another $6,000 in a Roth IRA I started about two years ago. Ideally, as my income increases and my car payment disappears, I want to start maxing this out.

So, as of right now, I have about $10,500 in cash plus whatever I have in checking at the time. What are your thoughts about how much I should spend? I certainly expect my income to increase (I know everyone says this, but given the industry I currently work, MBA, professional certifications I am acquiring, it is almost a given). I want to do the right thing. I want a ring that my girlfriend and I can both be proud of, but at the same time, I don’t want to be behind the proverbial 8-ball financially. Does this make me selfish?
- Martin

You’re asking this question of someone who gave his wife-to-be a $50 sterling silver engagement ring.

How did that go over? I sat down with my wife-to-be and we just talked about all of this. The discussion went like this: “I have $X,000 to spend on an engagement ring and I’m happy to buy you something wonderful. However, if you’re happy with a $X00 ring instead, we could use that remaining money to pay off the car/make a house down payment/have a great honeymoon. What do you want to do, honey?”

I wouldn’t really worry about being “proud” of the ring. One big key of personal finance success is stop caring what other people think.

If you’re happy with and she’s happy with a $50 sterling silver ring, get that and save your money for something else. Just sit down with her and talk about it.

One of my medium-term goals is to go back to school for my PhD. I’m 25, completed my MA in 2008, and wanted to work for five or six years before going back into academia. While there are definitely options that will help offset the cost of working towards a PhD, such as a teaching position or research assistant, I want to save towards the expense but I’m not clear on the best way to do it. I’ve read about 529s, but I can’t figure if it’s available only for parents saving for their kids, or if adults saving for their education can do one as well. What would you reccomend?
- Sandy

An adult can absolutely start a 529 for themselves, and it’s probably the best option for you. It allows you to sock away money and not have to pay taxes on any interest earned as long as you use it towards your education. I’ve actually started an account for myself at College Savings Iowa (for a long-term goal of the University of Iowa’s Writer’s Workshop).

My suggestion would be to use a “targeted” fund when you start investing – most 529s have these. What “targeted” funds do is that they gradually scale back from aggressive investing to conservative investing as you grow closer to your target date for returning to school. Given that you seem to be three to five years out, you’ll already be fairly conservative (a good thing, because the stock market isn’t good for short term investing).

Good luck – and congratulations on your decision.

My husband and I are 29 and 25 years old respectively and I would like to think we are on the right path financially. We got into $8,000 in credit card debt when we moved to New York City three years ago but a combination of aggressive saving and job promotions/raises dug us out of the hole. I’m realizing that being comfortable financially can be just as stressful as being in debt — I’m always second guessing what I’m doing with my money.

Some vitals: we have $20,000 in an ING savings account (for emergencies as well as a down payment on a house someday), we both contribute 5% to our 401ks at our jobs, I have $4,500 in a Roth IRA and add $100 a month to it, we have $2,000 in a Schwab brokerage and no credit card debt. My husband’s monthly income after taxes is $5,400. Of that, rent is our biggest payment, at $1,400. Luckily we are able to save my entire paycheck (about $2,000 a month after taxes) to our ING savings account. Here’s the clincher: my husband is getting his MBA in addition to working and, when he is done in a year, will be carrying about $80,000 in student loans. We have started paying about $600 a month from his paychecks to the highest interest loans.

Here’s my question: Should we continue to put my paycheck in savings for a down payment on a house or should we start aggressively paying off the loans? What would be your priority? We hope to buy a home in the next five years and would like to have enough for a 20% down payment obviously. But the idea of paying off loans early is appealing as well. Kids (at least three) are also in our future. Any advice would be appreciated.
- KJ

From my perspective, the biggest factor is where you’re intending to buy a home in the future. Are you going to be buying it in a New York suburb where you’ll be paying hundreds of thousands of dollars and your monthly housing costs will go way up? Or are you moving somewhere else where housing costs will be way lower?

If your costs will be lower, you’ll likely be able to find a home that won’t escalate your monthly housing costs. In that case, I wouldn’t change a thing about what you’re doing right now, assuming the rates on the loan are reasonably low (8% or lower or so). If it’s way above that, focus on the debt first.

If your costs will be really high, you’re going to need to maximize your monthly cash flow to pull it off, and the best way to do that is to eliminate your debt as fast as you can. Hammer his student loan debt HARD and get rid of it quickly.

I just graduated from college (with no student loans to pay off) and am looking to start up my own freelance web design business. Admittedly I know plenty about my career but almost nothing about running a business and a lot of the tips I’ve gotten have raised as many questions as they’ve answered. I know I’ll probably want to register as a LLC as well as needing to set up my own bank account for the business. My biggest concern is the money management aspect of it and most pressing on my mind is how to avoid getting slammed come tax seasons. I save my receipts for business based purchases but I also know that’s only a start. Do you have any advice and tips about how to start off on the right foot?
- James

It really depends on what this business is going to entail. Is it just going to be you or are you going to be hiring a team? When some people hear “small business,” they imagine several employees, but I’m not sure that’s the case here. Also, do you have a lot of clients lined up or are you going to be starting completely from scratch? Are you going to have a separate office or are you going to be doing this from home?

If it’s just going to be you and it’s going to be very simple at the start (which is what I think you’re saying), I would just do it as a sole proprietorship at first until I was sure that it was going to take off. Basically, that means you just keep track of your income and expenses on your own, don’t actually form a LLC, and file the taxes on this as an extension of your personal income tax.

If it’s going to be a larger operation, you should seek out forming an LLC. Transitioning from a sole proprietorship to an LLC is pretty easy, provided you were keeping track of things as a sole proprietorship.

I have a home which is paid for. Also have about 300K for investment. Was thinking of buying second home and converting first to a rental. Have been looking for deal but yet to find good one. In mean time where can I invest which will give me fluidity to take out if I find a home while giving me secure and better than saving or CD interest rates
- Vikram

If you want liquidity and security, you pay the price of not having a strong return.

All investments have some amount of liquidity, some amount of security, and some amount of return. The reason people diversify their investments is because no investment is great in all of these areas.

A savings account is liquid and secure, but returns poorly. Stock market investments return well (over a long time scale) and is fairly liquid, but isn’t secure at all (remember 2008?). Owning property usually returns fairly well and is pretty secure, but is very illiquid.

There really isn’t anything out there that is liquid and secure that beats a savings account. You should just shop around for a while. You can find banks that offer savings rates over 3% right now.

Currently my husband and I have a 2 bedroom townhouse that I bought back in 2006 before we even met. I have a 30 year mortgage at 6.25%. The monthly payment, including insurance and property taxes, is $837. We are hoping to start a family soon and would likely want to move into a house with its own yard in about 5 years. We are currently putting $400 a month into a saving acoount for a down payment for this future home. We should be able to bump this savings up in the coming months as we will both be getting raises this year. We do not have much equity in the townhouse, but it has held its value since the purchase in 2006. Luckily there was no housing bubble where we live! Would we be better served paying down the mortgage as quickly as possible instead of just parking the money in an ING account? Maybe save half and pay down the mortgage with the other fast of the savings? I’ve looked for advise on this subject, but almost everything I’ve found assumes that you are saving for a down payment on a first home. Thanks so much for any insight you can provide.
- Lauren

Provided you have a healthy emergency fund, the best thing you can do with your money is to put it wherever you’ll get the best interest rate. Since your mortgage is at 6.25% and most savings accounts earn 2% or less right now, you should be paying down that mortgage.

Of course, this could change over time. Within the last few years, some banks have offered interest rates over 6% on their savings accounts and this could easily happen again during the later years of the next economic upturn. If you can find a savings opportunity that returns more than 6%, you should sock your money away there.

Is there any advantage/disadvantage to getting a 30 year mortgage and planning to make higher payments each month than getting a 20 year mortgage? I think of the lower payment as a bit of a safety net should something happen, but would rather pay less on the house in interest.
- John

First of all, a 30 year mortgage will usually have a worse interest rate than a 20 year mortgage. This means you’ll spend far more in interest over the life of the mortgage than you would with a 20 year mortgage.

Second, most people don’t consistently pay “optional” bills. When you realize that you’re spending $200 a month (or whatever amount it is) on an unnecessary bill, you have a very high likelihood of finding something else to do with it, even if your intentions are good.

The best bet is to simply get the mortgage with the lowest interest rate, provided you can make ends meet on the monthly payments.

When you first started doing reader mailbags, they were about 50% personal finance and 50% questions related to other stuff like pop culture and politics. Lately, they’re almost all personal finance. What gives?
- Kenny

I’d say the balance is about 80%/20% now, but there’s still a definite trend in that direction.

Why did I do this? Quite often, the non-personal finance questions ended up in flamewars with name calling and other rude behaviors that simply took away from the readers who wrote in with genuine personal finance situations and were asking for genuine help.

So, as time has gone on, I’ve moved the non personal finance stuff to other places, like TrentHamm.com. I still touch on such topics here, I just give a lot more room to the readers that actually need help.

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.