Where Do You Want to Be In Five Years? How Do You Get There?

I’m going to share with you excerpts from seven different emails I’ve received from readers in the last few days.

Kenny:

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

Scott:

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

Angela:

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

Monique:

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

Em:

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

Raghu:

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

Sean:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Good luck.


Continue reading Where Do You Want to Be In Five Years? How Do You Get There? …

From The Simple Dollar.

March 9, 2010 | Filed Under Frugal Living | Leave a Comment 

Reader Mailbag: More Time for Reading

I find that, whenever I get busy with things in my life, the first thing I cut out is the hour or two a day I spend reading. If I do that for a few days, I begin to intensely miss it.

Just yesterday, I was talking to a friend of mine who’s a stellar athlete. He expressed to me the exact same thing about training – if he skips a couple of days due to personal issues, he REALLY misses his daily hours in the gym.

Exercise your body, exercise your mind, I guess.

I’ve always been very financially responsible and rather frugal. I might occasionally allow myself to purchase a bottle of wine at the end of a week or a new book once a month or so, but I’ve never been a spender. I very much believe that I’d rather struggle (not that my husband and I really struggle) now and relax when I’m older.

However, the last year has brought considerable change in my attitude. In the last year, [my family has experienced several tragedies]. Due to these things, I’ve become a much more in the moment liver, than living for the future. I’ve spend quite a bit more money lately than I ever have before. I’m not spending out of control or over our means, but I’m still concerned.

I had such a tight string on my wallet for long it felt good to just buy stuff for the first couple of months. But now I’m afraid I’m going to fall into some kind of spending spiral. I would like to find a balance between incredibly frugal and lightening up a little bit. I don’t know what tomorrow is going to bring I don’t want to live entirely in the future any more. I need to enjoy the life I’m living now too. Do you have any advice?
- Dana

I edited Dana’s question a bit to eliminate some of the more personal elements, which weren’t really relevant to the issue at hand but might be embarrassing if someone she knew were to read the question.

I don’t see anything to be concerned about in your email, Dana. As long as the things you’re spending your money on in the now are things that are genuinely important to you, there’s no problem with spending money today.

Of course, you should always keep a few basic principles in mind. Even if you’re spending more than before, you should still strive to spend less than you earn – keep that as a firm cap. You should also reflect on the things you’ve spent money on to make sure that they’re bringing you genuine happiness.

From your email, you’re clearly already doing the reflecting, and it seems as though you’re spending less than you earn. All that’s happening is that your values are shifting a bit due to changes in your life – and that’s completely normal, even healthy.

We have $5800 in a money market account for savings. After a recent look at that account, I noticed that it’s returning 0.5%. Obviously, I want to improve that rate of return. I’ve contemplated a CD ladder, but CD rates at my credit union are well below the return I get on my checking account (with very simple stipulations to meet) that gets me 3%. Is there any reason to not move this money into my checking account? We have another $4000 in savings in the checking account currently and don’t have a problem with keeping the mental separation of savings vs. spending money being in the same account.
- Joseph

The entire purpose of a CD – and thus a CD ladder – is to earn rates that exceed what you can get in your checking or savings account in exchange for losing some liquidity (i.e., you can’t just remove money from a CD at will without paying a penalty).

If you’re earning more in your checking account or savings account than you can earn with a CD, then you shouldn’t have that money in a CD. It’s earning less (a negative) and you have less access to it (a negative), with no corresponding positives.

You’re doing things right.

I have been reading a while and looked around a lot on the “should I cash out my 401k to pay off debt?” question. I’m still stuck as to whether I should or should not. I have reduced my expenses, stopped using cards, have a $1,000 safety fund/savings, but still have $18,851 in credit card debt. I am not depositing in to my 403b now so i can use that to pay down debt, but at this rate, it looks like 5 years for all of it. I have a 401K from an old job valued at about $11,380 right now. I was thinking about waiting till it’s at about $12k, that way, after tax and penalty, I would have enough to pay off one card, $7791 at 19.99% ! and then snowball the other card payments from highest interest down and that would take overall two years (or less depending on refunds etc that could be applied). I’m in a better paying job now and employer is putting a tiny amount in to 403b even though i am not contributing right now. I am 32 yo, have a condo and car payment, and once credit card debt is paid off (about 500 a month), i could put a lot into savings, start an IRA, and resume 403b contributions. I guess I just want to see some more rapid progress on paying off this debt, but am I betting my future by cashing out the 401k?
- Christopher

If I were you, I would not touch the 401(k) and I would also start contributing more to the 403(b), even if it adds some time to the debt payoff.

Why? You can never get those contributions back into your retirement plan. If you take that money out of your 401(k), you have permanently hindered your retirement. The only way to approximate it is to contribute quite a lot extra to your 403(b), but that would be even later, after your debts are gone, so it would require a lot of contributions.

In fact, I would contribute to my 403(b) up to the top of the employer’s match, starting right now. Again, you can’t ever get this contribution opportunity back – it’s free money that your employer is handing you that you’re turning down right now.

Yes, your credit card debt might take a little longer, but a 20% loss on your credit card interest rate is well worth a 100% gain on your 403(b) contributions from the match.

My husband and I are trying to decide when we should start a family, he is 28 and I am 27. One of us plans to stay home with the baby so we need to be able to live off of one income. I am a registered nurse and he is a Commercial Truck driver with a class A. The issue is we have debt and need to fix our house up, our current plan we would have this done in 2 1/2 years, 3 1/2 and we could have no mortgage. We are starting to feel this is too long to wait to try to start a family. Total income 2009 $90,000, debt: CC $4500 9.8%, car $14,000 7.8%, student loan $24,000 5.5%, Mort. $42,000 6%, about $15,000 needed in home repairs. In 2009 we paid off $12,000 in CC debt and put $5,000 into our home. We both do 6% of our income to 401K, emergency savings is $2000, and I am furthering my education and we are paying cash for it. I am starting to feel that we are overly preparing to have a family. Any thoughts?
- Lindsay

I think you should move forward with your family plans when you’re sure you can make it financially after having the child. For you, this means not only adding the child costs to the equation, but it also means one of you staying home with the child.

You should spend some time planning out exactly what will happen in that case. You mention that you’re getting further education (to be a nurse practitioner, I’m guessing?) – if you’re going to be the one that stays home with the child, cut that expense right now.

It’s also worth noting that even when you decide to go forward with trying to have a child, that child won’t arrive in a stork tomorrow. Even if you conceive almost immediately, you still will have most of a year before you lose one or the other of your incomes.

My suggestion? Right now, make up a very detailed plan for how you will do things after the child is born. How much income will you have? Will you be able to cover the bills? Who will stay at home with the child? How many years will that person stay at home? Some of these questions may alter what you’re doing with your money and time right now – if you’re staying at home, for example, you may not want to invest a lot of money into furthering your education at the moment.

If it looks like you could make it with the way things are right now, then I’d start trying to conceive. If it doesn’t look possible, I’d wait a bit longer, then re-evaluate.

There’s a lot of conflicting information out there and I’m curious what you would do. When I go on vacation I often rent a car and never know what to do about insurance. I don’t own a car at home and therefore don’t have any auto insurance policy for myself. I have the option of getting non-owners auto insurance from my insurance provider for $20/month but, based on the explanation of the coverage, my understanding is that all that covers is medical and damage liability if I hit someone else. I do have a visa that could presumably provide collision and damage insurance beforehand but doesn’t cover liability for another person if I collide with them. However, I’m not ready to pay $240/year so that I have that coverage for the 2x a year I drive a car. What do you suggest I do when I rent a car? Just use my credit card coverage? Get one month of liability coverage (if that’s even an option)? I paid an arm and a leg last time I rented because my parents and boyfriend freaked me out and demanded I get it but from my research they don’t understand what sort of coverage I need either. What would you do in my situation?
- Arlene

Most likely, you won’t be able to buy that policy on a month-by-month basis. Most policies are drawn up to cover six months or a year and your monthly payments are fractions of what you owe for that policy.

My first suggestion would be to look at the insurance offered by the rental companies. Typically, such policies are redundant for people who have auto insurance themselves, but they may not be redundant for you.

I would also take a look at what exactly your credit card offers in terms of coverage. It seems that your card just offers liability coverage, so I would look at the company you typically rent from and get quotes on insurance for the passenger and rental car. This will probably be in the ballpark of $10-15 a day, so this will save you money if you rent only for short periods, but if you rent for two weeks a year, it won’t be much of a savings.

If you have a well-stocked emergency fund, you may want to consider just having liability coverage (as provided by your card) and calling it good enough. After all, if you’re not driving the rental too much, your risk of a major accident is relatively low – and that’s what we’re talking about here, risk.

I have been working as a software developer for around two years. It’s a steady job and pays fairly well and I do enjoy it at times. I find though my concentration span really holds me back from enjoying this more and from progressing in my programming ability. Sometimes I can almost do a full day doing no work. I just can’t keep focus long enough.

At first I wondered if perhaps this job just doesn’t interest me enough (i.e. perhaps lack of concentration is due to lack of enjoyment and not vice versa) but looking back this is something that has plagued me all my life and I think it really held me back at school. I even struggle reading a couple of pages of a novel (that I find interesting) without having to go back and read. my mind just starts thinking of other things even while I’m saying each word in my head!

I haven’t received any warnings about the lack of work I sometimes produce (yet) but would like to get on top of this so I don’t stay at the same level of ability all my life and narrow my future horizons.

I have recently pondered the idea of hypnotherapy but to be honest I’m a little scared of this. Do you have any suggestions to improve my concentration span?
- Ben

I’ve thankfully never really had this problem. In fact, I tend to have the opposite – when I bear down on a task, I can lose all track of time and even reach the point where I literally don’t hear people around me.

Anyway, one of my mentors once suggested a five-prong plan for maintaining concentration. He used the word FOCUS as an acronym for it. I’ve seen variations of it floating around online, but here’s how my mentor defined it.

Five more means that if you’re doing something and feel your focus wandering, always challenge yourself to do five more. Five more pages. Five more minutes of coding. Five more emails. It’s like endurance training for your mind.

Only the thing you’re working on means that you should try to look at the task you’re doing with fresh eyes if you find your mind wandering. Look at what you’re doing and ask yourself if you’re doing it well or why you’re doing it. It often refreshes the task.

Complete the little things now means that if you have a task you’re putting off, start working on it immediately. This helps with concentration because a task that’s been put off is a task that’s weighing on your mind.

Understand the details means that, instead of thinking about the big picture of the project you’re working on, you should try to break it down into the smallest detail you can, then just focus on that detail. It makes the task seem much shorter and manageable, which again helps with concentration.

Silence means that you should cut off interruptions. Unplug your phone. Close your web browser. You can even go so far as to rest your face on your hands and cup your hands around your eyes so that they function as peripheral blinders.

Good luck!

I’ve been reading The Simple Dollar for about a year now and really enjoyed the series you did a while ago on cooking. Quick question, I’ve tried Eggplant several times (never as Eggplant Parmesan) and not had much luck, however I found a recipe for Eggplant Parmesan and wondered if you’ve ever attempted to cook it at home. The particular one I found says to peel the eggplant and I’m wondering if that’s the reason all my other eggplant attempts have failed. Any thoughts?
- Shawna

You didn’t really specify what the problem was with the eggplant. For the most part, the peel makes little difference – it’s mostly a matter of personal preference, like a potato peel (I prefer them, myself). My guess is that the problem is not with the peel, but with the sweating.

Sweating? Try salting the outside of your eggplant about a half an hour before you tend to use it. Just take some table salt and rub it on the outside. When you’re ready to use it, you’ll find that the outside of the plant is now moist with some very salty and bitter water. Rub the water off and slice it.

I don’t know if that’s the solution for your problem, because I’m not entirely clear on what’s wrong with the eggplant when you cook it. I’m just assuming that the problem is bitterness.

It may also be that you simply don’t like eggplant, for which there is no real cure other than just trying it in different ways on an irregular basis.

My husband and I are in our late 20s and don’t yet have any kids but are thinking about it – we’d like to have a baby in the next year, but obviously there are no guarantees on timing. I’m currently making about $45k and my husband $75k; when we have a baby we plan on me staying home, so we’ll be losing that income.

We already have an emergency fund with 6 months of expenses in it, we’ll be paying off my student loans in May (that bill had been about $100/month), and after that we’re debt free except for our house! We currently have a budget excess of about $2500/month (give or take depending on the month) that we’ve been putting toward my student loans, and I am on the hunt for my next financial goal to knock out. The only retirement savings we have is a 401k for my husband that we started this year, putting 4% of his salary into it. Looking ahead, I think we’ll have about $20k extra to play with this year, and this is where you’re advice comes in. We are definitely going to open an IRA (undecided as to traditional vs Roth) and with the max contribution of $10k between us for the year, that leaves an unaccounted-for $10k or so.

Option 1: We only put 10% down on our house when we bought it almost two years ago, so we’re paying PMI of about $60/month. We have $16k left to get to the 80% mark where we can get rid of PMI (and potentially adjust our monthly payment to reflect the new principal). We could put the other $10k this year toward our mortgage principal and get the last bit paid down early next year, so provided we don’t have a baby and drop income in the meantime, we could be PMI-free by next year this time.
Option 2: Alternatively, since we’ll have a more limited budget when we go down to one income, we could put the $10k in savings to put into the IRA in 2011. We’ll be able to save something when we have one income, but while I’m not sure what our budget will look like with a baby, I’m almost positive we won’t have $10k a year to put toward retirement (beyond the 401k).

That’s the scoop – thoughts?? Also, input on whether to do traditional IRA vs Roth IRA would be helpful, I think. We’re in a very blessed and pretty fantastic stage of life right now, and really want to take every advantage that we can while we can.
- Marisa

As I mentioned above, the first thing you need to do before considering going ahead with a child is to make a post-baby budget. Spend some time really contemplating how your life will look at that point. Is one of you going to stay home with the child? What will child care costs be like? Do some research and find some real answers here, then figure out what things will look like financially for you. I encourage you to estimate high, because it’s going to cause a lot less problems than estimating low will.

If you make that budget and decide that things look doable but close post-baby, put that $10k into savings for now. It may wind up being a “baby emergency fund” as you find that there are lots and lots of baby expenses you didn’t consider. If you get through 2011 without a child, then contribute to the IRA.

If you make that budget and decide you’re good to go with a fair amount of room to breathe, I’d sink it into the mortgage, mostly to get you below the PMI mark, which will make breathing even easier for you.

In the two years after graduating college, I learned a fantastic lesson about living on credit cards (badidea!) and living without health insurance, and had to go through CCCS to pay off the impressive debt that I accrued– About $20k in credit cards and $10k in medical bills. During this time, I had to sign a agreement with CCCS that I would not use any credit card until my debt was paid off.

Now I’m 28 years old, single, working a job with great medical insurance, have paid off those medical and credit card bills and have not used– or even opened– a credit card since I was 22 years old. I’ve been putting aside a little money each month into an emergency fund and into retirement, but otherwise I’m basically living paycheck-to-paycheck.

Understandably, I have a mild phobia of opening and using a credit card, even though I’ve matured and learned a lot since my wild (stupid) days. However, it seems like a credit card would make my life a lot easier at times– like when I have to pay upfront for a business trip in which I will be reimbursed, or if I loan a friend money and I am scraping by at the end of the month.

Would you recommend that I open a new credit card and pay it off each month? And if so, what advice can you give me about going back into the world of credit?
- Jamie

If you’re truly living paycheck to paycheck, the first thing you need to do is either increase income or cut spending (or, ideally, both). Perhaps you need to change your living situation or your energy consumption or your food consumption (do you constantly eat out?). Maybe you can get a second job. Whatever it is, you need to be spending a bit less than you earn or you’re always in danger of getting into financial trouble when something unexpected happens – and it will happen.

If I were you in this situation, I would get an extremely focused credit card that you use for just one specific purpose so that you’re not tempted to use it outside of that context.

The idea that comes to mind for me is a credit card (Visa or Mastercard) offered through a gas station chain that you frequently use. Sign up for one of those cards, but use it ONLY for gas. The giant gas chain logo on the card should be a strong reminder of that. Then, at the end of the month, pay off the bill in full.

This simple step will allow you to re-establish your credit without opening the floodgates. Just keep that card for one purpose and one purpose alone.

I would not use it for any other purpose – don’t “pay up front for trips” with it or anything like that. Use it simply as a means of improving your credit and maybe reducing your gas costs a bit.

My husband and I own a reasonable home in Pennsylvania, and are hoping to move to Maryland to be closer to my family in the next couple of years. We also just welcomed our first child about 7 months ago. I am a full-time working mom and am growing weary of being away from my home and family 10 hours a day, but my family relies on my income (which is significantly higher than my husband’s: $56k to $38k) and my health insurance.

My question is sort of two-fold:

(1) Is it selfish of me to want to stay home and care for my family? I have done contract work in the past and could make up a great deal of my salary, but not the health insurance, which is much more expensive through my husband’s job and very limiting in its offerings.

And (2), would it be a bad idea to rent for a while once we move to Maryland in order to save money? Housing is substantially pricier there, so we were planning to build on family land, but that could take a while since my husband would do much of the building himself, while also working a full-time job.
- Jen

(1) It is not selfish of you to want to stay at home with your child. Having a child is an intensely personal and emotional thing and, for many people, staying at home is something they strongly desire simply because of the emotional attachment and quality of care that they would provide to the child. It’s your child. You love that child. Wanting to care for that child and protect it is completely normal.

(2) It is never a bad idea to rent housing, particularly if you don’t plan to live in the house for seven years or more. It’s the first years of the mortgage that are the most painful ones – most of your mortgage payment goes towards interest and the power of compound growth on your home’s value really hasn’t had time to work yet. If you can find a good deal renting, renting absolutely should be on the table.

As for the building, a close friend of mine did that (and I’ve asked him for a guest post to discuss it). It can work and it can save a lot of money, but you really need some serious passion about carpentry and plumbing and electrical work to make it happen.

Good luck.

Got any questions? Email me or leave a comment and I’ll try to answer it in a future mailbag. Please note, however, that I get many more questions than I can answer in any sort of reasonable mailbag length.


Continue reading Reader Mailbag: More Time for Reading …

From The Simple Dollar.

March 4, 2010 | Filed Under Frugal Living | Leave a Comment 

Reader Mailbag: More Time for Reading

I find that, whenever I get busy with things in my life, the first thing I cut out is the hour or two a day I spend reading. If I do that for a few days, I begin to intensely miss it.

Just yesterday, I was talking to a friend of mine who’s a stellar athlete. He expressed to me the exact same thing about training – if he skips a couple of days due to personal issues, he REALLY misses his daily hours in the gym.

Exercise your body, exercise your mind, I guess.

I’ve always been very financially responsible and rather frugal. I might occasionally allow myself to purchase a bottle of wine at the end of a week or a new book once a month or so, but I’ve never been a spender. I very much believe that I’d rather struggle (not that my husband and I really struggle) now and relax when I’m older.

However, the last year has brought considerable change in my attitude. In the last year, [my family has experienced several tragedies]. Due to these things, I’ve become a much more in the moment liver, than living for the future. I’ve spend quite a bit more money lately than I ever have before. I’m not spending out of control or over our means, but I’m still concerned.

I had such a tight string on my wallet for long it felt good to just buy stuff for the first couple of months. But now I’m afraid I’m going to fall into some kind of spending spiral. I would like to find a balance between incredibly frugal and lightening up a little bit. I don’t know what tomorrow is going to bring I don’t want to live entirely in the future any more. I need to enjoy the life I’m living now too. Do you have any advice?
- Dana

I edited Dana’s question a bit to eliminate some of the more personal elements, which weren’t really relevant to the issue at hand but might be embarrassing if someone she knew were to read the question.

I don’t see anything to be concerned about in your email, Dana. As long as the things you’re spending your money on in the now are things that are genuinely important to you, there’s no problem with spending money today.

Of course, you should always keep a few basic principles in mind. Even if you’re spending more than before, you should still strive to spend less than you earn – keep that as a firm cap. You should also reflect on the things you’ve spent money on to make sure that they’re bringing you genuine happiness.

From your email, you’re clearly already doing the reflecting, and it seems as though you’re spending less than you earn. All that’s happening is that your values are shifting a bit due to changes in your life – and that’s completely normal, even healthy.

We have $5800 in a money market account for savings. After a recent look at that account, I noticed that it’s returning 0.5%. Obviously, I want to improve that rate of return. I’ve contemplated a CD ladder, but CD rates at my credit union are well below the return I get on my checking account (with very simple stipulations to meet) that gets me 3%. Is there any reason to not move this money into my checking account? We have another $4000 in savings in the checking account currently and don’t have a problem with keeping the mental separation of savings vs. spending money being in the same account.
- Joseph

The entire purpose of a CD – and thus a CD ladder – is to earn rates that exceed what you can get in your checking or savings account in exchange for losing some liquidity (i.e., you can’t just remove money from a CD at will without paying a penalty).

If you’re earning more in your checking account or savings account than you can earn with a CD, then you shouldn’t have that money in a CD. It’s earning less (a negative) and you have less access to it (a negative), with no corresponding positives.

You’re doing things right.

I have been reading a while and looked around a lot on the “should I cash out my 401k to pay off debt?” question. I’m still stuck as to whether I should or should not. I have reduced my expenses, stopped using cards, have a $1,000 safety fund/savings, but still have $18,851 in credit card debt. I am not depositing in to my 403b now so i can use that to pay down debt, but at this rate, it looks like 5 years for all of it. I have a 401K from an old job valued at about $11,380 right now. I was thinking about waiting till it’s at about $12k, that way, after tax and penalty, I would have enough to pay off one card, $7791 at 19.99% ! and then snowball the other card payments from highest interest down and that would take overall two years (or less depending on refunds etc that could be applied). I’m in a better paying job now and employer is putting a tiny amount in to 403b even though i am not contributing right now. I am 32 yo, have a condo and car payment, and once credit card debt is paid off (about 500 a month), i could put a lot into savings, start an IRA, and resume 403b contributions. I guess I just want to see some more rapid progress on paying off this debt, but am I betting my future by cashing out the 401k?
- Christopher

If I were you, I would not touch the 401(k) and I would also start contributing more to the 403(b), even if it adds some time to the debt payoff.

Why? You can never get those contributions back into your retirement plan. If you take that money out of your 401(k), you have permanently hindered your retirement. The only way to approximate it is to contribute quite a lot extra to your 403(b), but that would be even later, after your debts are gone, so it would require a lot of contributions.

In fact, I would contribute to my 403(b) up to the top of the employer’s match, starting right now. Again, you can’t ever get this contribution opportunity back – it’s free money that your employer is handing you that you’re turning down right now.

Yes, your credit card debt might take a little longer, but a 20% loss on your credit card interest rate is well worth a 100% gain on your 403(b) contributions from the match.

My husband and I are trying to decide when we should start a family, he is 28 and I am 27. One of us plans to stay home with the baby so we need to be able to live off of one income. I am a registered nurse and he is a Commercial Truck driver with a class A. The issue is we have debt and need to fix our house up, our current plan we would have this done in 2 1/2 years, 3 1/2 and we could have no mortgage. We are starting to feel this is too long to wait to try to start a family. Total income 2009 $90,000, debt: CC $4500 9.8%, car $14,000 7.8%, student loan $24,000 5.5%, Mort. $42,000 6%, about $15,000 needed in home repairs. In 2009 we paid off $12,000 in CC debt and put $5,000 into our home. We both do 6% of our income to 401K, emergency savings is $2000, and I am furthering my education and we are paying cash for it. I am starting to feel that we are overly preparing to have a family. Any thoughts?
- Lindsay

I think you should move forward with your family plans when you’re sure you can make it financially after having the child. For you, this means not only adding the child costs to the equation, but it also means one of you staying home with the child.

You should spend some time planning out exactly what will happen in that case. You mention that you’re getting further education (to be a nurse practitioner, I’m guessing?) – if you’re going to be the one that stays home with the child, cut that expense right now.

It’s also worth noting that even when you decide to go forward with trying to have a child, that child won’t arrive in a stork tomorrow. Even if you conceive almost immediately, you still will have most of a year before you lose one or the other of your incomes.

My suggestion? Right now, make up a very detailed plan for how you will do things after the child is born. How much income will you have? Will you be able to cover the bills? Who will stay at home with the child? How many years will that person stay at home? Some of these questions may alter what you’re doing with your money and time right now – if you’re staying at home, for example, you may not want to invest a lot of money into furthering your education at the moment.

If it looks like you could make it with the way things are right now, then I’d start trying to conceive. If it doesn’t look possible, I’d wait a bit longer, then re-evaluate.

There’s a lot of conflicting information out there and I’m curious what you would do. When I go on vacation I often rent a car and never know what to do about insurance. I don’t own a car at home and therefore don’t have any auto insurance policy for myself. I have the option of getting non-owners auto insurance from my insurance provider for $20/month but, based on the explanation of the coverage, my understanding is that all that covers is medical and damage liability if I hit someone else. I do have a visa that could presumably provide collision and damage insurance beforehand but doesn’t cover liability for another person if I collide with them. However, I’m not ready to pay $240/year so that I have that coverage for the 2x a year I drive a car. What do you suggest I do when I rent a car? Just use my credit card coverage? Get one month of liability coverage (if that’s even an option)? I paid an arm and a leg last time I rented because my parents and boyfriend freaked me out and demanded I get it but from my research they don’t understand what sort of coverage I need either. What would you do in my situation?
- Arlene

Most likely, you won’t be able to buy that policy on a month-by-month basis. Most policies are drawn up to cover six months or a year and your monthly payments are fractions of what you owe for that policy.

My first suggestion would be to look at the insurance offered by the rental companies. Typically, such policies are redundant for people who have auto insurance themselves, but they may not be redundant for you.

I would also take a look at what exactly your credit card offers in terms of coverage. It seems that your card just offers liability coverage, so I would look at the company you typically rent from and get quotes on insurance for the passenger and rental car. This will probably be in the ballpark of $10-15 a day, so this will save you money if you rent only for short periods, but if you rent for two weeks a year, it won’t be much of a savings.

If you have a well-stocked emergency fund, you may want to consider just having liability coverage (as provided by your card) and calling it good enough. After all, if you’re not driving the rental too much, your risk of a major accident is relatively low – and that’s what we’re talking about here, risk.

I have been working as a software developer for around two years. It’s a steady job and pays fairly well and I do enjoy it at times. I find though my concentration span really holds me back from enjoying this more and from progressing in my programming ability. Sometimes I can almost do a full day doing no work. I just can’t keep focus long enough.

At first I wondered if perhaps this job just doesn’t interest me enough (i.e. perhaps lack of concentration is due to lack of enjoyment and not vice versa) but looking back this is something that has plagued me all my life and I think it really held me back at school. I even struggle reading a couple of pages of a novel (that I find interesting) without having to go back and read. my mind just starts thinking of other things even while I’m saying each word in my head!

I haven’t received any warnings about the lack of work I sometimes produce (yet) but would like to get on top of this so I don’t stay at the same level of ability all my life and narrow my future horizons.

I have recently pondered the idea of hypnotherapy but to be honest I’m a little scared of this. Do you have any suggestions to improve my concentration span?
- Ben

I’ve thankfully never really had this problem. In fact, I tend to have the opposite – when I bear down on a task, I can lose all track of time and even reach the point where I literally don’t hear people around me.

Anyway, one of my mentors once suggested a five-prong plan for maintaining concentration. He used the word FOCUS as an acronym for it. I’ve seen variations of it floating around online, but here’s how my mentor defined it.

Five more means that if you’re doing something and feel your focus wandering, always challenge yourself to do five more. Five more pages. Five more minutes of coding. Five more emails. It’s like endurance training for your mind.

Only the thing you’re working on means that you should try to look at the task you’re doing with fresh eyes if you find your mind wandering. Look at what you’re doing and ask yourself if you’re doing it well or why you’re doing it. It often refreshes the task.

Complete the little things now means that if you have a task you’re putting off, start working on it immediately. This helps with concentration because a task that’s been put off is a task that’s weighing on your mind.

Understand the details means that, instead of thinking about the big picture of the project you’re working on, you should try to break it down into the smallest detail you can, then just focus on that detail. It makes the task seem much shorter and manageable, which again helps with concentration.

Silence means that you should cut off interruptions. Unplug your phone. Close your web browser. You can even go so far as to rest your face on your hands and cup your hands around your eyes so that they function as peripheral blinders.

Good luck!

I’ve been reading The Simple Dollar for about a year now and really enjoyed the series you did a while ago on cooking. Quick question, I’ve tried Eggplant several times (never as Eggplant Parmesan) and not had much luck, however I found a recipe for Eggplant Parmesan and wondered if you’ve ever attempted to cook it at home. The particular one I found says to peel the eggplant and I’m wondering if that’s the reason all my other eggplant attempts have failed. Any thoughts?
- Shawna

You didn’t really specify what the problem was with the eggplant. For the most part, the peel makes little difference – it’s mostly a matter of personal preference, like a potato peel (I prefer them, myself). My guess is that the problem is not with the peel, but with the sweating.

Sweating? Try salting the outside of your eggplant about a half an hour before you tend to use it. Just take some table salt and rub it on the outside. When you’re ready to use it, you’ll find that the outside of the plant is now moist with some very salty and bitter water. Rub the water off and slice it.

I don’t know if that’s the solution for your problem, because I’m not entirely clear on what’s wrong with the eggplant when you cook it. I’m just assuming that the problem is bitterness.

It may also be that you simply don’t like eggplant, for which there is no real cure other than just trying it in different ways on an irregular basis.

My husband and I are in our late 20s and don’t yet have any kids but are thinking about it – we’d like to have a baby in the next year, but obviously there are no guarantees on timing. I’m currently making about $45k and my husband $75k; when we have a baby we plan on me staying home, so we’ll be losing that income.

We already have an emergency fund with 6 months of expenses in it, we’ll be paying off my student loans in May (that bill had been about $100/month), and after that we’re debt free except for our house! We currently have a budget excess of about $2500/month (give or take depending on the month) that we’ve been putting toward my student loans, and I am on the hunt for my next financial goal to knock out. The only retirement savings we have is a 401k for my husband that we started this year, putting 4% of his salary into it. Looking ahead, I think we’ll have about $20k extra to play with this year, and this is where you’re advice comes in. We are definitely going to open an IRA (undecided as to traditional vs Roth) and with the max contribution of $10k between us for the year, that leaves an unaccounted-for $10k or so.

Option 1: We only put 10% down on our house when we bought it almost two years ago, so we’re paying PMI of about $60/month. We have $16k left to get to the 80% mark where we can get rid of PMI (and potentially adjust our monthly payment to reflect the new principal). We could put the other $10k this year toward our mortgage principal and get the last bit paid down early next year, so provided we don’t have a baby and drop income in the meantime, we could be PMI-free by next year this time.
Option 2: Alternatively, since we’ll have a more limited budget when we go down to one income, we could put the $10k in savings to put into the IRA in 2011. We’ll be able to save something when we have one income, but while I’m not sure what our budget will look like with a baby, I’m almost positive we won’t have $10k a year to put toward retirement (beyond the 401k).

That’s the scoop – thoughts?? Also, input on whether to do traditional IRA vs Roth IRA would be helpful, I think. We’re in a very blessed and pretty fantastic stage of life right now, and really want to take every advantage that we can while we can.
- Marisa

As I mentioned above, the first thing you need to do before considering going ahead with a child is to make a post-baby budget. Spend some time really contemplating how your life will look at that point. Is one of you going to stay home with the child? What will child care costs be like? Do some research and find some real answers here, then figure out what things will look like financially for you. I encourage you to estimate high, because it’s going to cause a lot less problems than estimating low will.

If you make that budget and decide that things look doable but close post-baby, put that $10k into savings for now. It may wind up being a “baby emergency fund” as you find that there are lots and lots of baby expenses you didn’t consider. If you get through 2011 without a child, then contribute to the IRA.

If you make that budget and decide you’re good to go with a fair amount of room to breathe, I’d sink it into the mortgage, mostly to get you below the PMI mark, which will make breathing even easier for you.

In the two years after graduating college, I learned a fantastic lesson about living on credit cards (badidea!) and living without health insurance, and had to go through CCCS to pay off the impressive debt that I accrued– About $20k in credit cards and $10k in medical bills. During this time, I had to sign a agreement with CCCS that I would not use any credit card until my debt was paid off.

Now I’m 28 years old, single, working a job with great medical insurance, have paid off those medical and credit card bills and have not used– or even opened– a credit card since I was 22 years old. I’ve been putting aside a little money each month into an emergency fund and into retirement, but otherwise I’m basically living paycheck-to-paycheck.

Understandably, I have a mild phobia of opening and using a credit card, even though I’ve matured and learned a lot since my wild (stupid) days. However, it seems like a credit card would make my life a lot easier at times– like when I have to pay upfront for a business trip in which I will be reimbursed, or if I loan a friend money and I am scraping by at the end of the month.

Would you recommend that I open a new credit card and pay it off each month? And if so, what advice can you give me about going back into the world of credit?
- Jamie

If you’re truly living paycheck to paycheck, the first thing you need to do is either increase income or cut spending (or, ideally, both). Perhaps you need to change your living situation or your energy consumption or your food consumption (do you constantly eat out?). Maybe you can get a second job. Whatever it is, you need to be spending a bit less than you earn or you’re always in danger of getting into financial trouble when something unexpected happens – and it will happen.

If I were you in this situation, I would get an extremely focused credit card that you use for just one specific purpose so that you’re not tempted to use it outside of that context.

The idea that comes to mind for me is a credit card (Visa or Mastercard) offered through a gas station chain that you frequently use. Sign up for one of those cards, but use it ONLY for gas. The giant gas chain logo on the card should be a strong reminder of that. Then, at the end of the month, pay off the bill in full.

This simple step will allow you to re-establish your credit without opening the floodgates. Just keep that card for one purpose and one purpose alone.

I would not use it for any other purpose – don’t “pay up front for trips” with it or anything like that. Use it simply as a means of improving your credit and maybe reducing your gas costs a bit.

My husband and I own a reasonable home in Pennsylvania, and are hoping to move to Maryland to be closer to my family in the next couple of years. We also just welcomed our first child about 7 months ago. I am a full-time working mom and am growing weary of being away from my home and family 10 hours a day, but my family relies on my income (which is significantly higher than my husband’s: $56k to $38k) and my health insurance.

My question is sort of two-fold:

(1) Is it selfish of me to want to stay home and care for my family? I have done contract work in the past and could make up a great deal of my salary, but not the health insurance, which is much more expensive through my husband’s job and very limiting in its offerings.

And (2), would it be a bad idea to rent for a while once we move to Maryland in order to save money? Housing is substantially pricier there, so we were planning to build on family land, but that could take a while since my husband would do much of the building himself, while also working a full-time job.
- Jen

(1) It is not selfish of you to want to stay at home with your child. Having a child is an intensely personal and emotional thing and, for many people, staying at home is something they strongly desire simply because of the emotional attachment and quality of care that they would provide to the child. It’s your child. You love that child. Wanting to care for that child and protect it is completely normal.

(2) It is never a bad idea to rent housing, particularly if you don’t plan to live in the house for seven years or more. It’s the first years of the mortgage that are the most painful ones – most of your mortgage payment goes towards interest and the power of compound growth on your home’s value really hasn’t had time to work yet. If you can find a good deal renting, renting absolutely should be on the table.

As for the building, a close friend of mine did that (and I’ve asked him for a guest post to discuss it). It can work and it can save a lot of money, but you really need some serious passion about carpentry and plumbing and electrical work to make it happen.

Good luck.

Got any questions? Email me or leave a comment and I’ll try to answer it in a future mailbag. Please note, however, that I get many more questions than I can answer in any sort of reasonable mailbag length.


Continue reading Reader Mailbag: More Time for Reading …

From The Simple Dollar.

March 4, 2010 | Filed Under Frugal Living | Leave a Comment 

Reader Mailbag: More Time for Reading

I find that, whenever I get busy with things in my life, the first thing I cut out is the hour or two a day I spend reading. If I do that for a few days, I begin to intensely miss it.

Just yesterday, I was talking to a friend of mine who’s a stellar athlete. He expressed to me the exact same thing about training – if he skips a couple of days due to personal issues, he REALLY misses his daily hours in the gym.

Exercise your body, exercise your mind, I guess.

I’ve always been very financially responsible and rather frugal. I might occasionally allow myself to purchase a bottle of wine at the end of a week or a new book once a month or so, but I’ve never been a spender. I very much believe that I’d rather struggle (not that my husband and I really struggle) now and relax when I’m older.

However, the last year has brought considerable change in my attitude. In the last year, [my family has experienced several tragedies]. Due to these things, I’ve become a much more in the moment liver, than living for the future. I’ve spend quite a bit more money lately than I ever have before. I’m not spending out of control or over our means, but I’m still concerned.

I had such a tight string on my wallet for long it felt good to just buy stuff for the first couple of months. But now I’m afraid I’m going to fall into some kind of spending spiral. I would like to find a balance between incredibly frugal and lightening up a little bit. I don’t know what tomorrow is going to bring I don’t want to live entirely in the future any more. I need to enjoy the life I’m living now too. Do you have any advice?
- Dana

I edited Dana’s question a bit to eliminate some of the more personal elements, which weren’t really relevant to the issue at hand but might be embarrassing if someone she knew were to read the question.

I don’t see anything to be concerned about in your email, Dana. As long as the things you’re spending your money on in the now are things that are genuinely important to you, there’s no problem with spending money today.

Of course, you should always keep a few basic principles in mind. Even if you’re spending more than before, you should still strive to spend less than you earn – keep that as a firm cap. You should also reflect on the things you’ve spent money on to make sure that they’re bringing you genuine happiness.

From your email, you’re clearly already doing the reflecting, and it seems as though you’re spending less than you earn. All that’s happening is that your values are shifting a bit due to changes in your life – and that’s completely normal, even healthy.

We have $5800 in a money market account for savings. After a recent look at that account, I noticed that it’s returning 0.5%. Obviously, I want to improve that rate of return. I’ve contemplated a CD ladder, but CD rates at my credit union are well below the return I get on my checking account (with very simple stipulations to meet) that gets me 3%. Is there any reason to not move this money into my checking account? We have another $4000 in savings in the checking account currently and don’t have a problem with keeping the mental separation of savings vs. spending money being in the same account.
- Joseph

The entire purpose of a CD – and thus a CD ladder – is to earn rates that exceed what you can get in your checking or savings account in exchange for losing some liquidity (i.e., you can’t just remove money from a CD at will without paying a penalty).

If you’re earning more in your checking account or savings account than you can earn with a CD, then you shouldn’t have that money in a CD. It’s earning less (a negative) and you have less access to it (a negative), with no corresponding positives.

You’re doing things right.

I have been reading a while and looked around a lot on the “should I cash out my 401k to pay off debt?” question. I’m still stuck as to whether I should or should not. I have reduced my expenses, stopped using cards, have a $1,000 safety fund/savings, but still have $18,851 in credit card debt. I am not depositing in to my 403b now so i can use that to pay down debt, but at this rate, it looks like 5 years for all of it. I have a 401K from an old job valued at about $11,380 right now. I was thinking about waiting till it’s at about $12k, that way, after tax and penalty, I would have enough to pay off one card, $7791 at 19.99% ! and then snowball the other card payments from highest interest down and that would take overall two years (or less depending on refunds etc that could be applied). I’m in a better paying job now and employer is putting a tiny amount in to 403b even though i am not contributing right now. I am 32 yo, have a condo and car payment, and once credit card debt is paid off (about 500 a month), i could put a lot into savings, start an IRA, and resume 403b contributions. I guess I just want to see some more rapid progress on paying off this debt, but am I betting my future by cashing out the 401k?
- Christopher

If I were you, I would not touch the 401(k) and I would also start contributing more to the 403(b), even if it adds some time to the debt payoff.

Why? You can never get those contributions back into your retirement plan. If you take that money out of your 401(k), you have permanently hindered your retirement. The only way to approximate it is to contribute quite a lot extra to your 403(b), but that would be even later, after your debts are gone, so it would require a lot of contributions.

In fact, I would contribute to my 403(b) up to the top of the employer’s match, starting right now. Again, you can’t ever get this contribution opportunity back – it’s free money that your employer is handing you that you’re turning down right now.

Yes, your credit card debt might take a little longer, but a 20% loss on your credit card interest rate is well worth a 100% gain on your 403(b) contributions from the match.

My husband and I are trying to decide when we should start a family, he is 28 and I am 27. One of us plans to stay home with the baby so we need to be able to live off of one income. I am a registered nurse and he is a Commercial Truck driver with a class A. The issue is we have debt and need to fix our house up, our current plan we would have this done in 2 1/2 years, 3 1/2 and we could have no mortgage. We are starting to feel this is too long to wait to try to start a family. Total income 2009 $90,000, debt: CC $4500 9.8%, car $14,000 7.8%, student loan $24,000 5.5%, Mort. $42,000 6%, about $15,000 needed in home repairs. In 2009 we paid off $12,000 in CC debt and put $5,000 into our home. We both do 6% of our income to 401K, emergency savings is $2000, and I am furthering my education and we are paying cash for it. I am starting to feel that we are overly preparing to have a family. Any thoughts?
- Lindsay

I think you should move forward with your family plans when you’re sure you can make it financially after having the child. For you, this means not only adding the child costs to the equation, but it also means one of you staying home with the child.

You should spend some time planning out exactly what will happen in that case. You mention that you’re getting further education (to be a nurse practitioner, I’m guessing?) – if you’re going to be the one that stays home with the child, cut that expense right now.

It’s also worth noting that even when you decide to go forward with trying to have a child, that child won’t arrive in a stork tomorrow. Even if you conceive almost immediately, you still will have most of a year before you lose one or the other of your incomes.

My suggestion? Right now, make up a very detailed plan for how you will do things after the child is born. How much income will you have? Will you be able to cover the bills? Who will stay at home with the child? How many years will that person stay at home? Some of these questions may alter what you’re doing with your money and time right now – if you’re staying at home, for example, you may not want to invest a lot of money into furthering your education at the moment.

If it looks like you could make it with the way things are right now, then I’d start trying to conceive. If it doesn’t look possible, I’d wait a bit longer, then re-evaluate.

There’s a lot of conflicting information out there and I’m curious what you would do. When I go on vacation I often rent a car and never know what to do about insurance. I don’t own a car at home and therefore don’t have any auto insurance policy for myself. I have the option of getting non-owners auto insurance from my insurance provider for $20/month but, based on the explanation of the coverage, my understanding is that all that covers is medical and damage liability if I hit someone else. I do have a visa that could presumably provide collision and damage insurance beforehand but doesn’t cover liability for another person if I collide with them. However, I’m not ready to pay $240/year so that I have that coverage for the 2x a year I drive a car. What do you suggest I do when I rent a car? Just use my credit card coverage? Get one month of liability coverage (if that’s even an option)? I paid an arm and a leg last time I rented because my parents and boyfriend freaked me out and demanded I get it but from my research they don’t understand what sort of coverage I need either. What would you do in my situation?
- Arlene

Most likely, you won’t be able to buy that policy on a month-by-month basis. Most policies are drawn up to cover six months or a year and your monthly payments are fractions of what you owe for that policy.

My first suggestion would be to look at the insurance offered by the rental companies. Typically, such policies are redundant for people who have auto insurance themselves, but they may not be redundant for you.

I would also take a look at what exactly your credit card offers in terms of coverage. It seems that your card just offers liability coverage, so I would look at the company you typically rent from and get quotes on insurance for the passenger and rental car. This will probably be in the ballpark of $10-15 a day, so this will save you money if you rent only for short periods, but if you rent for two weeks a year, it won’t be much of a savings.

If you have a well-stocked emergency fund, you may want to consider just having liability coverage (as provided by your card) and calling it good enough. After all, if you’re not driving the rental too much, your risk of a major accident is relatively low – and that’s what we’re talking about here, risk.

I have been working as a software developer for around two years. It’s a steady job and pays fairly well and I do enjoy it at times. I find though my concentration span really holds me back from enjoying this more and from progressing in my programming ability. Sometimes I can almost do a full day doing no work. I just can’t keep focus long enough.

At first I wondered if perhaps this job just doesn’t interest me enough (i.e. perhaps lack of concentration is due to lack of enjoyment and not vice versa) but looking back this is something that has plagued me all my life and I think it really held me back at school. I even struggle reading a couple of pages of a novel (that I find interesting) without having to go back and read. my mind just starts thinking of other things even while I’m saying each word in my head!

I haven’t received any warnings about the lack of work I sometimes produce (yet) but would like to get on top of this so I don’t stay at the same level of ability all my life and narrow my future horizons.

I have recently pondered the idea of hypnotherapy but to be honest I’m a little scared of this. Do you have any suggestions to improve my concentration span?
- Ben

I’ve thankfully never really had this problem. In fact, I tend to have the opposite – when I bear down on a task, I can lose all track of time and even reach the point where I literally don’t hear people around me.

Anyway, one of my mentors once suggested a five-prong plan for maintaining concentration. He used the word FOCUS as an acronym for it. I’ve seen variations of it floating around online, but here’s how my mentor defined it.

Five more means that if you’re doing something and feel your focus wandering, always challenge yourself to do five more. Five more pages. Five more minutes of coding. Five more emails. It’s like endurance training for your mind.

Only the thing you’re working on means that you should try to look at the task you’re doing with fresh eyes if you find your mind wandering. Look at what you’re doing and ask yourself if you’re doing it well or why you’re doing it. It often refreshes the task.

Complete the little things now means that if you have a task you’re putting off, start working on it immediately. This helps with concentration because a task that’s been put off is a task that’s weighing on your mind.

Understand the details means that, instead of thinking about the big picture of the project you’re working on, you should try to break it down into the smallest detail you can, then just focus on that detail. It makes the task seem much shorter and manageable, which again helps with concentration.

Silence means that you should cut off interruptions. Unplug your phone. Close your web browser. You can even go so far as to rest your face on your hands and cup your hands around your eyes so that they function as peripheral blinders.

Good luck!

I’ve been reading The Simple Dollar for about a year now and really enjoyed the series you did a while ago on cooking. Quick question, I’ve tried Eggplant several times (never as Eggplant Parmesan) and not had much luck, however I found a recipe for Eggplant Parmesan and wondered if you’ve ever attempted to cook it at home. The particular one I found says to peel the eggplant and I’m wondering if that’s the reason all my other eggplant attempts have failed. Any thoughts?
- Shawna

You didn’t really specify what the problem was with the eggplant. For the most part, the peel makes little difference – it’s mostly a matter of personal preference, like a potato peel (I prefer them, myself). My guess is that the problem is not with the peel, but with the sweating.

Sweating? Try salting the outside of your eggplant about a half an hour before you tend to use it. Just take some table salt and rub it on the outside. When you’re ready to use it, you’ll find that the outside of the plant is now moist with some very salty and bitter water. Rub the water off and slice it.

I don’t know if that’s the solution for your problem, because I’m not entirely clear on what’s wrong with the eggplant when you cook it. I’m just assuming that the problem is bitterness.

It may also be that you simply don’t like eggplant, for which there is no real cure other than just trying it in different ways on an irregular basis.

My husband and I are in our late 20s and don’t yet have any kids but are thinking about it – we’d like to have a baby in the next year, but obviously there are no guarantees on timing. I’m currently making about $45k and my husband $75k; when we have a baby we plan on me staying home, so we’ll be losing that income.

We already have an emergency fund with 6 months of expenses in it, we’ll be paying off my student loans in May (that bill had been about $100/month), and after that we’re debt free except for our house! We currently have a budget excess of about $2500/month (give or take depending on the month) that we’ve been putting toward my student loans, and I am on the hunt for my next financial goal to knock out. The only retirement savings we have is a 401k for my husband that we started this year, putting 4% of his salary into it. Looking ahead, I think we’ll have about $20k extra to play with this year, and this is where you’re advice comes in. We are definitely going to open an IRA (undecided as to traditional vs Roth) and with the max contribution of $10k between us for the year, that leaves an unaccounted-for $10k or so.

Option 1: We only put 10% down on our house when we bought it almost two years ago, so we’re paying PMI of about $60/month. We have $16k left to get to the 80% mark where we can get rid of PMI (and potentially adjust our monthly payment to reflect the new principal). We could put the other $10k this year toward our mortgage principal and get the last bit paid down early next year, so provided we don’t have a baby and drop income in the meantime, we could be PMI-free by next year this time.
Option 2: Alternatively, since we’ll have a more limited budget when we go down to one income, we could put the $10k in savings to put into the IRA in 2011. We’ll be able to save something when we have one income, but while I’m not sure what our budget will look like with a baby, I’m almost positive we won’t have $10k a year to put toward retirement (beyond the 401k).

That’s the scoop – thoughts?? Also, input on whether to do traditional IRA vs Roth IRA would be helpful, I think. We’re in a very blessed and pretty fantastic stage of life right now, and really want to take every advantage that we can while we can.
- Marisa

As I mentioned above, the first thing you need to do before considering going ahead with a child is to make a post-baby budget. Spend some time really contemplating how your life will look at that point. Is one of you going to stay home with the child? What will child care costs be like? Do some research and find some real answers here, then figure out what things will look like financially for you. I encourage you to estimate high, because it’s going to cause a lot less problems than estimating low will.

If you make that budget and decide that things look doable but close post-baby, put that $10k into savings for now. It may wind up being a “baby emergency fund” as you find that there are lots and lots of baby expenses you didn’t consider. If you get through 2011 without a child, then contribute to the IRA.

If you make that budget and decide you’re good to go with a fair amount of room to breathe, I’d sink it into the mortgage, mostly to get you below the PMI mark, which will make breathing even easier for you.

In the two years after graduating college, I learned a fantastic lesson about living on credit cards (badidea!) and living without health insurance, and had to go through CCCS to pay off the impressive debt that I accrued– About $20k in credit cards and $10k in medical bills. During this time, I had to sign a agreement with CCCS that I would not use any credit card until my debt was paid off.

Now I’m 28 years old, single, working a job with great medical insurance, have paid off those medical and credit card bills and have not used– or even opened– a credit card since I was 22 years old. I’ve been putting aside a little money each month into an emergency fund and into retirement, but otherwise I’m basically living paycheck-to-paycheck.

Understandably, I have a mild phobia of opening and using a credit card, even though I’ve matured and learned a lot since my wild (stupid) days. However, it seems like a credit card would make my life a lot easier at times– like when I have to pay upfront for a business trip in which I will be reimbursed, or if I loan a friend money and I am scraping by at the end of the month.

Would you recommend that I open a new credit card and pay it off each month? And if so, what advice can you give me about going back into the world of credit?
- Jamie

If you’re truly living paycheck to paycheck, the first thing you need to do is either increase income or cut spending (or, ideally, both). Perhaps you need to change your living situation or your energy consumption or your food consumption (do you constantly eat out?). Maybe you can get a second job. Whatever it is, you need to be spending a bit less than you earn or you’re always in danger of getting into financial trouble when something unexpected happens – and it will happen.

If I were you in this situation, I would get an extremely focused credit card that you use for just one specific purpose so that you’re not tempted to use it outside of that context.

The idea that comes to mind for me is a credit card (Visa or Mastercard) offered through a gas station chain that you frequently use. Sign up for one of those cards, but use it ONLY for gas. The giant gas chain logo on the card should be a strong reminder of that. Then, at the end of the month, pay off the bill in full.

This simple step will allow you to re-establish your credit without opening the floodgates. Just keep that card for one purpose and one purpose alone.

I would not use it for any other purpose – don’t “pay up front for trips” with it or anything like that. Use it simply as a means of improving your credit and maybe reducing your gas costs a bit.

My husband and I own a reasonable home in Pennsylvania, and are hoping to move to Maryland to be closer to my family in the next couple of years. We also just welcomed our first child about 7 months ago. I am a full-time working mom and am growing weary of being away from my home and family 10 hours a day, but my family relies on my income (which is significantly higher than my husband’s: $56k to $38k) and my health insurance.

My question is sort of two-fold:

(1) Is it selfish of me to want to stay home and care for my family? I have done contract work in the past and could make up a great deal of my salary, but not the health insurance, which is much more expensive through my husband’s job and very limiting in its offerings.

And (2), would it be a bad idea to rent for a while once we move to Maryland in order to save money? Housing is substantially pricier there, so we were planning to build on family land, but that could take a while since my husband would do much of the building himself, while also working a full-time job.
- Jen

(1) It is not selfish of you to want to stay at home with your child. Having a child is an intensely personal and emotional thing and, for many people, staying at home is something they strongly desire simply because of the emotional attachment and quality of care that they would provide to the child. It’s your child. You love that child. Wanting to care for that child and protect it is completely normal.

(2) It is never a bad idea to rent housing, particularly if you don’t plan to live in the house for seven years or more. It’s the first years of the mortgage that are the most painful ones – most of your mortgage payment goes towards interest and the power of compound growth on your home’s value really hasn’t had time to work yet. If you can find a good deal renting, renting absolutely should be on the table.

As for the building, a close friend of mine did that (and I’ve asked him for a guest post to discuss it). It can work and it can save a lot of money, but you really need some serious passion about carpentry and plumbing and electrical work to make it happen.

Good luck.

Got any questions? Email me or leave a comment and I’ll try to answer it in a future mailbag. Please note, however, that I get many more questions than I can answer in any sort of reasonable mailbag length.


Continue reading Reader Mailbag: More Time for Reading …

From The Simple Dollar.

March 4, 2010 | Filed Under Frugal Living | Leave a Comment 

Michigan tax assessments are in the mail

Michigan readers – did you get your tax assessment paperwork in the mail during the past few days?

Be sure to look for, and save, the paperwork labeled “Notice of Assessment, Taxable Valuation and Property Classification.” The taxable value that is listed on that paperwork is what your property taxes will be based on.

It’s also a helpful snapshot of what the local real estate market values have done in the past year. (And that translates to … bleh!)

Continue reading Michigan tax assessments are in the mail …

From Monroe on a Budget.

February 23, 2010 | Filed Under Frugal Living | Leave a Comment 

Loose Ends

Spiritual Life Retreat

To those who have asked, we had a great time at the spiritual life retreat. As someone who cooks a lot, I was looking forward to a few days without cooking. Still I found myself in the kitchen helping out the students as a way to get to know them a little better. Many of these students I was meeting for the first time, so I really enjoyed my time with them.

The teaching sessions were awesome, but we were only there for the tail end of the retreat, so we didn’t get the full message. Still, we came away invigorated and thankful.

The kids were a big hit. Everyone wanted to hold Bobby, but he wouldn’t let them. Thomas, though, was passed around to everyone. It reminded Dan and I of our pre-kid life when holding a baby would be the highlight of our day. Now, it is our whole day, but still a great joy.

Most of all, this was a retreat for us. We were able to put away the stresses of our daily lives for a few days. We didn’t think or talk about the blog, work, or even classes. That was refreshing.

Mattresses, Mattresses, Mattresses

I think there has been some misunderstanding about the no-mattress idea.

First, the links I posted of alternatives were not of alternatives I was thinking of getting, but ideas of bedding types I was inspired by. Beds that fold up or roll out are neat and worth considering, which is why I used the word “like” when mentioning them.

Second I don’t want a conventional mattress for reasons that have been discussed. I think the best alternative I am looking at is a nice blanket mattress. This would not be a blanket thrown on the floor, or even folded once or plopped on the floor. This would be three or four blankets folded three or four times, depending on the size and type of bed we end up with. It would also depend on what my kids want for firmness and it may talk a few nights to figure out exactly how that will go. Then, when we’ve got them the way we like them, I would sew them together in a way similar to how you would sew a quilt to keep the batting in place. They would then be covered and put into place. If people genuinely think this would be uncomfortable, go get a stack of blankets, fold them up and see if it is cozy.

It will take longer for my husband and I to convert our own bed to this, since we simply don’t have that many blankets. I imagine we will achieve this by the end of the yard sale season for our bed.

One More For Haiti

After I wrote the post about helping Haiti without money, I received an email about one more way to help. It took me six minutes to donate $1 through Brickfish. All you have to do is go here, make an account and submit a photo. For each photo, they will donate $1. You can then tell others about it so that more money can be donated. Here is the photo I submitted:

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You might want to check out my new comment policy .
Copyright Under $1000 Per Month, 2009-2010

Continue reading Loose Ends …

From Under $1000 Per Month.

February 20, 2010 | Filed Under Frugal Living | Leave a Comment 

Why Work?

A few days ago, my four year old son came into my office when I was finishing up an article for The Simple Dollar.

“What are you doing, Dad?” he asked.

“I’m working,” I told him.

“Why?” he asked.

“Well, I have to work so that we can make money, and we use that money to pay for our house and for our food and our clothes,” I told him.

He thought about that for a minute. “But why do you work on your computer?” he asked.

“Well, that’s my job,” I told him.

“Why?” he asked.

“I enjoy writing. It’s something that I like to do and I’m lucky enough to make money when I do it,” I told him.

He stood there for a moment. “But sometimes you don’t like it,” he said.

“Yes, that’s true. Sometimes I get frustrated with it. But if it were always easy, everyone would do it,” I said.

“Why don’t you make money doing something you like better?” he asked.

“Well, there is no job in the world that doesn’t sometimes frustrate the person doing it, Joe,” I told him. “No one always likes what they’re doing.”

“But why do you work when you don’t like it?” he asked me. “You should go do something else when you don’t like it.”

“It’s not that easy, bud,” I told him. But I did go and play with him after that.

Still, our conversation stuck in my mind for quite a while. I jotted down most of it in my notes a bit later in the day to think about some more.

Joe brought up a few really good points along the way. Why do we work? What are the reasons we choose to do the things we do? Why do we sometimes choose frustration and unhappiness along the way when it comes to that work?

Most important, what’s the right balance?

Why Work?
The easy answer, of course, is to make money. But that’s far, far from the only answer.

Think back to that classic high school guidance counselor question: “What would you do with your time if you had ten million dollars?” Once you got the rest and relaxation out of your system, of course.

For me, the answer is an easy one. I’d write fiction. I’d write lots of fiction. I’m usually happiest when I’m creating a character and breathing life into him or her, then carrying that character through some event in life. I’d try hard to get it published, too. (What I do now is a reasonable substitute for that, but it’s not a perfect substitute.)

Everyone will have a different answer to that question. My oldest brother, for example, would love to make hunting videos. He loves hunting deeply and is all about sharing it with others. My niece would be a photographer. She loves capturing moments on film. My father would cry himself to sleep with joy if he could run an outdoorsman’s lodge. The list goes on and on.

What Keeps Us From Doing That?
The need for money, to put it simply.

For most of us, money simply doesn’t grow on trees. We need a certain amount of money to pay for housing, for food on the table, for electricity and heating, for clothing, and so on.

Most of the things we dream about doing do not earn much money, especially at first. An unpublished fiction writer is going to not earn much at all for quite a while as they keep throwing short stories and novellas and novels at the wall until (hopefully) something sticks. You can’t make hunting videos and sell them without buyers and a reputation. You can’t open a restaurant or a lodge without a tremendous amount of capital that will take quite a while to recoup.

Those two things run head to head. So we compromise. We find a job that’s tolerable that earns us some money – something within our ethical boundaries (a hitman, for example, is outside of most people’s ethical boundaries) and our skill set (not everyone can be a doctor, for example). We settle in. We get used to it. And those things that we dream about doing become just that – dreams.

Bridging That Gap
This brings us back to that key question – why work? Ideally, shouldn’t we work in order to make our lives more enjoyable? And, since we fill quite a lot of our waking hours with our work, shouldn’t a big part of our work’s effort go towards making that work time more enjoyable?

Five years ago, the thought of writing for a living was firmly in the “dream” camp for me. Rather than working to make my whole life better, I worked solely to make my life outside of work better.

That was a huge mistake. When I stepped back and looked at the big picture, I realized how much of my time I was devoting to a job that wasn’t the peak of my personal happiness. I enjoyed it, but it was keeping me from things that I enjoyed more, like my children (especially when I traveled) and time devoted to writing.

Given that my work took up about fifty hours a week of actual work time and commuting time – and often took up much more than that during crunch times, emergencies, and travel – and would often fill my thoughts when I wasn’t at work – I was devoting the vast majority of my waking hours to something that was (far) less enjoyable than what I dreamed of doing.

Fixing that problem is one of the most worthwhile goals there is for your extra money.

If you stuff your hours full of one thing, but find yourself wishing you were spending all of those hours each week doing something else, you absolutely should devote every spare resource you can to (1) getting yourself out of debt and on a very stable financial playing field and (2) putting the pieces in place so you can live that dream.

That means going without some things – and the things you choose to go without really depends on how urgently you want to change your life. If you want to reach it any time soon, you may have to make some radical changes.

Just step back and ask yourself these three things.

First, how many hours do you devote to your work each week, including your commute, any trips you have to take, and time outside of work thinking about your job? What portion of your waking hours is that?

Second, what would your life be like if you could fill those hours doing something you truly loved doing?

Finally, how many of those material trappings in your life are really worth forcing you to trade away all of those hours each week?

You might just find that a completely different game plan is the one that works for you.

Think big. Do you need that large of a house or that large of an apartment? Do you need that car? Keep going down the scale. Do you need to eat out? Do you need that cable bill? And include the hundreds of small things, too. Do you need name-brand paper towels – or paper towels at all?

And when you think about how you want some of these things, compare them to the majority of waking hours in your life that you devote to doing things that you don’t want to do.

When you start thinking that way – and moving in that direction – big elements of your life start to shift. The simple question of “why work?” changes in nature when you start making those kinds of choices.

And, yes, a big reason why I’ve chosen the career that I have is to show my children very clearly that you can do whatever you want in life. If you want to do a certain thing, you certainly can make it happen.


Continue reading Why Work? …

From The Simple Dollar.

February 16, 2010 | Filed Under Frugal Living | Leave a Comment 

Starting a Carpool

Jenny writes in:

I work at an office park about forty five minutes from where I live. I live in a highly populated suburban neighborhood.

In order to save some money on gas and wear and tear on my car, I want to start a carpool, but I don’t know anyone who lives near me who works in the office park. I don’t mind stretching my hours a bit to make this work, as I could go in with them a bit earlier and do some busywork (email and the like) to start the day or read a book at the end of the day.

The only problem is I don’t know how to get this kind of thing started and I don’t have any obvious people to ride with. Any ideas?

Carpools are a tremendous way to save money. My wife is in a (semi-functional) carpool with a coworker and often has a ride to work two days a week. We estimate that it saves us at least $100 a month in gas and maintenance costs. It would be truly great if she could get another person or two into the carpool.

How can Jenny get a carpool started in her situation? Here’s the game plan I would use.

First, I would make up a very clear flyer that stated my first name, my cell phone number, and the fact that I wanted to start a carpool from the neighborhood or city where I lived to that office park. I’d probably make some “tear-off” tabs on the right hand side of the flyer so that people could yank the number off and put it in their pocket. Put “car pool” above the number.

I would then take a copy of this flyer to each office in the office park. There may be a lot of offices there, so you may need quite a few copies. Ask for permission to hang the flyer on the office bulletin board in each of those offices. Given your situation, I would imagine most would let you do this.

Ideally, you’ll get a few calls within the next few days. You’ll need to get some key information from each person, so you may want to carry a notepad with you.

From each caller, get the following:
+ their name
+ their cell phone number
+ their address (so you can map their location)
+ their approximate work schedule (so you know when they would need to depart/arrive)
+ any “special” days they have (like my wife’s carpool, where it doesn’t happen on Fridays due to a special need of her carpool mate)
+ what types of vehicles they have and how many it can seat

Once you have this information from a few callers (give it a few days), set up a schedule. Figure out a departure time (both from your town and from the office park) that works for everyone (or at least for the largest number of participants). Also, figure out a rotating driving schedule.

Once you have this information, call each person in the pool back and let them know when the pool will begin. I highly recommend you drive the first day.

When you do the first day, pick up the other people on the route and give each person a list of addresses, phone numbers, and schedules for everyone in the pool. I recommend that you make the schedule as simple as possible, even if it inconveniences you. The best way to do this is to say that Person X drives on Mondays, Person Y drives on Tuesdays, Person Z drives on Wednesdays, and Person A drives on Thursdays, with Fridays handled on a rotating basis. If you have five people, this is really easy. If you have three people, have Thursday and Friday rotate. If you just have two people, have each person drive two days and have Friday rotate.

Yes, this is a lot of set-up work. But you’re the one who has the initiative to start the carpool and you will save a lot of money on it. It may take a bit of extra effort in setting it up and an occasional headache when someone is sick, but it will be worth it in the large savings you get, especially with a four or five person carpool.

Good luck!


Continue reading Starting a Carpool …

From The Simple Dollar.

February 4, 2010 | Filed Under Frugal Living | Leave a Comment 

New Year’s Resolutions, Keeping New Year’s Resolution, New Years Resolutions

Tired of giving up New Year’s Resolutions just a few days into the new year? Here are some easy solutions for keeping your New Year’s Resolutions.

Continue reading New Year’s Resolutions, Keeping New Year’s Resolution, New Years Resolutions …

From The Dollar Stretcher Featured Content.

January 27, 2010 | Filed Under Frugal Living | Leave a Comment 

Special Thanks

There are a lot of things that I was thankful for during my son’s hospital stay. We are, of course, the most thankful to God, for deciding to allow our son to come through the whole thing unharmed, and thankful for the many many people praying for him. We are grateful for a great hospital staff. Our family and church family was supportive and there for everything we needed. There was one other thing we are thankful for, as it just made our lives infinitely easier during this high-stress time:

Ronald%20McDonald%20House-thumb
We live about a half an hour away from the hospital where my son stayed. It doesn’t seem like a lot, but going home would have been a lot of work. Besides the simple lack of the need to travel, the Ronald McDonald House provided a nearby haven.

The Ronald McDonald House is a charity of the McDonald’s Corporation. They provide temporary housing for the families of hospitalized children. We stayed there for a week while Daniel was in the hospital. This is what they did for us:

Meals were provided. Most nights a meal was made for everyone, but the kitchen was always open and full of left-overs. Had we come home, I would have had to do a lot of work cooking, which would have kept me away from my son.

There was an on site laundry room. I could wash and dry a load in an hour and a half, just like normal Americans. We brought four outfits per person and did laundry every few days. This simplified everything.

Late night hospital visits were a must. There were a few nights that Thomas and I stayed overnight at the hospital (while Bobby and Dan stayed at the Ronald McDonald House), but on nights that we didn’t, it wasn’t unusual for me to visit. Either I couldn’t sleep without my son or my son couldn’t sleep without me. Being right down the street from the hospital made these visits possible.

They had the internet. The hospital did too, but we couldn’t access Facebook from the hospital. I was able to write a post from there, moderate comments, and send out email updates to family and friends.

There was one phone designated for long distance phone calls. I discovered this after dumping a few dollars into the hospital pay phone, but it still came in handy.

They had gifts for our sick son. There was a box full of stuffed animals and books that we could choose from. We found an excellent Thomas and Friends book that we read to Daniel several dozen times. There was also a box that must have been donated by RedBox, as it had RedBox DVDs and a sign saying we were welcome to take one home. There was a Thomas and Friends movie in there that Daniel loves.

The volunteers were amazing. Between people donating food and those coordinating our stay, they were understanding of the guests’ unique position, being non intrusive but still available.

Dan and I have had a long-term hypothetical debate about which would be better to sleep on: the Sleep Number Bed, or a Tempur Pedic. After a week on a Sleep Number bed, I can’t imagine a bed could be more comfortable, which means I lost the debate.

Anyway, people have asked many times if there was anything we needed. Every time, we answered that the Ronald McDonald House had taken care of all of our needs. Even after the $10 nightly donation, we technically saved money staying there, considering the cost of gas to visit the hospital and meals costs. But if anyone felt led to do something, we told them they take donations. Before this all happened, I didn’t know much about the Ronald McDonald House. Now, I consider it an exemplary charity.

Continue reading Special Thanks …

From Under $1000 Per Month.

January 24, 2010 | Filed Under Frugal Living | Leave a Comment 

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