Technology is a double-edged sword: It has the power to revolutionize our productivity and allow us to achieve feats previously thought to be impossible; but it also has the ability to drain our focus and squander our attention.

As a blogger, I’m usually a strong proponent of gadgets that plug in and turn on. These type of tools allow me to make a living from anywhere I want. But, like many who stare at a computer all day, I struggle with turning all the fancy gadgets off.

It’s incredibly easy for me to work, play, entertain, and socialize all in front of my computer… or a television… or my new iPhone. Even my two-year-old daughter is obsessed with cell phones now. I don’t blame her — they blink, make sounds, and mommy and daddy use them all the time!

Our recent overdose of technology has Courtney and me actively looking for ways to unplug our life. Yesterday on Twitter (ironic I know), I stumbled upon the Sabbath Manifesto. From the website, the Sabbath Manifesto is “a creative project designed to slow down lives in an increasingly hectic world.” Perfect!

The Sabbath Manifesto encourages people to set aside one day a week to take a timeout from life. On this one day, you’re urged to:

1. Avoid technology.
2. Connect with loved ones.
3. Nurture your health.
4. Get outside.
5. Avoid commerce.
6. Light candles.
7. Drink wine.
8. Eat bread.
9. Find silence.
10. Give back.

The Sabbath Manifest is co-ordinating a National Day of Unplugging. From sundown on March 19th (today!) to sundown on March 20th, we’re being called to turn off and unplug our gadgets to whatever degree we feel comfortable. This has the potential to benefit our selves, our relationships, our environment — and our pocketbooks.

Here’s a fun video they made to support the cause:

You know what? We’re buying in. Courtney and I are going to give it an earnest shot. We love organized days like this, and will be having some people over for board games by candlelight (alright, maybe we’ll actually use the lights… still undecided)!

Either way, we’ll be burying the laptops, the cell phones, and the television. For us, that would be a big step in unplugging.

What about you? How do you unplug? Will you be joining the National Day of Unplugging?

J.D.’s note: Just the other night I was chatting about this very subject with Fraser from Universe Today. We’re both gadget guys, and both make our livings from the computer. But we’re also both drawn to do more outside, to cut the cord with technology. Fraser has dropped his smartphone for a cheap pre-paid unit. And I’m beginning to question my drawer full of gadgets. I’ll actually be joining Adam for the National Day of Unplugging. And I’ll consider adding a sabbath to my weeks.

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Related Articles at Get Rich Slowly:

• The Best of Get Rich Slowly: March 2008
• The Best of Get Rich Slowly: March 2009
• National Credit Score Index
• Video: Credit Cards in the Blender
• The GRS Garden Project: March Update

I’m wondering if I should sell my 2007 Honda Fit. Or will this be a quick fix that may not pay off in the long run?

For the last several years, I’ve been trying to make it as a part-time adjunct community college instructor living in San Francisco. As everyone is likely aware, the state of California is experiencing a major budget crisis and education is suffering. As a result, I decided in 2007 to take a relatively low-paying but secure office job during the day and to continue teaching in the evenings at one of the two colleges at which I had been working. This has been a wonderful way to have some financial peace of mind, do the job I love, steady my budget, and get on with paying down $30,000 in consumer debt.

Last week, I was told by my college that, due to budget cuts, I won’t be offered classes for the summer or fall semesters. Beginning in June, this leaves me with just my trusty day job which covers only my rent, utilities, and groceries. Period. No saving, no paying down debt. Nothing beyond survival. And I’ve only got a $500 safety net in savings. If anything unexpected should happen, I’m deeper in the red.

At this moment, I can only see three ways to improve my financial situation:

1. Get a higher-paying job, or a new second job;
2. Get a cheaper apartment; or
3. Sell my car.

#1 is something that I’ll be working toward. Finding a better-paying job in this economy is a tough proposition at the moment, but not an impossibility. I would also like to go back to school one night a week in order to get an additional credential that will better position me for more solid, full-time teaching jobs (and, uh-oh, it’s going to cost me for that weekly class). This additional schooling will take 12 to 18 months.

#2 is non-negotiable. Although it costs 55% of the take-home salary from my day job, my apartment is my home, and I love it dearly. I’m in an super-walkable neighborhood that’s three blocks from my day job. Most everything a person could need is within a five-block radius, and I’m three blocks from a major streetcar line. It provides great quality of life. My place is right next to Golden Gate Park — lots of free fun and exercise!

#3 is very attractive to me at the moment. I bought this car in 2007 because the main college that I worked at is 30 miles from S.F. Now that I don’t see myself making this commute through the rest of 2010, I feel foolish paying for insurance (about $125/mo.), parking tickets (sometimes $0, sometimes $110/mo.), and for the car itself. (I should mention that a parent loaned me the money for the car, and I pay $200/mo. for that.) I could sell this car for about $10,000, which is almost exactly the total of my remaining credit card debt.

So, here’s my question: Is it better to keep a good, fairly new economy car in the long run as things could improve next year and I may want to be driving again and have this good car? Or should I sell it for what I see at the moment as having greater financial freedom? I live in a very pedestrian-friendly city, and I don’t plan on leaving San Francisco in the foreseeable future. Would selling this car be cutting off my nose to spite my face, or would it be a sound money move?

Thanks for your time and consideration. Any input is very, very appreciated.

To me, it almost sounds like Martina knows what she should do. Based on my own personal experience and preferences, and based on what she’s shared in her story, I’d sell the car, too. It sounds as if her apartment contributes greatly to her quality of life, so she’s probably best served my keeping it for now.

But I also think she should absolutely do what she can to boost her emergency savings as soon as possible. Maybe even take a weekend job working retail specifically to save for a rainy day.

If at some point in the future Martina decides she does need a car, it might make sense to pick up a beater as a stopgap. (Or join Zipcar.)

What do you folks think? Should Martina sell her car or keep it? What’s her best bet in this situation?

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Related Articles at Get Rich Slowly:

• Pep Talk: Climb Out of Debt
• The Hardest Thing to do in Investing
• 21st Century Real Estate: Use a Blog to Sell Your Home
• Flipping Cars for Fun and Profit
• Ask the Readers: How Do You Buy One Home While Selling Another?

Though the book is out now, the “launch” ceremonies aren’t officially underway. My publisher is putting together a PR push for early April, and I’ll start doing more marketing myself in the next week or two. To start, I’ve contributed 5 practical tips for saving money over at O’Reilly Answers. (O’Reilly is my publisher.) Go take a gander — and while you’re there, feel free to leave a comment with your tips for saving.

In non-J.D.-related news, here are some other interesting financial articles I’ve found recently:

I mentioned the new blog Pop Economics about a month ago, but I’m going to mention it again. I like it. A lot. The author tends to stay on the economics side of personal finance (as you might guess from the blog’s title), but his articles are informative and interesting. I particularly enjoyed the recent rant about the problem with gold bugs. I’ve considered writing an article about gold myself, but don’t have the guts. (I’m not a fan of gold as an investment, and I know saying that will make some people cranky.)

Earlier this month, Steve at Brip Blap wrote a post called “How to Make Money on Facebook”. But the post is really about how to lose money in a negotiation. When you’re buying something — especially a house — you put yourself at a disadvantage when you let the other side know how much you want to buy. I learned this lesson the hard way when I bought my Mini Cooper (I gushed about the car to the salesman, who could then get me to pay even more). When you’re negotiating, let the other side do the talking.

In her article about the myth of the $18,000 wedding, Laura Rowley argues that people think they’re supposed to spend that much because they’ve been told that’s how much people spend — even though that might not be the case. While researching my book, I was frustrated to find that a lot of the figures we financial fanatics hold dear are actually based on myth. (For instance: Can anyone show me the purported Dun & Bradstreet study that shows people spend more with credit cards than without?)

How did I miss this when it was first posted at The Consumerist last November? I don’t know, but this is awesome. Here’s a video from a former Bank of America customer-service rep that explains why she was fired: because she stopped denying people who needed help:

If you can’t (or don’t want to) watch the video, The Consumerist has a complete transcript.

Finally, I’ve been very busy for the past few months. Or years. Which may be why Marissa Bracke’s post about why she stopped working with busy people hit home with me. Maybe I need to change my outlook.

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Related Articles at Get Rich Slowly:

• links for 2007-03-14
• Daily Roundup: Money Myths, Going Organic, and DIY Halloween Calendar
• Return of the Daily Links
• Daily Links: Positive Cash-Flow Edition
• Daily Links: A Fool and His Money Edition

Before I changed my habits, I spent money without much thought. In college, if I had a two-hour break between classes, I’d drive to the mall. Once I started working full time, my coworker and I would bring our lunches to work just so that we’d have the entire hour to shop. If I was bored, I’d wander into the cosmetics superstore Sephora for entertainment. Even at home I’d shop, buying online and tracking my packages until they arrived.

I thought I needed a new dress for every event I attended, new clothes from REI for every backpacking trip, and practically a whole new wardrobe if I was going out of town. I thought these new things were a way to reinvent myself or to portray the right image, but all they did was fill up my closets and bathrooms with a ton of Stuff that I’m still sorting through today. (Brokamp’s article on turning clutter into cash inspired me to devote this weekend to more de-cluttering.)

These habits never put me deeply into debt, but they weren’t helping me to get out, either. I was often surprised at what my total at the checkout counter, but I’d throw down the credit card anyway, too self-conscious to put anything back. I’d make a lame promise to myself to cut back, but I never did.

A stop to the splurging
The temporary high of buying Stuff was making me miserable when the credit card bill arrived every month. When I finally had enough of paying down the debt just to drive the balance back up again, I went in the other direction. I quit buying clothes and cosmetics and made my lunch every, single day. It was a strange adjustment to have a packed lunch and a full hour in the middle of the day, without a shopping trip to fill the time. I cut my magazine subscriptions, reduced the minutes on my cell phone plan, carpooled to save gas money, and took clothing to the resale shop. I avoided every expense I possibly could, and the debt was paid off pretty quickly.

The downside was that I found it hard to spend money on anything, even after my husband and I were debt-free and had a healthy emergency fund.

A stop to the miserliness
I remember when it became clear that I needed to assess my relationship with money (yet again) because it was the day that the glass carafe from our French coffee press hit the floor. My stomach turned, and I immediately wondered how much it was going to cost to replace it. I went online and found that a replacement carafe would cost $12. I breathed a sigh of relief, but I also realized that my reaction wasn’t indicative of a healthy relationship with money.

My compulsion to buy had turned into a compulsion to save. Why was I buying all that Stuff? Why was I now so worried about saving every cent, especially since we were out of debt and saving money every month? I filled my need to buy with a need to save, and neither was working for me.

The middle ground
In an attempt to find a balance between debt and spending guilt, I began to think about the reasons why it would be a good thing to spend extra money. I came up with the following situations:

• Gaining knowledge. This year I paid more than I ever thought I would for a business course. Halfway into it, I know it was a good decision that will more than pay for the cost of the course. Paying to learn something useful doesn’t necessarily have to have a monetary return on investment, though. I’d like to hire a swim coach to improve my skills, which won’t make money but does provide a great physical workout. I don’t feel badly about spending money when I will learn something of value.
• Experiencing something new. This one can overlap with gaining knowledge, but I felt it was still worth mentioning separately. Experiencing something new can mean travel or taking lessons in something that interests you.
• Paying for quality. The quality of the food I eat is a high priority to me, so I’m okay with spending extra in that area. Another example is the aforementioned clothing habit. I’ve come to adapt the quality over quantity stance when it comes to clothes. If I actually need something, I’ll buy it, but I want it to last and I’ll pay a more for that (and an upcoming wedding is no longer considered a need for a new dress).
• Supporting important causes. One example of a cause that I support is buying locally, so I’m okay with spending extra if it’s supporting a local business. You can lobby for many causes just by mindfully choosing how and where you spend your money.

Determining when I’m okay with spending has helped me to find a balance between mindlessly consuming and mindlessly saving. When are you okay with spending more money? Why do you value those things?

J.D.’s note: I went through this exact same thing. When my frugality paid off, when I got out of debt and built savings, I still couldn’t spend on myself. Does everyone go through this? It wasn’t until I re-discovered the balanced money formula that I was able to loosen up again and budget for fun. I’m much happier for it.

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• What I Like About Scrooge
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• Lifestyle Trade-offs: Being Frugal While Having Fun
• Financial Nirvana: It’s the Little Things
• From Zero Percent to Thirty Percent in Just One Month

Even though I can’t peer into your closets or surveil your garage (or can I?), I can say this with certainty: You have a lot of Stuff. And as the proud owner of a lot of Stuff, you should consider two things:

• Your Stuff could get stolen or destroyed, and then you’d have to prove to your insurer that you once owned it, and
• The Stuff you no longer want can be turned into cash.

I can personally attest to the latter. As I wrote previously, the Brokamp family kicked off 2010 by moving into a new house, so over the past few months we’ve sold all kinds of things on Craigslist. We also held a couple of yard sales — one in below-freezing weather. The total take was more than $2,000 in extra cash.

Of course, you probably want to keep most of your Stuff, and if you’re smart, you have homeowners or renters insurance to protect it. But if your residence is burgled or burns, how would you prove to the insurance company what you once owned?

The answer is to take a home inventory — going room by room and documenting everything you own. As you’re looking at each possession, take the opportunity to evaluate whether you still want it. Once you’ve completed the inventory, you’ll not only have proof of your possessions — which, beyond its insurance purposes, will help you determine your net worth — but also a pile of items to sell, trade, donate, or give as presents. (Re-gifters aren’t judged here in GRS-land.)

Ready, Set, Inventory!
Are you raring to see how much you really own, de-clutter your house, and make some cash? Here’s how.

1. Designate a place for the Stuff you no longer want. Clear some space in the garage or guest room where you’ll put your trash that will become someone else’s treasure.
2. Choose a method and start inventorying. You have a few options when it comes to providing proof of your possessions. Perhaps the easiest is going from room to room with a video recorder, opening drawers, closets, cabinets, armoires, safes, floorboards, and false walls along the way. Another option: Use the Insurance Information Institute’s online inventory tool at KnowYourStuff.org. Or just write it all down, using digital photos and receipts as evidence of ownership. Remember: As you’re recording all your possessions, you’re also identifying Stuff you no longer want.
3. Note important information. Take video or photos or detailed notes to record identifying information such as brand, model, serial numbers, engravings, and unique attributes.
4. Give special attention to expensive items. Consider getting a written appraisal for jewelry, family heirlooms, rare collectibles, and other pricey Stuff. Contact the American Society of Appraisers or the International Society of Appraisers to find an appraiser in your area. You also might want to take extra steps — such as buying a fire-resistant safe or renting a safe-deposit box — for these items. And make sure your insurance actually covers them. Some policies specifically exclude jewelry and other big-ticket items or only provide coverage up to a limited amount.
5. Scatter copies of your inventory. Keep a few copies of your inventory outside your home, such as in a safe-deposit box or buried in your office desk. If your inventory is in a digital format, email it to yourself. If you use KnowYourStuff.org, the information is stored on secured servers that will be up and running even if your house is down and smoldering.

Turn Clutter Into Cash
Now that you’ve combed through your worldly possessions for things you no longer want to possess, you need to decide the best way to ditch them. Here are your options:

1. Donate your Stuff. If you itemize your taxes, you can deduct the fair market value of items you donate to qualified organizations. Make sure you document what you’re donating, get a receipt, and follow the rules — and there are many. For example, any donation of used clothing or household items that’s more than $500 requires that you file Section A of IRS Form 8283. Consult IRS.gov for all the gory details.
2. Hold a yard sale. This is the best option if you have a lot of Stuff of modest value. You won’t get top dollar, but you will get rid of a lot of Stuff in a single morning, assuming you price it right and live near a lot of people.
3. Sell items online. If you have items that will sell for $50 or more and you’re willing to put in the time to list them online, websites like Craigslist or eBay or Amazon.com’s Marketplace can help you find sellers miles — and even countries — away. Just make sure you take steps to protect yourself and your Stuff, such as using a payment service like PayPal or dealing only in cash. There are a lot of people in cyberspace trying to scam online buyers and sellers.
4. Use a consignment store, auction house, or specialized seller. For unique and expensive items — such as rare collectibles, antiques, or jewelry — enlist a professional who knows the market and can help you get the most money.

Voilá! You’ve now documented your possessions, cleaned out your house, and maybe even made a buck or two. Congratulations!

J.D.’s note: More great stuff from Brokamp. It’s as if he reached into my mind and plucked out a piece of my book. Your Money: The Missing Manual has material covering this subject, though it’s spread out over a couple of chapters instead of compressed into one concise article like this. Photo by Phillip Stewart.

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Related Articles at Get Rich Slowly:

• Simplify Your Life with a Stuff Replacement Fund
• Clutter’s Last Stand: The Cost of Buying Things You Will Not Use
• The High Cost of Clutter
• The Balance Between Splurger and Miser
• Purge Clutter with a De-Accumulation Bag

Here are the Consumer Reports top-rated vehicles in ten categories (with previous years’ top cars in parentheses):

• Pickup Truck: Chevrolet Silverado 1500 (2009: Chevrolet Avalanche, 2008: Chevrolet Silverado 1500, no pick in 2007)
• Sporty Car (formerly Fun-to-drive): Volkswagen GTI (2007-2009: Mazda MX-5 Miata)
• Small sedan: Hyundai Elantra SE (2008-2009: Hyundai Elantra SE, 2007: Honda Civic)
• Family sedan: Nissan Altima (2007-2009: Honda Accord)
• Sports sedan (formerly Upscale sedan): Infiniti G37 (2009: Infiniti G37, 2007-2008: Infiniti G35)
• Luxury sedan: no pick, but implied Lexus LS 460L (2009: implied Lexus LS 460, 2008: Lexus LS 460L, 2007: Infiniti M35)
• Small SUV: Subaru Forester (2007-2009: Toyota RAV4)
• Family SUV (formerly Midsized SUV): Chevrolet Traverse (2009: Toyota Highlander, 2008: Hyundai Santa Fe, 2007: Toyota Highlander Hybrid)
• Family Hauler (formerly Minivan): Mazda5 (2007-2009: Toyota Sienna)
• Green car: Toyota Prius (2007-2009: Toyota Prius)

This year, Consumer Reports chose a “best car overall”, which was again the Lexus LS 460L. The LS scored 99 out of a possible 100 points in the magazine’s road test. (By comparison, my beloved Mini Cooper scored an 81 again.)

Again this year, CR shared its list of “most overlooked cars”, which was identical to last year’s list of overlooked cars. These five vehicles are safe and performed well in their testing, but don’t sell well:

• Mazda5
• Kia Rondo
• Mitsubishi Outlander
• Hyundai Azera
• Suzuki SX4

This year, Consumer Reports revised how it determined which cars provide the best value. Last year they divided each vehicle’s 5-year cost-of-ownership by its road score to come up with an arbitrary measure of cost vs. quality. This year their method is more obscure, though it seems to follow the same principles (but with reliability ratings tossed in for good measure).

The CR website actually has more complete info than the magazine regarding the best and worst values in 2010 cars. Best value overall? The Honda Fit Sport with a “value score” of 2.24. Worst? The Jeep Wrangler Unlimited Sahara with a value score of 0.30. (The Mini Cooper places well at 1.82.) Where can you find the best car values? According to the magazine:

Small cars and family cars tend to have the best scores…Similarly, small SUVs tend to be better values than larger ones.

Reliability is important too, of course. This year, Consumer Reports rated these five used cars as the most reliable for their vintage:

• 2009 Toyota Yaris hatchback
• 2007 Toyota Highlander
• 2005 Toyota Prius
• 2003 Lexus LX
• 2001 Toyota Echo

Overall, vehicles from Toyota have been most reliable over the past ten years (present woes notwithstanding), followed by Honda. (These two stand far ahead of the pack in long-term reliability.) Volkswagens and Hyundais have been more problematic, especially over a span of many years. (The magazine notes that Hyundai quality has been improving in recent years, however.)

Other notable rankings:

• The Toyota Prius has the best fuel economy (44mpg), while the Ford F-250 Lariat diesel has the worst (10mpg).
• The Dodge Challenge (V8) has the highest customer satisfaction (92% would buy again), while the Chrysler Sebring sedan has the worst (37%).
• The Honda Fit is the least expensive car to own over five years ($25,500), while the Dodge Viper is the most expensive ($113,000).

Some of the material from the Consumer Reports 2010 Auto Issue is freely available on their website. Other information, however, is locked behind a paywall. And don’t forget that you can always find great info on the Consumer Reports car blog.

From the archives
Don’t forget that Get Rich Slowly features car-buying tips from time-to-time. Notable articles include:

• Why I drive a 13-year-old car
• Dave Ramsey says ‘Drive free, retire rich’
• The best way to buy a new car and A real fighting chance
• Two approaches to car-buying
• How to sell a used car

I also recommend two older AskMetafilter threads:

• Fix it or junk it? At what point is a car not worth repairing?
• What is a reasonable offer for a new car? Don’t miss this fantastic response from a fellow who just bought a car.

The Consumer Reports car issue is an excellent resource. If you think you might purchase a vehicle soon, I recommend it. But I think it’s a little dangerous to pick up just for the sake of browsing. You may find yourself moved from merely curious to “itching to buy”!

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Related Articles at Get Rich Slowly:

• How to Drive a Great End-of-Summer New Car Deal
• The Consumer Reports Auto Issue: Best and Worst 2009 Cars
• Consumer Reports Auto Issue: Top Picks for 2008
• Consumer Reports Auto Issue Round-Up: Top Picks for 2007
• Free Crash Test Videos from Consumer Reports

Well, now seems to be the time. To celebrate the upcoming fourth anniversary of Get Rich Slowly and the imminent release of my first book, Your Money: The Missing Manual, I’ve decided to do something a little scary and exciting. We’re going to have a video contest.

GRS readers are awesome
The reader stories I’ve been featuring every Sunday seem to be a hit. And, in fact, I’ve always maintained that what makes this site so awesome has nothing to do with me and everything to do with you, the readers. Your tips and stories and suggestions are what make this one of the best places on the internet to discuss actual personal finances.

As proud as I am of this site’s growth, of the income it has provided, and of having now written a book, I think my favorite achievement came last year when The Wall Street Journal wrote: “The strength of [Get Rich Slowly] is that, along with plenty of advice from financial experts, he opens the site up to input from readers so they can learn from each other…Much of the value of the blog comes from readers’ comments.” Amen.

Well, it’s time to get open this site up for even more reader input. Here’s how it’s going to work.

The Get Rich Slowly video contest
I want you to create videos of under two minutes in length that provide personal-finance info in one of two categories: Personal Finance Tips or Success Stories. You can use anything you want to record the videos, and you can be as creative (or non-creative) as you’d like to be.

Since I’m the judge for the contest, I’ll tell you right now that although content is king (meaning the quality of your tip counts for a lot), I’m going to be pre-disposed to hands-on, how-to type videos: “Here’s how to change your oil”, “Here’s how I use coupons to save at the grocery store”, and so on.

Here’s a sample of what a video in the Personal Finance Tips category might look like:

And here’s an example of what videos in the Success Stories category might look like:

As you can see, your videos don’t have to be anything fancy. While you’re certainly welcome to get creative, what I really want is for you folks to make something by hand. I want you to take risks, get creative, and share your ideas with other GRS readers. I think it’ll be awesome!

Prizes!
What’s a contest without prizes? For the 2010 Get Rich Slowly video contest, we’re giving away cold, hard cash. The winner in each category — Personal Finance and Success Stories — will receive $500. And ten runners-up in each category will win an autographed copy of Your Money: The Missing Manual. That makes 22 prizes in all!

How to enter
If you’re over 18 years old and this contest is legal in your state (sorry, this contest is for U.S. residents only), you’re invited to submit an online video no more than two minutes in length. To do so, follow this procedure:

• Make your awesome video.
• Upload the video to your YouTube account.
• Head to the video contest page and click the “submit your video” button.
• If you have any questions or have problems submitting your video, email videocontest@getrichslowly.org.

You can submit videos in two main categories: Personal Finance Tips or Success Stories. (You may submit one video in each category, for a total of two possible entries.) And, as mentioned before, if you have a website, you can flag your video to be entered in the bonus Website category.

The contest is open until 15 April 2010. I’ll announce the winners on 01 May 2010. Once submissions start coming in, you’ll be able to view the most recent entries — I’ll post the place to view them on the video contest page soon. (Plus I may highlight a few videos between now and April 15th.)

Join the fun!
It takes guts to put yourself out there on video. Trust me, I know. But please don’t be afraid of looking like a dork. Be enthusiastic, share your knowledge, and have fun! (And if you’re worried about the juvenile YouTube commenters, simply turn off comments on your videos.)

What are you waiting for? Pull out your cameras and start recording. I hope you join in the fun, not only for the possibility of winning a prize, but to also share your stories and ideas with others — and to make something by hand.

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Related Articles at Get Rich Slowly:

• Contest Deadline Approaching!
• One-Millionth Hit! Contest Winners Announced!
• One-Millionth Hit Contest
• Site Updates: My Wish is Your Command
• Reminder: Enter the Get-Rich-Slowly Holiday Tips Contest

My father was a serial entrepreneur — he was always starting businesses. But more than that, he was a serial inventor, a master of DIY, an amateur everything.

When I was a boy, my father:

• Built a windmill to supply some of our electricity. (The windmill blew over during a freak windstorm, and lay on the ground behind our property for many years.)
• Built his own boat. I can’t remember what kind of boat it was, but I think it was a small sailboat. (I was very young at the time, but I remember the library books he used to teach himself how to build the craft. I couldn’t help but remember them; he checked them out in 1972, and we still had them at home during the early 1980s!)
• Built his own telescope — or tried to. Again, I can’t remember if he ever finished the project, but I know that for years, he had a huge (12 inch? 15 inch?) and heavy hunk of polished glass the top drawer in his dresser.
• Wrote his own accounting software to manage his businesses. Dad bought an Apple II when I was in fourth grade (so late 1978?). Using the built-in Integer BASIC language (and, to some extent, the machine’s assembly language), my father taught himself how to program whatever he needed.

• Later wrote an entire suite of applications to run the box factory. When my father founded the box factory in 1985, he bought a new Atari 1040 ST computer and wrote all of the programs he needed in BASIC. He wrote programs for box layout, accounting, and more.

• Designed an electronic, timed sprinkler system to run the irrigation in his failed nursery business.
• Designed, built, and marketed a line of wheat grinders and food dryers. Doing so, he built his first successful business, Harvest Mills. After five stressful years (and many gained pounds), he sold the business in the late 1970s.
• Created a second successful business, Custom Box Service, which he started in 1985. As I mentioned, he wrote all the computer software for the company, but he also built all of the manufacturing equipment by hand. Today, 25 years later, that equipment still powers the family business.

When Kris and I decided in 1993 that we wanted to start our own vegetable garden from seed, my father helped me build a small greenhouse. We didn’t use any blueprints; he was the blueprints. One long Saturday, we bought lumber and nails and plastic sheeting, and he stood around watching me, telling me what lengths to trim the two-by-fours and at what angles. He didn’t sketch anything out on paper — he just told me what to do and I did it. That greenhouse is still standing.

But all of these things barely scratch the surface. These are just the things I remember, and mainly his successes. My father did more: He wrote poetry (mostly bad poetry), played guitar, drew funny pictures, spent a couple of summers raising 40+ acres of wheat, flew airplanes, sailed boats, and more. When he contracted the cancer that eventually killed him, he bought a microscope so that he could draw his own blood and look at his dwindling supply of white blood cells.

Made by hand
So what? What does all of this have to do with personal finance? I’ve already written a lot about how my parents — especially my father — were poor at handling money. (In fact, all of Dad’s extensive and expensive hobbies surely played a role in our family’s poor financial standing.)

Well, I just finished reading an uncorrected proof of Mark Frauenfelder’s Made by Hand, which is due to be published in late May. In the book, Frauenfelder — who is perhaps best known as the co-founder of Boing Boing and editor of Make magazine — chronicles his experience dabbling in the world of do-it-yourself (or DIY). The book includes chapters describing how Frauenfelder (intentionally) kills his lawn, grows food, raises chickens and keeps bees, brews tea and coffee, builds musical instruments, carves kitchen utensils, and, most of all, learns how to learn.

The book isn’t a practical guide to anything. You won’t learn how to keep your own bees or carve your own kitchen utensils in Made by Hand; instead, you’ll get the pleasure of watching over Frauenfelder’s shoulder as he does these things. And, if you’re like me, you’ll be reminded of how much we, as a culture, used to do ourself.

For good or ill, the United States has become a service economy. We pay people to do all sorts of things we used to do ourselves. In some cases, this makes sense; “outsourcing” can free us from work we find drudgery, allowing us to pursue our passions. But sometimes this reliance on professionals and experts makes us more detached from the things we ought to know about. (As a hypothetical example: If you pay a financial adviser, you may think there’s no need to know about asset allocation and diversification and all that boring stuff — but there is.)

Frauenfelder believes — as do I — that the DIY ethic is only partly about the things you produce. It’s also about learning how to learn, about connecting with others who share your interests, and about taking pride in your accomplishments. (Look! I built a personal-finance blog read by millions of people every year!) There’s a reason Get Rich Slowly has a DIY category, even if it’s seldom used: Doing things yourself is a great way to save money and increase happiness.

In praise of the amateur
After reading Made by Hand, it occurred to me that much of my own personal philosophy is about finding ways to do things myself. I don’t (and can’t) do everything myself, but I get the most pleasure in life when I’m producing instead of consuming. I also thought of other folks I know who do stuff. My father was one of these, but I know (or know of) many others, such as:

• My wife, who cooks and cans and bakes like crazy. (One reason I struggle with my weight is that Kris is always making terrific food.) But she does other creative stuff, too. Sitting next to me at the moment is a little stuffed animal that she made by hand.
• Bloggers of all stripes. I love seeing others write about cars and flowers and painting and chemistry and more. I think it’s great that blogs have served to level the playing field, allowing non-professional voices to be heard. (My favorite shelf in my library contains books by bloggers.)
• Chris Guillebeau and others who produce top-notch e-books on a variety of topics, earning good money while bypassing the traditional publishing industry.
• Courtney Woolsey, who started out singing for a few hundred folks on YouTube and now has a recording contract.
• My friends who play musical instruments. I love that Rhonda took up piano in her late thirties. Over the past two years, I’ve watched her move from rank beginner to competent learner. And I hope to see her progress even further.
• My friend Craig, who is a DIY master (though he probably wouldn’t call himself that). He’s remodeled his house (slowly), built raised garden beds and a chicken coop, constructed his own vineyard, built a mud oven, and is one of the best DIY cooks I know. (He and I and another friend were going to make our own bacon together for my upcoming birthday, but it’s too late now…)
• And, most of all, our friends’ children. Craig’s son, Albert, for example, loves electronics. His parents have fostered this, giving him all sorts of stuff to build and take apart. Other kids we know love to write, draw, do science, and more. It’s great to see children innately drawn to DIY before they grow older and more complacent.

The thing is, these folks are all amateurs (and so am I). They’re not trained pros. They do these things because they love to, and this passion aids their performance. When they fail (as they inevitably do), they try again. (I think Craig has built his mud oven at least three times because it keeps falling apart.) These amateurs find ways to succeed, even if it’s not a success in the eyes of the world.

There are a lot of people who dislike amateur work because they think it’s poorer quality than that put out by the pros. That’s fine. I get that perspective. But for myself, I get much more value for my money when I pay five or ten bucks to see a community theater perform than when I pay fifty or one hundred to see a Broadway show.

I’m not saying that you have to choose one or the other; I’m saying there’s room for both. But for some reason, we’ve abandoned the stuff of talent shows and living-room concerts. I’d like to see more of that. I want to be awed by the stuff my friends make and do.

Action is everything
As always when I dwell on this subject, I’m reminded of Sarah Dyer’s manifesto, “Action Girl’s Guide to Living”. I’ve linked to this many times before, and nobody seems to like it as much as I do, but that’s okay. I think it’s great, especially this abbreviated bit (which I think I pulled from an actual Action Girl comic book):

ACTION IS EVERYTHING! Our society, even when it’s trying to be “alternative” usually just promotes a consumerist mentality. Buying things isn’t evil, but if that’s all you do, your life is pretty pointless. Be an ACTION GIRL! (Or boy!) It’s great to read / listen to / watch other people’s creative output, but it’s even cooler to do it yourself. Don’t think you could play in a band? Try anyway! Or maybe think about putting on shows or starting a label. Don’t have time/energy to do a website yourself? Contribute to someone else’s website. Not everyone is suited to doing projects on their own, but everyone has something to contribute. So do something with all that positive energy!

I love that. And I think it has everything to do with personal finance and happiness. (When I say, “Nobody cares more about your money than you do“, I’m thinking of Action Girl and the DIY ethic.)

What I value most
My father died in 1995, ten days shy of his 50th birthday. I wasn’t very close to him at the time; our relationship had grown strained over the last few years of his life. But in recent years, I’ve become more and more sentimental about all the stuff he knew and did.

A few years ago, I realized that nobody in our family actually owned a food grinder or a wheat grinder from the old Harvest Mills days thirty years ago. How was that even possible? I managed to track down a food dryer via Craigslist, but the wheat grinder was more elusive.

One of my father’s first food dryers, made by hand.

Then one day, we were scouring our favorite annual garage sale. And there, sitting on a table, was a Harvest Mills wheat grinder. I knew it instantly from its shape, even though I hadn’t seen one since the 1970s. It was marked at $100. Being a frugal fellow, I tried to bargain with the owner. No go. He wanted $100. That was fine, though. I gladly paid the man the money. I would have paid $1000, if that’s what it would have taken.

Like most Americans, Kris and I own a lot of Stuff. Some of it, like the computer I’m using to write this post, is actually worth a fair bit of money. But you know what? None of it is worth as much to me as my father’s food dryer or the painting of Kermit the Frog that Jolie just made for me. This computer (and most of the other stuff in my life) is impersonal and mass produced, but these other things were created by people I know.

So, please: Make stuff. Don’t just consume the things produced by others. If you don’t already, try to find something that you enjoy doing, something that you can make by hand. Don’t be afraid to fail. When you make things, you make the world a better place.

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Related Articles at Get Rich Slowly:

• links for 2007-05-18
• Daily Links: Homemade Cars and Urban Farming
• Cheap Clothing Jackpot
• Ask the Readers: How to Live Debt-Free?
• The Frugal Photographer

Like J.D., I once had a big problem with debt. Unlike J.D., I didn’t dig myself out from under that problem gracefully.

About eight years ago, I was a college student, living in an apartment near campus, and working full time while going to school. I felt like I was on top of the world. Here I was, seeing all my friends making $6 or $8 an hour, while I was making about $17. That seemed like a lot of money. It was about $35,000 a year — not just a college student’s salary, but a real salary. I felt like I deserved to be living it up a bit, especially considering all the work I was doing with a full-time job and a full time class load.

I went overboard. I spent well beyond the $35,000/year I was making (it wasn’t as much money as it felt like). I bought a Mustang, and modified it into an amateur race car. I had the latest laptop and a desktop computer with a flat screen display (in 2001). My $35k/year salary was enough to live on, but it wasn’t enough to support spending $1500 on a laptop computer and on a desktop computer and on high-performance cylinder heads, but that’s what I did.

I bought all of them, and more.

This kept up for a year or two. I kept justifying these purchases to myself, and my credit card balances slowly rose along with my required minimum payments. A bout of bad luck exacerbated the problem. I was mugged outside my apartment, and having no medical insurance, ran up an emergency room bill. My race car was stolen, and being 21 and owning a race car, I couldn’t afford comprehensive car insurance, I had liability only. I bought another car to replace it, again with borrowed money.

Things fall apart
Eventually, I realized I was in over my head. I was gasping for air. I couldn’t make my credit card payments and also pay my rent and buy groceries. I was driven to the edge, and I gave up. I stopped paying all my credit card bills, and they went into collections. I voluntarily surrendered my car to be repossessed. I figured if I was going to ruin my credit score, I might as well go all out — I even hired a bankruptcy attorney. She managed to stop the incessant flood of phone calls from creditors, but I found I couldn’t afford even to pay for the bankruptcy proceedings, and so that process stopped shortly thereafter.

At this point, I owed approximately $30,000 on about four different credit cards, the medical bill, and the car loan, all of these in collections. My credit had been destroyed, but my creditors had been silenced by the bankruptcy attorney. I decided to get my life in order and worry about paying back the debts I owed later. It was easy to justify — I could barely put food on the table and the credit card company was still bringing in billions every year. They didn’t need an extra few thousand dollars as desperately as I did. So I let my debts ride, and worked on running my life in a sustainable way.

Turning things around
The first thing I did was give up credit cards entirely.

I decided to only spend money I actually had, and so my purchases of toys slowed dramatically. My extravagances in life dropped to going out to eat with my roommate a couple times a week, and not at particularly fancy places. I got into bicycling as a hobby, on a used, mid-range road bike — not a brand new, high-end model like I would have bought before. And there I sat, content with the computer I already had, my modest bicycle, and the occasional trip out for dinner. I was living quite comfortably on my salary with my new outlook on life. For the first time in years, I felt comfortable with myself. I actually managed to save a few dollars from paycheck to paycheck instead of spending them!

I did decide that I needed a car, though. I hadn’t enough money to pay cash for one, and I doubted anyone would give me a loan, so still being young and in school, I asked my parents to help. This time though, I was much more conservative.

I borrowed about $5,000 from my parents and created a definite plan for paying them back. I bought a nine-year-old but well-maintained Honda Accord, and I stuck to the payments religiously. This time if I were to fall behind, not only would I give up my newfound peace I’d made with myself financially, but I’d be letting my parents down instead of faceless mega-corporations.

No credit needed
Shortly thereafter, I finished school, and took a software engineering job in San Francisco. Rents were higher in the city, but my salary doubled. My brother needed a car, and I worked out a deal with my parents to give him mine, along with the rest of the payments on the loan. I wanted to get a brand new one.

I went down to the car dealership with my pay stubs from my new job, and my ruined credit score, and a pre-approval I’d gotten online for a loan of up to $26,000. I was determined to make something work. As it turned out, this was easier than I’d anticipated. Car dealerships will do anything to sell cars, and that includes selling cars to people with horrible credit and a repossessed car on their credit report. I bought this car with no money down, which in retrospect, is the stupidest financial decision I’ve made since I began my financial recovery.

Still, it wasn’t a horrible decision — I now made a salary that could justify a car like this. Sure, I got a crappy 12% interest rate on the loan, but I eventually refinanced the loan to 10%, and a shorter term, and then I paid the loan off early, about two-and-a-half years after I first bought the car. When I called the bank to pay off the first loan (when I refinanced), they were practically begging me to take a credit card from them, seeing as I’d overpaid my car loan every single month, on time, for the life of the loan. But still, I wouldn’t break my ‘no credit cards’ rule, and I refused.

Renting an apartment was another thing I was scared to do with bad credit, but it turned out easier than I thought, as well. I got my first new apartment with my ruined credit when I moved to San Francisco. I decided to share a place with a friend of a friend. We found a two-bedroom place listed on Craigslist, and went to see it. It was a four unit building, quite common in San Francisco, owned by a little old Chinese lady. She didn’t care to even run a credit check. Two well-dressed young men showed up, with pay stubs indicating an above-average combined annual salary, and job titles of ‘Software Engineer’ and ‘Accountant’. She was more than happy to rent the place to us for $1800/month.

I continued my life living the way I had since I’d given up on my debt a few years ago, but now on a much larger post-college salary. I bought few toys, aside from the car and some furniture. I’d go out to eat with friends sometimes, or I’d go out for drinks occasionally with my new coworkers. I actually found money piling up in my checking account because I was making it faster than I even wanted to spend it. I had nothing I needed to buy.

After a year, my roommate took a promotion that had him moving from San Francisco to Denver. I decided that I wanted to get my own place, but $1800/month was too much for me to spend by myself. The little old lady who’d been our landlord actually asked if we’d reconsider staying, and if I could find another roommate, as we’d been such good tenants, but I told her I had to leave.

I was questioning my ability to get lucky with finding an apartment a second time, but figured I’d done it before, and I could do it again. I looked at one place I like, and decided to take it, but was turned down by the rental agency due to my bad credit. I found another place a few blocks away that actually ended up being nicer — It was an old Victorian house divided into two units, one upstairs and one downstairs. The family that owned the place lived upstairs and rented out the downstairs.

Wary because of my bad credit and previous rejection, I wrote down my story, and gave the owners my bank statement showing the money I’d accumulated in the last year I’d spent living below my means, and the phone number of the landlord that’d asked me to stay in San Francisco. In light of this information, they rented to me regardless of my credit score, and they too ended up extremely happy with me as a renter.

The road to recovery
Several years after I’d given up on my credit card bills, I was finally contacted again by one of my creditors (or really, the collection agency to which they’d sold my debt). They demanded, in a rude and threatening manner, payment in full of an outstanding debt over $10,000.

My girlfriend (now my wife), who worked at a law firm, asked a co-worker of hers to help me out. He was an attorney who had previously worked in this specific area, representing clients being sued by creditors, and had no sympathy for a threatening collection agency. With a single phone call on my behalf, he had the collection agency offering a settlement of about half their initial demand. I paid it in full from the surplus I’d been accumulating.

Slowly, over the course of several years, my other creditors would contact me, and we’d agree on a settlement like this. Eventually, the statute of limitations for them to collect on the debt through legal channels expired. After that, all I needed to mention to creditors was that I knew it was too late for anyone to sue me, and I’d have a reduced settlement offer.

Now, at the beginning of 2010, it’s been nearly seven years since this whole mess started, and these old marks are due to start dropping from my credit report soon. Surprisingly, I’ve found in the intervening time that I haven’t been impacted much at all by my poor credit — certainly not as much as you would have thought, given the emphasis the financial media puts on credit scores.

• I paid maybe 5% more than market value for the car I financed, not a huge deal.
• I was turned down for one apartment rental.

I’ve since rented one other place, where I live now, in a manner similar to the second — it’s a privately-owned little house with landlords that live next door.

I told them my story, showed them my bank statements and pay stubs, and they were happy to rent to me, and I love it here. Aside from the lousy car interest rate and a single apartment rejection, I haven’t even noticed my poor credit score. Employers haven’t cared. Cell phone companies haven’t cared. The electric company hasn’t cared. For the most part, nobody but myself has even looked at my credit score for the past six years.

While all this has been happening, my life otherwise has been going fantastically. My career has progressed well, I make roughly four times what I did when the story started. I got married. I moved back to my hometown, which I love. I’ve been traveling a bit, to five other countries and various places in the US. My life is going as well as I could hope.

Strangely enough, I’m not sure that any of this would have happened if I hadn’t given up on those debts years ago. That began a change in lifestyle — a focus on experiences instead of things, on making do with what you have instead of needing the latest and greatest. Those lessons have shaped my life since then, and I don’t know if I would have learned them as well without going through that experience.

Final words
I was originally hesitant about sharing this story. I was afraid of being judged for the method I used to pay off my debts. I’m not proud about having done this, but at the same time, I don’t feel bad about it.

These credit card companies were willing to do everything in their power to make a profit off me. They had teams of actuaries calculating the exact interest rates and credit limits that would maximize profits from their customers, and they had the legal system at their disposal if they thought it would have been beneficial. I used the same tactics. I was never sued and in the end, I came to mutual agreements with my creditors that satisfied both parties.

Was it an ideal solution for either party? No, but once I was in in over my head, there wasn’t a realistic ‘ideal solution’. The situation was eventually salvaged, and now, years down the line, it’s water under the bridge.

Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

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Related Articles at Get Rich Slowly:

• My Parents Ruined My Credit!
• National Credit Score Index
• Credit Card Companies Are Closing Unused Accounts
• Your Secret Credit Scores
• Reader Question: Buying a House Without a Credit History?

If you’re craving a similar financial podcast — and aren’t opposed to higher quality — check out the Consumerism Commentary podcast. Consumerism Commentary, written by Flexo, is the grand-daddy of personal-finance blogs! The podcast has been running for nearly a year without a break, and the show just keeps getting better and better.

“I wanted to add a podcast to Consumerism Commentary for several years,” Flexo says. “My first attempts involved reading posts on Consumerism Commentary and recording an MP3, like an audio book. This wasn’t the perfect solution, but it did give me some practice dealing with audio.”

Then, in a stroke of luck Flexo learned that Tom Dziubek, a techie at Dow Jones and a co-host the Wall Street Journal podcast, found himself with a lot of extra time on his hands. Tom was excited about the idea of working together, so the pair created a full podcast.

“It took us a few weeks to find our footing while producing weekly shows,” Flexo says, “but we’re approaching the first anniversary of the podcast without skipping a single week!”

Not only is the show consistently on schedule, it also features top-notch disussions. Dziubek does an outstanding job of steering the discussion, while Flexo keeps the conversations grounded in reality.

I was a guest on last week’s episode. I talked about my book, Your Money: The Missing Manual (I got my first printed copy yesterday!), covered a bit of my financial philosophy, and spent a few minutes describing what it’s like to move from blog to book.

Listening to this again, I’m reminded of just how stuffed up my nose was the day we did the interview!

Notable past episodes of the Consumerism Commentary podcast include:

• Episode #40: Author David Bach (of Automatic Millionaire fame) talks about getting back on track with your finances.
• Episode #36: Columnist Jane Bryant Quinn talks about being financially secure, including dealing with unemployment and foreclosures.
• Episode #30: Nick Corcodilos talks about using a headhunter to find a job, and how to find a job without one.
• Episode #27: Our own Adam Baker talks about his war on debt, plus gives tips on frugal traveling.
• Episode #26: Mark Frauenfelder, founder of Boing Boing (the biggest blog in the world) and editor of Make magazine talks about credit, the DIY movement, and his upcoming book about his DIY experiences. (I’m reading an advance copy of this book right now, and I love it.)
• Episode #23: Herb Cohen and Teri Gault discuss how to negotiate for items large and small.
• Episode #8: Greg Grunberg (whom you may have seen on Alias or Heroes) talks about acting, but also about his work on Yowza!!, an iPhone app for saving money.
• Episode #5: My first appearance on the Consumerism Commentary podcast. I discuss my financial history, including what it took to make the leap from the day job to being a full-time blogger.

Not everyone enjoys podcasts. That’s fine. But if you’re one of those folks who do like to listen to these shows while you work, be sure to check out the Consumerism Commentary podcast. It’s like The Personal Finance Hour used to be, but with much higher quality!

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Related Articles at Get Rich Slowly:

• Interviewed by the Money Blogger Podcast
• The Rentometer: How Does YOUR Rent Compare?
• Cat and Girl on Halloween
• links for 2007-03-23
• When Consumers Cut Back

“Having kids has made spending choices much more emotional and complex,” she says. “You can’t always calculate a return on investment.” Here’s her predicament:

My husband and I are looking to purchase a home in our new city, but we’re having trouble deciding where our values, finances, and priorities intersect.

We have young children, one who will start public school this year. We’re considering buying a home in a modest neighborhood so we could have a house/car replacement fund available, rather than taking all of the down payment money and putting it in a “better” house. The schools in the neighborhood are solid, but not the best in the district. If we buy in this smaller, less fancy area, we can choose a 15-year mortgage, minimize our overall house expenses, and have more money for all of life’s priorities. But, it feels like we’re “cheaping out” on the kids.

To compound our “analysis paralysis”, we lost a fair amount of equity when we had to sell our house to transfer out of state, so we’re feeling less than enamored with the idea of putting money that is currently liquid into a building that isn’t guaranteed to hold its value, much less appreciate. (We have no car/consumer debt, and we have a comfortable emergency fund.)

I think our family might feel more comfortable in a more modest neighborhood with more coupon-clipping parents and kids who don’t have the latest and greatest, but I also want my children to have a great education. Have other parents faced this battle, doing what’s best for the overall budget vs. doing what’s expected for our kids? We’d love to hear how it worked out for you.

I love questions like this. They’re a clear demonstration that personal finance isn’t only about the numbers; it involves a complex calculus of math, emotions, and dreams.

Most of the time, I can offer suggestions when people ask these sorts of questions. But when it comes to kids, I’m at a loss. Kris and I have chosen to remain childfree, and as a result, I’ve never had to wrestle with these sorts of sticky issues.

From a non-parent perspective, I admit that the obsession over which school a kid will attend seems…well, I don’t know how to put it in words that won’t make people angry. But I’ve watched friends and family go through mental and financial gyrations to get their kids into the right pre-schools, which boggles my mind. I’m a firm believer that education is more about the child than it is about the school. If a kid has been taught to love and value learning, she can thrive almost anywhere.

In other words, I’d urge Lisa to make her decision based on finances and not the school district. This may mean she needs to take a more active role in fostering her children’s intellectual curiosity, but that’s a good thing all the way around. But what do I know? As I say, I don’t have kids, and I don’t know what it’s like to actually face this decision. It’s one thing to say it and another to live it.

So, what do you parents say? How do you judge the trade-off between expenses and education? Is it worth paying more to live in a good school district? How does one make this sort of decision?

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Related Articles at Get Rich Slowly:

• Workshop for Kids
• links for 2007-04-06
• links for 2007-03-26
• links for 2007-03-31
• How Do You Teach Kids the Value of Money?

I usually have an idea of what I want to accomplish once I get home from work. It goes something like this:

• Practice yoga.
• Get some writing done.
• Make a fabulous, healthy dinner.
• Work on my business.
• Read something thought-provoking.

But I never seemed to accomplish all I set out to do. Sometimes I’d accomplish none of it. Other activities would get in the way, and my evening would go something like this:

• Check e-mail (for the 40th time that day).
• See some Facebook updates in my inbox.
• Log on to Facebook to leave my oh-so-clever comment on my best friend’s page. (”She is going to LOL when she reads this!”)
• Check out some random person’s page who is friends with my friend.
• Check out random person’s blog, which they haven’t updated since last year.
• Remember that I hadn’t checked my blog feed since this morning.
• And on and on.

An hour and a half would pass by, and I’d realize that I wasn’t going to get as much done as I had planned. I’d start to practice yoga, but with my head full of e-mails, social media posts, and random bits of information, my practice wouldn’t be as fruitful. Eastern traditions refer to this as the “monkey mind” that jumps from one thought to the next, and my monkey mind would be swinging in the trees. This led to a somewhat dissatisfying practice, which made me want to speed it up because I was unable to focus.

Then, instead of making dinner, I’d eat some yogurt and granola and flip on the TV (you know, only planning to watch while I ate dinner). Eventually I might make it back to the computer and read a couple of things pertinent to my freelance work, but then I’d be derailed by checking out that-site-about-that-thing. After awhile I’d realize it was late and decide to hit the hay.

No satisfaction
I wasn’t satisfied with this routine. I wanted a good yoga practice. I wanted to get ahead on my writing work and to spend an hour or so cooking something wonderful. I wanted to feel like I was making headway on my freelance business and to sink my teeth into a good book every night. Out of five things I wanted to do, I’d actually do only one or so, and I wouldn’t even do that one thing very well.

I figured that the problem was starting the evening with activities that were real time sucks, like e-mail, Facebook, and blog feeds. After that, it was even more likely that I’d watch a little TV or surf the net for “just a few more minutes.”

I decided to test my theory. The next day I came home and resisted the urge to “quickly check” anything online. Instead, I rolled out my yoga mat and had a satisfying practice. Afterward, all I wanted to do was to make a big salad, and that’s exactly what I did, sans TV shows. Later I sketched out an outline for an article and brainstormed some new leads, and eventually made my way to bed. I only got through three pages of a book before falling asleep, but all in all, I had my perfect evening, accomplishing what I wanted. It felt good.

Identifying time sucks
I have a lot of irons in the fire right now, especially compared to just one year ago. Juggling these things isn’t easy, and I’m sure most of you can relate. If you have kids, you’re probably 20 times busier than me. We can wish for more hours in a day, but we’re only going to get 24, so it’s up to us to decide how we want to spend them.

Everyone has a different way of wasting away the hours, but I’ll identify some common ones. In the online world, there are countless time-sucking activities, such as:

• Checking e-mail excessively
• Seeing what’s new on Twitter
• Reading Facebook updates
• Reading blogs that don’t deliver much value
• Browsing retail sites
• Playing games
• Watching funny YouTube videos
• Clicking on random articles on StumbleUpon
• Tagging and grouping your Flickr photos
• Googling your ex

Time sucks aren’t only found on the internet, though. Offline, activities that can suck your time include:

• Unimportant chores
• Watching TV shows you don’t even like that much
• Reading junk mail
• Video games
• Opening the refrigerator door and staring at the contents
• Thinking about unimportant things, replaying conversations in your head, stressing out about future possibilities that may or may not ever happen
• Organizing your iTunes files
• Unproductive or negative conversations

It’s also worth mentioning that another time suck is struggling with disorganization. If I want to go for a run, but I have to spend 30 minutes looking for my other tennis shoe, that’s a frustrating waste of time that might derail the run all together. Also, I want to point out that many activities on these lists are not inherently bad, unless you’re doing them at the expense of something else that would be more satisfying to you.

Battling the time suck
If any of those time sucks sound familiar (and they do to me), there are ways to circumvent time suckage.

1. First, try not to get sucked in the first place. If your tasks don’t involve the internet, don’t go online. If they don’t involve the computer at all, don’t open your laptop.
2. If you do need to go online or use a computer, don’t go to unnecessary sites. I am much more productive when working online if I close my Gmail tab.
3. If there isn’t a show on that you really like, turn off the TV.
4. Commit to doing one thing on your list for just 10 minutes. You know how this works. After 10 minutes, you usually want to do more.
5. When you feel yourself being sucked in by mindless activities, ask yourself if you spent the last hour as you intended. What did you want to do with your time, and if you didn’t do it, what can you do now?

Number five is powerful because it focuses on the positive, letting enjoyment and good feelings affect your activities instead of making the evening one big to-do list. I know I’ll feel better after my yoga practice, and that gets me on my mat. Afterward, I’m encouraged by that success to spend the rest of the evening mindfully.

Avoiding time sucks is not something you accomplish once and for all. There will be days when you come home and waste three hours watching Buffy the Vampire Slayer re-runs. (No? Just me?) It’s a daily choice, but a worthy goal. When you are mindful with your time, you can accomplish more of what’s important to you.

Readers, what time sucking activities have I left out? What do you do to avoid them?

J.D.’s note: This really reminds me of the book I’m reading right now (The Other 8 Hours by Robert Pagliarini). It’s all about avoiding time sucks. Any interest in a review? It also reminds me of Trent’s post yesterday about meeting goals.

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Related Articles at Get Rich Slowly:

• Use a No-Spend Month to Become Mindful of Money
• Personal Finance Breakdown: New iPod
• Learn to Save by Taxing Yourself
• Ask the Readers: How Do You Manage Your Money?
• Reader Comment: It’s Not Wrong to Avoid Debt

I’m older and wiser now, and I prefer not to get a tax refund. I’d rather get my money up front so I can tuck it in a high-interest savings account. This gives me an extra boost toward my goals.

But let me be clear: I certainly don’t begrudge others who do choose to get a refund. Some folks are happy to let the government use their money for a year, and others are like I used to be, using the refund as a means of forced saving. That’s fine.

If you have a refund due this year and you’re getting antsy for it, you can easily check its status with this simple web-based tool from the IRS web site. You’ll need to provide your social security number, marital status, and exact refund amount in order for your request to be processed.

If you’ve always received a refund but want to see if you now have the discipline to save on your own, consider adjusting your W-4 so that less is withheld from your paycheck. (The IRS withholding calculator can help you calculate how much you should have withheld.) This will, in essence, spread your refund out over the course of a year. If you have the discipline to use this money wisely, you’ll have use of it much earlier than if you had waited for a refund.

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Related Articles at Get Rich Slowly:

• How to Check the Status of Your Tax Refund
• Check the Status of Your Tax Refund
• Tax Refund Status
• Telephone Excise Tax Refund
• A Contrarian View: Why I Love a Huge Tax Refund

Courtney and I are big fans of what we call “mental filters”. These are simple little tips and tricks that we can use to increase our financial awareness. (J.D. likes to call these tips and tricks money hacks.)

For example, I’ve talked before about how we taped a picture of our daughter to our credit cards while we were paying down our debt. Many people I know use some sort of 30-day rule to curb their impulse desires, especially those which contribute to clutter.

Both of these techniques are examples of deliberately installing a barrier between yourself and a routine action. Many of us do this in various aspects of our lives to help raise consciousness, but this technique can be particularly powerful in our finances.

Today, I want to share a mental filter (or money hack, if you prefer) that Courtney and I used while passionately attacking our debt. But first, let me share a quick story:

The $6.25 foot-long
Once upon a time, I was approached by a close friend with a question about his credit card statement. He knew one of his rates was out of control, but didn’t know how to go about asking for a reduction (or even where to find the details on his statement).

Always the good friend, I offered to look over the statement for him. As my eyes drifted down the page I saw a frightening sight: 24.99% APR!

Yikes! The amazing thing was that he’d been paying consistently and timely for well over 18 months at this rate! He’d been paying the minimum payment, and occasionally making a small charge here and there. Because the interest was 90% of his minimum payment, his balance was simply treading water and at this rate he was never going to get out of debt.

Trying to help him brainstorm options (and trying to light a little fire under his butt), I turned to him and asked, “Do you realize that, until we get this fixed, every purchase you make is actually costing you 25% more?”

My friend thought for a second and replied, “I guess you mean because I could use the money to pay down the card. I never really thought of it that way.”

To be completely honest, neither had I before that very moment. I pondered the concept for a second and then shoved it into the back of my brain as we piled in the car to search out something to eat. As we drove through town we came upon the very difficult choice every person has to make at some point in their life: Subway or Taco Bell?

My friend paused and then said, “I’m definitely going to Subway. You just can’t beat the $5 dollar foot-longs!”

I tried to fight the urge, but I couldn’t resist: “More like a $6.25 Foot-loooooooooong!”

Realizing I’d just sucker-punched him, my friend snapped back, “You know, maybe you should change the name of your blog to Man vs. Fun!” Ouch!

The hidden cost of being in debt…
While my friend ended up getting the best of me in the story, I did revisit my side of the conversation a couple of days later. At the time, our highest interest rate on a debt was about 14.5%.

I realized that mentally tacking on an additional 15% (or so) to my purchases might help ensure that I only spent on items that were specifically budgeted for or that were absolutely essential.

From that moment on, I tried to think of any non-essential expense as if it was marked up by a 15% premium.

You know what? It worked. It didn’t really affect the small purchases as much — I wasn’t fazed by an additional $0.25 or $0.50 tacked on — but when it came to purchases of $50, $100, or $150, I started to feel the effects.

Psychologically, nobody likes to pay a premium. Even if it’s still a fantastic deal, none of us enjoy paying what we think is a 15% premium.

The only downside I can see to this mental filter is if it were taken to an extreme. There’s no need (and certainly no benefit) in examining every single purchase through a tiny microscope. For us, we never felt pressured on expenses that were truly needs. I didn’t feel pinched to buy a loaf of bread because I had 15% credit-card debt.

This wasn’t necessarily a life-changing tactic that we employed, but a combination of these small mental filters did play a huge role in our financial turnaround. Each one helped raise our overall awareness!

J.D.’s note: I remain a huge fan of money hacks. Money hacks are identical to what Baker is calling a money filter; they’re little tricks you can use to make yourself spend less and save more. There are tons of money hacks in the GRS archives.

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Related Articles at Get Rich Slowly:

• The Hidden Fee Economy
• links for 2006-11-13
• Super-Sizing Your Meal Costs More Than You Think
• The Best of Get Rich Slowly: November 2007
• Best of November, and How to Subscribe to GRS

Consumer Action Handbook
First up is the 2010 edition of the Consumer Action Handbook. I’ve mentioned this book before, and I’ll mention it in the future. This book is from the Federal Citizen Information Center, that small department of the U.S. government in Pueblo, Colorado, which distributes free and low-cost consumer publications.

The 2010 Consumer Action Handbook is a 172-page guide to becoming a savvy consumer, and includes information on buying a car, purchasing a home, preventing identity theft, shopping from home, creating a will, and handling unsatisfactory transactions. And much, much more.

This book would be a good buy at $10 or $15, but it’s freely available from the U.S. government. (Technically you’ve already paid for it with your tax dollars, of course.)

• You can order your copy here.
• A Spanish-language version is also available.
• You can also view the handbook in PDF format. You can view the entire handbook at once [11.9mb], or simply browse individual sections.
• Nearly all of the book’s content is available via the Consumer Action web site.

This book is a great resource, and I encourage you to order a copy, download the PDF, or bookmark the web site. Though the 2010 Consumer Action Handbook doesn’t go into great depth on any subject, it provides excellent informative overviews, and it usually points to further resources. It’s perfectly at home on the shelf with all of my other personal finance books. (And was, in fact, an excellent source while writing Your Money: The Missing Manual.)

Unautomate Your Finances
Elsewhere, our very own Adam Baker has just released his first e-book, Unautomate Your Finances, which lays out his personal financial philosophy. This e-book is not free. It costs $17, but comes with Baker’s “as long as I have a pulse” guarantee. (If you’re not satisfied, send him an e-mail and he’ll refund your money as long as he’s still alive.)

Baker believes that the more you simplify your financial life, the easier it is to control it. He’s not necessarily opposed to all automation, but believes that for many of us, automation breeds more complexity than simplicity. He argues that in most cases, automating our financial lives magnifies existing problems, and we’d be better off un-automating things: spending consciously, making sustainable choices, and focusing on our goals.

Along the way, Baker shares solid personal-finance advice on saving for emergencies, coping with credit, and creating a realistic budget. Is Unautomate Your Finances right for you? I don’t know. But since it comes with a money-back guarantee, it’s certainly worth a look!

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Related Articles at Get Rich Slowly:

• 2008 Consumer Action Handbook
• Understanding Money
• Essential Personal Finance E-Books
• The Hidden Cost of Spending While In Debt
• The 13 Commandments of Savvy Consumers

Do you have piles of papers lurking on your desk? Mountains of laundry looming beside your bed? Shelves double-stacked with knick-knacks? I have a bit of a clutter problem myself. The other day, I spent an hour looking for the vacuum cleaner, which eventually turned up buried under a pile of laundry almost as tall as I am.

All that clutter isn’t just annoying. It’s expensive. That’s right: Excess Stuff can keep costing you money even after it’s been bought and paid for.

How expensive is your Stuff? Professional organizer Jen Hunter of Find Your Floor in Boston says clutter can cost us real money in a lot of ways:

• Buying replacement Stuff: Somewhere in your closet is that pair of running shoes you bought last year. Probably next to the ones you bought the spring before that. Clutter costs us dollars and time when we have to buy duplicates of stuff we know we own but just can’t find.
• Damage to your Stuff: When you have more Stuff than space, storage can become a problem. Things can get stepped on, stored improperly and broken, water-damaged or just so buried they can’t be retrieved when needed.
• Missing deadlines: When your Stuff is disorganized, you wind up paying hundreds of dollars a year in bank fees, late charges, library fines, overdue fees and tax penalties. Trust me on this one. I speak from years of painful experience.
• Renting storage space: Almost 10% of U.S. families rent storage space for belongings that don’t fit in their homes. That’s a lot of dollars going to serve your Stuff instead of your life. Even those that don’t rent space may choose larger homes than they need so that they can store more Stuff.
• Health costs: Out of control clutter can pose health risks from falling, and encourage the growth of allergens like dust and mold. Treatments for those can get expensive. Clutter can also affect your mental health. Writer Ariel Gore saw a therapist until she realized that what she really wanted was a clean home. So she hired a housekeeper for less than she paid the therapist and lived happily ever after.

To Hunter, the biggest cost is an intangible. “It’s the impediment that it presents to people’s lives,” she says.

Stacy J. Kaplan of Clutter Away in San Diego agrees. “You can’t function at your optimum level if you’re disorganized,” Kaplan says. “You wouldn’t run a business without a business plan. If you’re not organized your business will fail. A house is a small business in a way. It’s the operating structure behind what your family is doing.”

Clutter stops us from working as effectively as we otherwise might. At its most basic level, time spent looking for your car keys is time you’re not spending working, playing or relaxing.

It also costs us time because all that Stuff demands attention. While clutter might be a sign of neglect, it requires us to spend time working around it to accomplish basic household tasks like paying bills or preparing a meal. Those extra hours of housework are a drain on time and energy that could go into creative side projects, education or any number of other productive pursuits.

We can become prisoners of our Stuff. J.D. has written a lot here about how Stuff ties up our money. We can inadvertently tie up a lot of our earnings in rarely used sports equipment, video games, and other pricey toys. Selling that unused Stuff frees up not only your cash but your energy. When there’s too much Stuff around you, you’re like a plant in a too-small pot. It’s hard to grow or thrive when hemmed in by clutter.

Of course, the answer isn’t to move to a bigger place. There are families who live happily in 100-square-foot apartments. They just have less Stuff than we do.

The solution is to put your space on a diet. Some basic steps to get started:

• Consider adopting The Compact, an agreement to buy nothing new for one year. This should cut the flow of Stuff coming in down to a trickle.
• To deal with the Stuff you have, go through one small area at a time. Don’t try to do the whole house at once. Choose a room, a closet, a desk, or even just a kitchen drawer.
• A good rule of thumb: Get rid of anything you don’t use or love.

A habit of clutter can be hard to give up. If you’re used to having a lot of Stuff around you, a pared-down space can feel too spare and empty. Before you rush to fill that void, try sitting with it for awhile and really setting an intention for you want to replace your clutter with. It might be original art, new bookcases, workshop space or just more breathing room.

Whatever you choose to do with your space, you can use the same techniques you used to clear it to keep it clean. Don’t keep Stuff you don’t use or need. Don’t buy Stuff you don’t want or need. Spend a little time each day keeping your space organized.

Here are the top three clutter-busting tips from GRS Twitter followers:

• “Throw clutter in bags, put them in the attic. As you need something, take it from the bag. After 6mo, donate bags.” — @jacobmlee
• “For clutter: I’m using @gretchenrubin’s rules: Make your bed and the 1-min rule: if you can do it in 1 min, do it now!” — @jc_losangeles
• “My fave declutter advice: Spend 15 Mins a day!” — @BudgetsAreSexy

I know we just talked about Stuff last week, but how do you combat clutter? What tips and tricks can you share with readers?

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Related Articles at Get Rich Slowly:

• Clutter’s Last Stand: The Cost of Buying Things You Will Not Use
• Daily Links: Frugal Tips Edition
• Simplify Your Life with a Stuff Replacement Fund
• The Official GRS Referral Swapping Thread
• Guarding Against the Invasion of Stuff

I do have a stack of 74 guest-post submissions (including many reader stories), but I’m not including those in this tally. I’ll process those gradually, sending replies as quickly as I can. (If you’ve submitted a guest post, please be patient. I have dozens of them to get through, and can’t answer you all at once.)

While sorting through the last 200 e-mail messages today, I found lots of great stuff you folks had submitted. Here are some of the best bits sent to me over the past few months:

Carmen sent me this article from CNN/Money about living on a cash-only diet. The piece profiles five families that have given up their credit cards and are only using cash. Each family has a different motive and a different story. (Some of this covers ground we explored last month in our discussion about saying “no” to credit cards.)

Jill forwarded an article from (never home)maker in which the author shares five critical reasons you must read your bills. Her mortgage company made a $4,070 mistake. If she hadn’t been paying attention, she would have paid way way too much. Yet another example of how nobody cares more about your money than you do, so stay on top of things!

The folks at Your Money Bus wanted me to mention their work. The “buck-mobile” (my name, not theirs) is traveling around the country, providing a place where financial planners can meet with people and offer free advice. Here’s a list of scheduled stops.

Sam over at Getting Finances Done has begun his 12 weeks to fiscal fitness program. If you’re getting started with personal finance, check this out.

Meanwhile, the people at What Would John Templeton Say? are having a contest for bloggers: Write about some of Templeton’s advice, and you might win $500. (Templeton was a famous investor, and is the Templeton in Franklin Templeton mutual funds.)

Finally, Chris asked me if I could tell you about his project, Be Debt Free America. Apparently this is a tool that helps you create a “debt snowball payoff report”, although the site isn’t transparent enough for my tastes. I’d like to see more screenshots and know more about how this works. Why would I choose this over a free spreadsheet?

Okay, back to work. I have to be sure that nobody has tried to send me e-mail in the past fifteen minutes. Must defend Inbox Zero!

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Related Articles at Get Rich Slowly:

• Backlog of Reader Submissions
• Return of the Daily Links
• Daily Links: A Fool and His Money Edition
• Daily Links: Compound Interest, Web Income, and Happiness
• Daily Roundup: Bringing Home the Bacon Edition

Over 1000 GRS readers responded; the results surprised me:

• 17% of you said, “Yes, they did a great job in preparing me.”
• 17% said, “They did well — I learned the basics.”
• 18% said, “It was okay, but they missed some key areas.”
• 48% said, “What preparation for Financial Independence?”

I, too, fall in that last group, but I guess I didn’t expect it to be so large. It’s great that a third of you folks felt well-prepared to tackle your finances, but it’s incredible that half of us feel like we had little or no preparation at all.

What did your parents teach you about money?
I wanted to know a little more detail, so last week I polled my Twitter followers (both at the site’s @grsblog and my personal @jdroth account). I asked: “What did your parents teach you about money? Anything? Did it work?”

A lot of folks responded to say that their parents were poor examples:

• @MoneyMateKate wrote: My parents didn’t teach me — I taught them! I was paying my own dental bills (no insurance) from age 12 onwards with babysitting dollars.
• @RevancheGS wrote: My parents just taught me that you have to work hard to earn money, and how to write checks. I was on my own for the rest of it.
• @liberryteacher wrote: My parents never had any money, and life was hard. So they taught me by example that that was not a good way to live.
• @mike_strock wrote: My parents gave me money whenever I asked. Needless to say, that wasn’t helpful later in life. I’m learning!
• tcita wrote: My parents taught me absolutely nothing: no chores, allowance, budgeting, spending money, savings — nothing. Though I guess that taught me value of work.
• Via Facebook, Tamara wrote: What did I learn about money from my parents? “Don’t do any of things we did.”

But not all parents fail at training their children about money. Plenty of folks picked up good habits (like searching for a high interest savings account) from the Bank of Mom and Dad. Here are some of my favorite anecdotes and tips:

• Pam from The Turtle Path (a running blog) told me: In junior high, my parents gave me $400 at the beginning of the year (instead of a weekly allowance). They told me I could do whatever I wanted with it, but they weren’t giving me any more money the rest of the year, so don’t ask.
• @betsyatoreilly (who is on the PR team for my book!) wrote: My sister and I got $50/month to buy clothes, etc. I had a lockbox for cash and receipts, and a book to enter items. It worked great. I’m a great saver.
• @Elle_CM wrote: My mom (and grandma) emphasized always saving a chunk of any income you receive. We used to make Saturday deposits at the bank.
• Via Facebook, Cynthia wrote: As kids, if we were at the store and saw something we wanted, my dad would say, “Did you bring your money?” I think this is awesome! (And, in fact, I heard my friend Steve ask one of his kids this very thing last night.)
• On a related note, Courtney told me that she and her husband have an interesting approach when their kids beg for things at the store. They simply say, “It’s not in the budget.”
• @mattwakefield wrote: My dad taught me about the stock market by using a 1/100 scale model of the market (MSFT would be $.28 right now). Got hooked early!
• @OregonCPAs_PR wrote: My Dad has always been adamant about avoiding monthly payments. They seem small, but add up quickly.
• @EverydayFinance wrote: My father insisted on no credit-card debt and said, “Everything in moderation.” It worked like a charm.
• @kingkool68 wrote: My parents printed family checks for my allowance. I could write checks to my parents in first grade! They also gave me monthly statements. I love this idea!
• @studentfinances wrote: My parents taught me that hard work is required to be successful. Laziness is not an option. Time will tell if it worked…

That last comment is perceptive: “Time will tell if it worked.” Even if your parents did try to teach you about money, how can they be sure the lessons were right for you, or that they’ll stick?

Training for tomorrow
I’m curious: How did your parents prepare you for financial independence? What specific things did they do that helped you develop money skills you could use as an adult? Do you plan to do these same things with your own children?

And for those of you whose parents didn’t give you enough training: What do you wish they’d done differently? (For my own part, I wish my mother and father had included me in the household finances once I was old enough to understand. I know they struggled to make ends meet, but they never showed me exactly what the challenges were. They never showed me their income compared to their expenses. Also, I wish they’d given me a consistent allowance and required me to budget my fun with that.)

What was your story growing up? How did it affect how you handle money today?

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Related Articles at Get Rich Slowly:

• Financial Education: Are Schools Doing Enough?
• Ads I Hate: Good Parents Buy
• The Money Savvy Pig: A Piggy Bank for the 21st Century
• The Problem with the Bank of Mom and Dad
• How One College Student Handles Credit Cards

I am a graduate student, working towards a PhD, and I hope to graduate in 2012. Prior to starting my PhD program I acquired a significant amount of student loan debt while working on a Master’s degree. I also had a small amount of debt left over from my undergraduate degree. In total I had accumulated around $70,000 in student loans.

Some people might say that isn’t too bad considering that I already had completed my Master’s degree, and would not be acquiring any new loans while pursuing my PhD. But I had lived paycheck to paycheck for the two years I worked between college and graduate school, and I didn’t want to live that way anymore. I didn’t want that much debt hanging over me, potentially impacting my future career decisions, so I decided to start paying back the loans while still in school.

A rude awakening
While I wouldn’t say that I regret taking out so much in loans for a Master’s degree, and I’m not sure that I would do anything differently if I had the chance, it is different looking at that dollar amount from the other side. I think this is a potential trap that all students can fall into, both undergraduate and graduate, when deciding where to go to school: The financial implications of having to pay back those loans are so far outside your perspective when you sign a promissory note; it’s not until you graduate and have to figure out how you’re going to pay hundreds of dollars every month for the next decade or two that the weight of your decision finally hits you!

It was with the realization that I’d be paying $800 a month for 20 years according to the “standard repayment plan,” and would end up paying as much in interest as the original loan amount, that I decided to embark on a much more aggressive repayment plan. I am very lucky because I have a husband who works full time and is able to help support me while I am in school. I also was lucky to obtain a training grant that is paying both my tuition and a stipend for my PhD program. Not all graduate students are so lucky.

However, I also work very hard to find other sources of income, and for the past year or so I have budgeted my income very carefully to start paying back some of my debt. While my stipend is enough to live on, it would not provide much extra for paying off loans. So to earn extra money I work part time doing research for a professor in my department.

At times it has been difficult balancing work and school, but in addition to providing extra money it also teaches me time management, and gives me extra experience to put on my resume, which will hopefully help me get a better job when I graduate.

I also take advantage of opportunities to be a Teaching Assistant, which pays $1500 (pre-tax) for each 8-week course. Through the combination of my stipend, working part time, and being a teaching assistant, I was able to take home around $36,000 in 2009.

While this isn’t a huge amount of money, it is a pretty decent income for a graduate student. However, what was more important for me wasn’t how much I was making each month, but how I was budgeting that money. I used an Excel spreadsheet to carefully budget my money each month, allocating money for utilities, groceries, car insurance, my Roth IRA (which I max out each year, since it is the only retirement account I can have as a graduate student), and discretionary spending.

Destroying debt
I set a goal of allotting at least $1000 every month to go towards student loans. My budget was not super strict — my husband and I are careful with our spending, but we do go out to eat and to the movies, and we buy things when we really want them. We pay off our credit cards in full each
month, own just one car, and pack lunches.

By following this reasonable budget I was able to pay off $18,246.45 between May 2008 and September 2009. Here’s the break down of how I did it:

I used a combination of the debt snowball approach and paying off the highest interest loan first. I also chose to make payments in large chunks rather than a set amount on the same day each month. I knew I wanted to pay off the private loan early because it was accruing interest, but I also tackled one of my undergrad loans early on, because I could pay it off in one payment (the December 2008 payment). My final payment in September 2009 paid off the last of my undergraduate loans, just in time for my five-year reunion.

Back on track
For the last few months, I’ve taken a break from this aggressive loan paying, in part because the point I’m at in my degree program didn’t allow me to work as much recently. But I’m ready to tighten my budget again, and plan to devote at least $500 a month to my graduate student loans, comprised mostly of a Federal Direct loan now totaling just over $50,000 because about half of the amount is not subsidized and is accruing interest at 6.8% (a fixed rate — thanks a lot Uncle Sam!). In addition to putting money towards this loan I plan to save money in different “buckets” in my ING account for things like future travels and home improvements.

I wanted to share my story because I am an avid reader of Get Rich Slowly, and I hope I can inspire other young people out there struggling with student loan debt. You don’t have to stick to the “standard repayment plan” — most student loans have no prepayment penalties. Even if you don’t make a lot of money, it is possible to find extra money in your budget to pay down student loans early.

Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

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Related Articles at Get Rich Slowly:

• Ask the Readers: So Much Debt, So Little Time?
• Reader Story: Tackling Debt Through Volunteer Work
• How One College Student Handles Credit Cards
• Federal Student Loan Consolidation Primer
• Ask the Readers: Can College Students Save Money?

I’ve been thinking a lot lately about a quote from J.D.’s review of The Total Money Makeover:

Printed on the bottom of every page…is the book’s motto: “If you will live like no one else, later you can live like no one else.”

My husband and I recently made an unusual decision, and I’m in need of a motto that I can repeat to myself every time I question our choice, which I probably will at some point.

A loan story
I’ve mentioned in previous GRS posts that my husband and I are building a house. As we started on the final construction documents, we began working with a lender to sort through the construction loan. It’s not a fun process, let me tell you. Half of what the lender said went right over my head, despite my short-lived foray into the real-estate industry.

The first issue that arose was that we’d have to have a two-time closing. This means there’s one closing at the start of construction and a second closing after the home has been built to refinance into a permanent mortgage. Apparently one-time closings, which are loans with a single close for both the construction term and the mortgage, are a thing of the past.

The problem is that my husband and I couldn’t have a change in employment until the house was finished and the second closing was complete. But he’s planning to start his own business. Also, if one of us happened to lose our jobs, we’d be at the mercy of the bank. Even if we could easily make our payments from my freelance income, the bank wouldn’t recognize that income source until I had two years of tax returns on the business. It was a concern, but we decided to move forward.

Charges, interest, and fees
The lender sent the estimates for interim and permanent loans. As I sorted through the initial fees worksheets, I saw the standard stuff:

• Origination fee
• Appraisal fee
• Processing
• Underwriting
• Closing
• Document prep
• Title insurance
• Recording fees
• Survey costs

And on and on and on…

It’s not that I didn’t expect these fees, but they were sure adding up quickly. Also, we could expect a good interest rate on our mortgage, but the interest we’d pay for a 30-year loan would double the total cost of our home. Again, not unexpected, but still disconcerting when I was plugging in our numbers.

Closing delays
Another issue was that we’d need $15,000 to close the interim loan. With an interim loan, the bank requires 20% of the total value of the land plus improvements (i.e., the house). We have a lot of equity in the land, but not enough to cover 20% of land and house value. Since we were unwilling to tap our savings, we’d have to wait until autumn to start building.

I was getting a sinking feeling in my stomach, like we were going to be trapped. My husband couldn’t start his business. If one of us lost our jobs, it would be the bank’s decision whether to work with us, on their terms, or not.

Finally, the relationship with our architect, who also was to be our builder of record (another lender requirement), was deteriorating, causing us to reconsider the arrangement.

Assessing our situation
My husband and I are in a unique situation. My parents own land in the country, and we live next door to them, rent-free. This has allowed us to build a lot of equity in the land we purchased, which is five minutes away. My dad also is in construction, and he’s able to do the majority of the work to build what he can for us and subcontract the rest.

It might sound crazy not to take advantage of our situation, but there’s something to be said for having your home finished with all of the amenities you want, such as a dishwasher, carport, bigger kitchen, laundry room, and more space to host guests. I have this dream of what our home will look like, of what it will feel like to wake up in it every day, and it’s hard to be patient.

Number crunch
I started to run numbers on how long it might take to build our home if we paid in cash; assuming no change in income, it looks to be five years — six if I’m being super conservative. I assumed a completion date of April 2015. If we went with the loan, we’d probably complete the home in September 2011. By waiting about four years longer, we’d own our home and land outright, as opposed to paying on it for 30 years. Even if it takes longer than expected, it’s still a good deal. Owning our home sooner would give us so many options:

• We could scale back on work hours.
• We could travel more.
• We could put more into savings.

The point is that we’d have those choices. Our decision came down to having the home now, or having more freedom later. Again I thought of Dave Ramsey’s quote:

“If you will live like no one else, later you can live like no one else.”

You can probably figure out what we decided to do. We’re going to pay in cash, building as we can. Impatience is not worth the headaches, fear of losing a job or the house, and the interest we’d pay if we continued with the construction loan.

Patience and resolve
I realize we’re in a fortunate position. If our circumstances were different, this might not be an option, however, I believe our choice and Ramsey’s delayed gratification advice is relevant to everyone.

Every time I’ve put my impatience aside, the outcome has been positive. This was the case when we put off buying a second vehicle and when we moved out to the country, originally thinking we’d buy a house in the city as soon as possible.

Besides patience, delayed gratification also requires resolve. When you make choices outside of the norm, friends and family members might think you’re nuts. They mean well, and they’re only thinking of you, but some of them will definitely think you’ve lost your mind. One car for two people?! You’re just asking for a divorce! It can be hard when you’re already questioning yourself. The trick to not letting these comments derail you is to remember the reasons why you made your decision, and maybe find an affirmation, which is why I’m going to print Ramsey’s motto and read it often.

Delayed gratification isn’t easy, but it usually brings the most rewards.

How has delayed gratification benefited you? How have you exercised patience and resolve? Share your tips — I’m probably going to need them!

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When I was 14 years old, I opened my very first checking account at Bank One. That’s where my Dad banked and so that’s where he drove me when I asked to open an account. Over the years, I continued to give them my business.

By 16, I had opened another checking account (don’t ask me why) and a new savings account, too. At 20, I started my journey into credit cards with… yep, a brand new Chase credit card. (Note: Chase ate Bank One in 2004.)

At 21, I opened my first Chase business checking account and, at 22, I funded $1000 into my new Chase investment account. When my wife and I married the following year, we canceled her National City account to combine our finances with… Chase.

You get the point. While this may not seem too out of the ordinary, there’s only one problem: Neither of us really likes Chase Bank.

In fact, I’ve never really liked them that much. I’ve wanted to switch to a local credit union for years, but just haven’t done it. I’ve been eyeballing USAA ever since they opened their checking and savings accounts up to civilians. Mentally, I want to change…but physically I’m still a Chase customer.

What does it take to make you switch banks?
There are plenty of reasons why someone might switch banks. A couple factors that come to mind:

• Higher rates. This not only applies to rate chasing to find the highest interest rates, but any form of benefits offered. Maybe there’s a 0.5% better savings rate at the bank across the street. Maybe another is offering a free $100 when you open a new account. These are all situations where the bottom line may be the primary influence.

• Customer service. I love great customer service and I’m willing to pay more for it. In banking, this now includes both in-person and online customer service features. While I abhor having to call Chase (try it someday, it’s terrible),I love a couple of the people at my local branch. I know the branch manager and business banker well, and they always greet me by name. In addition, I have specific online banking features set-up that I’ve been using for years. Their online services aren’t perfect, but they’re above average.

• Length of history. As I outlined above, I’ve had a Chase account for over a decade now (and I’m only 25). In this day and age, customers will longer histories at a single bank are more rare. Anytime I have an issue on the phone, I immediately have them look up my history. While I’m not a big fish to them in terms of money, my account history tab shows dozens of accounts over nearly a dozen years!

• Principle. The longer I’m involved in personal finance, the more I prioritize this category. I’m not a huge fan of big banking. I’m not a conspiracy theorist and I won’t be picketing in Washington, but I like the idea of giving my business to a local bank. “Principle” is a major reason Courtney and I reject credit cards, and many people point to this reason giving their business to credit unions.

• Accessibility. Years ago, the only factor I cared about was how close my bank was to my house. Here in the Midwest, no one does that better than Chase. It’s almost as bad as McDonald’s (almost…)! With the rise of online banks, the walls of this one are coming down. For some, however, it remains a huge factor in choosing a bank.

So, will I walk the walk? I’m not sure whether Courtney and I will switch our bank. We want to, but we aren’t compelled to…at least not yet.

I’d enjoy supporting a local credit union or a testing out a bank with a reputation like USAA. I’m not much of a rate chaser and accessibility isn’t a huge priority. I much would prefer a bank I feel good about supporting and that offers me fantastic customer service.

At this point, Chase seems to be just doing enough to keep us around. But after writing this, we’ll see how long that lasts!

Have you recently switched banks? What was your motivation? Any suggestions for me?

J.D.’s note: I stuck with a lousy bank for a l-o-n-g time. Ultimately, I moved my accounts to a local credit union, and I love it. I’ve since added an online bank to the mix (ING Direct). Neither of these banks is perfect, but they both provide excellent customer service and above-average deals, so I’m pleased to stay with them.

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Chris
What is your advice to someone who wants to “escape” from traditional work and start something like this?

Tsilli
Find what you love to do, and then do it, even if it doesn’t bring in money at first. Experiment on the side, experiment on the cheap. It’s the single most important concept to grasp if you are looking to build something from scratch.

Chris
What worries you?

Tsilli
Everything! I’m a chronic worrier. But there’s a bad way to worry, and a good way.

The bad way of worrying paralyzes you. You worry you won’t make the money side work, and it seems so overwhelming that you decide not to even try. I used to worry in this way, and did nothing.

The good way of worrying keeps you competitive, keeps you striving. For example, I still worry about making the money side work (especially now that I’ve thrown my weight into my own business completely). I still think, “What if all the work dries up? What if a competitor comes into the market that takes away my market share?” But I worry about it differently now. I worry about it by thinking ahead of the curve, recognizing what my strengths are and what I can do to mitigate that risk.

I think this is fascinating. I’ve always admired artists for their passion, but wondered how they could make a living. It’s great to see somebody making a go of it. (Doubly so since Tsilli is a GRS reader!)

You can see some Tsilli’s art at her website; her business is called New Ketubah.

By the way, I recently did something I’ve always wanted to do: I commissioned an artist to do a painting for me.

Chris’s wife Jolie does whimsical paintings of children’s toys. When my wife’s sister loaned Jolie a stuffed Kermit the Frog to paint, I loved the result, and I knew I had to commission a painting of my very own. Here is a very very J.D. painting, which I plan to display in my Man Room:

“It’s Not Easy Being a Man” by Jolie Guillebeau

I love Kermit holding his pipe, his glass of Scotch at his side, and sitting on a copy of Your Money or Your Life. The only thing that could make this better would be if he had a stack of comic books by his side.

Speaking of art and entrepreneurship, Jolie is conducting an interesting experiment right now. In order to challenge herself (and perhaps make a little money), she’s creating 100 paintings in 100 days. And she’s selling each of them. For the first painting, she charged $1. For the second, she charged $2. And so on. The 100th painting will go for $100.

Though the money Jolie earns from this will be modest ($5,000 before expenses), it’s a great way for her to get her name out there. It’s a marketing ploy and a money-making project all in one.

Artists are entrepreneurs, too! It’s fun for me to get a small glimpse into their world.

[The Art of Non-Conformity: The Eight-Year Escape Plan: Interview with Tsilli Pines]

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I find predictions, and the people who make them, fascinating for a few reasons. First, I — like everyone — would love to get a hint of what’s coming up.

But successful forecasting is pretty difficult. Which brings us to the second reason why I like predictions: It’s entertaining to see how different the world turned out from how people expected. Here are several memorable predictions of yore:

• “Radio has no future. Heavier-than-air flying machines are impossible. X-rays will prove to be a hoax.” William Thomson, Lord Kelvin, British scientist, 1899
• “Television won’t last because people will soon get tired of staring at a plywood box every night.” Darryl Zanuck of 20th Century Fox, 1946
• “They couldn’t hit an elephant at that distance.” Final words of Union General John Sedgwick, 1864
• “Atomic energy might be as good as our present-day explosives, but it is unlikely to produce anything very much more dangerous.” Winston Churchill, 1939
• “Who the hell wants to hear actors talk?” H. M. Warner, Warner Brothers, 1927
• “It will be years — not in my time — before a woman will become Prime Minister.” Margaret Thatcher, 1969
• “We don’t like their sound, and guitar music is on the way out.” Decca Records, when rejecting the Beatles in 1962
• “The abdomen, the chest, and the brain will forever be shut from the intrusion of the wise and humane surgeon.” British surgeon Sir John Eric Ericksen, 1873
• “I think there is a world market for maybe five computers.” Thomas Watson, president of IBM, 1943
• “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” Western Union internal memo, 1876
• “I’m just glad it’ll be Clark Gable who’s falling on his face and not Gary Cooper.” Gary Cooper, on turning down the lead role in Gone With the Wind

Good stuff.

The blind leading the blind
But we don’t have to go back decades to find instances of people (some of them pretty smart) being wrong about the future. Let’s flip through the cyber-pages of the Dec. 20, 2007, issue of BusinessWeek, which featured one of those year-end, “where the Dow will be a year from now” types of articles.

So where did six Wall Street experts think the Dow would be at the end of 2008? Dumb roll, please…

• William Greiner, UMB Financial: 14,400
• Tobias Levkovich, Citigroup: 15,100
• Bernie Schaeffer, Schaeffer’s Investment Research: 15,300
• Leo Grohowski, BNY Mellon Wealth Management: 14,800
• Thomas McManus, Banc of America Securities: 14,700
• David Bianco, UBS Investment Research: 15,250

You may recall that the Dow was quite a bit lower than each of those predictions on Dec. 31, 2008 — approximately 40% lower, in fact, at 8,776.

Okay, so those people aren’t really dumb. In fact, they’re likely in possession of above-average intelligence, and work with teams of analysts who also have above-average brains. And they also likely have access to the most data, the fastest computers, and the best software.

And they still were very, very wrong.

Boy, it would be great if we could consistently predict which investments would be the winners and which would be the losers. But it’s very difficult; in the short term, it’s impossible.

Dr. Doom
Want more proof? By now, you likely have heard and seen Dr. Nouriel Roubini, the NYU professor known as “Dr. Doom” for his pessimistic outlook. He gained a lot of fame for predicting the housing crash and resultant deep recession. Good for him.

In December 2008, Fortune magazine asked Roubini for his predictions for 2009. Here’s what he wrote:

For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cash-like instruments such as short-term or longer-term government bonds. It’s better to stay in things with low returns rather than to lose 50% of your wealth.

Well, you know how good that advice was. The assets that Roubini warned against posted huge double-digit returns in 2009. As for the investments he recommended, the Vanguard Short-Term Treasury Fund (VFISX) returned just 1.4%, and the Vanguard Long-Term Treasury Fund (VUSTX) lost 12.1%.

As Yogi Berra once said, “It’s tough to make predictions, especially about the future.”

On my CAPS blog, I occasionally summarize predictions I’ve run across from the previous week or two. I always break them up into two groups: Those who predict good things for the economy or stocks, and those predict ill. Invariably, the people I quote are all smart, thorough, well-educated people. And they look into their crystal balls and see vastly different things.

But isn’t picking stocks the same thing as making predictions? If the future is so hard to forecast, why even try?

Ay, there’s the rub. If you’re putting money in an IRA or 401(k), you have to choose which investments to buy with that money. And investing, by its nature, is a predictions game; you put your money into the things that you think will be worth more in the future than they are worth today.

So what to do?

The power of diversification
As I’ve written before, having a well-diversified portfolio is the way to go for most people, because there’s no crystal ball required. You own lots and lots of investments, so that something will do well in just about any scenario. You own domestic and international investments; large, mid, and small stocks; index and actively managed funds; and if you own fixed-income investments, then diversify across corporate bonds, Treasuries, and inflation-adjusted bonds.

If you’re investing in individual stocks, keep yourself honest by tracking your results. If, after all the time you spend researching and monitoring your stocks, you underperform the market, then perhaps you’d be better off in a mutual fund of some kind. Motley Fool CAPS is a great way to see if you have what it takes to be a stock-picker before you commit too much of your nest egg.

In summary, my fellow Americans (and the Canadians who are reading — darn you and your gold-winning hockey team! — though you put on a great Olympics), unless you put all your money under your mattress, you have to make some guesses about what the future will bring. But do so with great humility and honesty. And beware of any “expert” who is very confident about what will happen. Chances are, if you examine his record, you’ll find plenty of reasons he shouldn’t be so confident.

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The more I purge Stuff from my life, the more I travel, and the more I see (and read) about how little others need to get by, the stronger my conviction to reduce what I own, as well. I’m in awe of my friend Leo from Zen Habits, for instance. At his secondary blog, mnmlist, Leo has been chronicling his attempt to reduce the number of thing he owns. At first, this was his 100 Things Challenge (he wanted to own just 100 personal items). Recently, he’s upped the ante. It’s now a 50 Things Challenge. Wow.

I’m not ready to go to this extreme — not even close. But I am beginning to wonder: How many t-shirts does one man need? How many jackets? How many books? And how in the heck did I end up with more than ten pairs of shoes? Ridiculous! How much Stuff does one man really need?

Small steps
Over the past three years, I’ve made great strides in ridding my life of Stuff. I’ve sold or given away thousands of books (yes, thousands). I’ve purged a garage full of computer parts. I’ve managed to turn off the rationalization switch in my brain and learned to simply donate my Stuff to charity instead of saving it for “someday”. And about a year ago, I started my slow-motion clothes purge.

Based on a Get Rich Slowly reader suggestion, I moved all of my sweaters and button-down shirts to an unused closet. For the past several months, I’ve gradually pulled one shirt and then another into my regular closet as I actually wear them. Unworn shirts and sweaters stay in their temporary holding space. At the end of this process (which should be in June), all of the shirts I’ve worn in the past year will be in one closet, and the Stuff I don’t wear will be purged.

Do you know how many different shirts I’ve worn over the past nine months? I just went upstairs to count. My “good” closet contains 17 button-down shirts and three sweaters. My closet of unused clothes contains 30 shirts (two of which haven’t even been taken out of their packaging) and 11 sweaters.

Sometimes I think I’m the village idiot. I don’t even wear two-thirds of my wardrobe? It’s like I’m just throwing my money away. But rather than beat myself up over this, I can use the info going forward.

For example, Kris and I made a trip to REI before leaving for Belize. I fell in love with one shirt, but I almost didn’t buy it after looking at the price tag. $40? For a shirt? Get real! I rarely spend more than $20. But then I realized: If I really love the shirt and it’ll live in my “good” closet, then spending $40 is much better than buying two cheap shirts I never wear. I bought the REI shirt in two colors (rust and aqua), and I’m glad I did. (But maybe I should get rid of two other shirts from my “good” closet to make up for this.)

I’ve begun to realize it’ll take a few more years to finally get rid of the worst of my Stuff. It took me two decades to acquire these things; it’ll take a bit of time to unload it. But how will I know when I’m finished? How much Stuff does one man need?

The magic of thinking small
It was interesting to see how small the average homes were in Belize and Guatemala. In the U.S., the average new home was 2349 square feet in 2004 (up from 1695 square feet in 1974). In Central America, homes seemed to be maybe 600 or 700 square feet (here’s a typical example).

Seeing these small homes made we think: What would I choose to own if my space were limited? Could I really rationalize my comic book collection? Forty-seven button-down shirts and fourteen sweaters? Two bicycles? My burgeoning pile of shoes? Which Stuff is worth owning, and which is not? And if it’s not worth owning in a small home, why is it worth owning in a large home?

I don’t know the answer to these questions; I’ll continue to puzzle them out.

This weekend, one of our neighbors held a yard sale. Kris and I went across the street to chat. “Wow,” Kris said. “It looks like you’re selling everything.” She scooped up the neighbor’s canning jars.

“In a way, I am,” our neighbor said. “I’m moving into a smaller place, and I have a couple of weeks before I have to be out of this one. I’ve already moved everything I want to keep, and I’m selling everything else.”

“That’s awesome,” I said. “I wish I could do that.”

But who says I can’t? Why can’t I pretend that I’m moving into a smaller place? If I did, what would I keep? What is it I really value? How much Stuff does one man really need?

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One of the most common issues that people with any kind of dependents face is, “How much life insurance do I need?”.

This is a tough question to answer in a simple equation; there are quite a few variables which affect the amount of insurance needed. First off, I’m only going to discuss term insurance. For most people, that’s the only type of insurance to consider.

One of the key factors to consider is what kind of lifestyle you want your family to have if you pass away. How much financial impact will your death cause to your family? Do you want them to be filthy rich if you die? Do you want your partner to continue to work? Do you want them to be debt free? Is it important that they keep the same house? Will they be fine without any insurance?

The amount of insurance you might need/want will vary widely depending on your current financial situation. Let’s look at two general situations.

Situation one: You want enough insurance to cover a specific use and don’t need any insurance to provide future income for your spouse.

This might be the situation where both spouses are working and making decent money and have no kids. In that case, they might decide to get enough insurance to pay off all debts, at which point the survivor should be fine since they’ll keep working.

This calculation is pretty easy. Just add the amounts of debts and whatever other costs you want covered, and that’s how much insurance you need. The problem, of course, is that the amount of debt you have now and the amount of debt you have in 10 years will be quite different. (Hopefully, you’ll owe less in 10 years!)

There isn’t a lot you can do about this other than buy different terms of insurance. For example, you might buy $100,000 for 10 years and $100,000 for 20 years. You can also cancel insurance at any time, so one strategy is to insure for the entire amount necessary and, if you end up debt-free, then just cancel the insurance. Life insurance needs are very inexact so sometimes you just have to pick a reasonable amount and go with it.

Situation two: You want insurance which will provide future income for your spouse/kids.

This is a bit more complicated since you’re now dealing with a lot of future assumptions. Regardless, for this situation an incorrect amount of insurance is a heck of a lot better than no insurance at all, so let’s continue.

In this case I’d suggest that you start with all current debts and assume you need enough insurance to cover that amount. That’s the first part of your insurance needs. The second part will provide an investment portfolio large enough to provide the desired annual income. To do this calculation, you can use the 4% withdrawal rule to be conservative.

The amount of insurance you buy will be the sum of these two numbers.

You can see from this example that future income is expensive! Using the 4% rule is fairly conservative. You might want to consider using a 5% or even 6% rule if the income needs are for a shorter term (i.e., if the insurance is only to cover a 10-year income gap before retirement age).

Other facts to consider when looking at future income:

• Retirement savings. If a couple is in their 50s and has a good retirement portfolio built up then the survivor might only need income until they reach 65 at which point they can live off the retirement savings.
• Pensions. This is probably more applicable to older people, but if Social Security and/or other private pensions are in the not-to-distant future then they should be factored in as well.

In summary, ignore all rules of thumb and insurance salespeople, and sit down to figure out how much insurance you need/want. Think about what it would be like financially if you or your spouse died and there was no insurance. Think about what you would like things to be like financially, and calculate how much insurance is necessary to fill the gap. Another approach is to pick specific insurance amounts and then apply those amounts to your situation. For instance, if you had $500,000 of insurance and you died tomorrow, what would your spouse do with the money and what would their financial life be like?

Don’t get hung up on details. It doesn’t matter how accurate your estimate is because things will change and then you’ll be over- or under-insured. I did a case study on myself only a couple of years ago where I went through the process for determining how much life insurance I needed. Things have changed so much in the last two years for me (I can’t believe how much) that I’ll have revisit this calculation: We have two kids now, our debt is less than half of what it used to be, my business is doing extremely well, and I don’t think I’ll keep my day job as long as I’d originally thought. (I get a lot of my insurance through work.)

Too much insurance is expensive. It’s easy to just get a large amount of insurance (just to be safe), but the reality is that if you are over-insured, then you’re paying a lot of extra money over 20 years. Plus, you don’t want to give your beneficiaries any extra incentive to bump you off!

J.D.’s note: Another way to come up with a coverage amount is to use this handy online calculator from the nonprofit LIFE Foundation.

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No surprise then that for the past couple of years, one of my favorite blogs has been Gretchen Rubin’s The Happiness Project. Rubin is a former lawyer who abandoned her promising high-paying career to follow her bliss: She decided to become a writer. She started her blog as a part of a year-long experiment to find new ways to be happy. She’s now turned that experience into a best-selling book.

The Happiness Project (the book) was released in late December. I’d hoped to review it when it was published, but work on my own book got in the way. Last week, as I was happily soaking up the sun in the jungles of Belize, I finally found time to read Rubin’s book. It’s fantastic.

The Happiness Project
I’ll admit that, on paper, The Happiness Project may seem sort of lame. Rubin decided to spend one year consciously pursuing happiness. Each month, she tackled one specific aspect of life — marriage, work, attitude, and so on — and during that month, she attempted to meet a handful of related resolutions she hoped would make her happier.

Her financial resolutions for July, for instance, were about money. Rubin is an “under-buyer”; she’s frugal by nature. For this month, she wanted to indulge in a modest splurge, buy needful things, spend out (meaning to actually use the stuff she has), and give something up (Rubin stopped obsessing over office supplies).

Fortunately, the book isn’t lame. Rubin’s style is warm and engaging. Though The Happiness Project includes tons of info from research into happiness and well-being, this data isn’t presented in a dull, dry way; it’s neatly woven into Rubin’s account of her day-to-day progress toward happiness (or lack thereof). She shares the research in casual prose, not in academic jargon.

Among my favorite findings, I bookmarked these:

• “The most effective way to judge whether a particular course of action will make you happy in the future is to ask people who are following that course of action right now if they’re happy and assume that you’ll feel the same way.”
• You can do anything you want, but you can’t do everything you want. This insight is remarkably similarly to the one I had a couple of years ago, when I realized that I can buy anything I want, but can’t buy everything I want.
• “One of the best ways to make yourself happy is to make other people happy. One of the best ways to make other people happy is to be happy yourself.”
• “Best is good, better is best.” In other words, the perfect is the enemy of the good. When you spend too much time pursuing the best, you’re bound to be unhappy.
• “Money doesn’t buy happiness the way good health doesn’t buy happiness. When money or health is a problem, you think of little else; when it’s not a problem, you don’t think much about it. Both money and health contribute to happiness mostly in the negative; the lack of them brings much more unhappiness than possessing them brings happiness.”
• I loved this tip from a reader of Rubin’s blog: “[I] change my passwords to a goal that I’ve been working on, or an achievement I want. They become a constant reminder of my goals, my dreams, of what I want to achieve.”

The Happiness Project is filled with anecdotes: from Rubin’s life, from the comments on her blog, and from the people she meets. These stories add a lot of color to the topics she covers, and help to show how complex happiness can be. For example, from the chapter on money, here’s a story that made me laugh:

While I was thinking hard about the relationship between money and happiness, I struck up a conversation with a fellow guest at a bridal shower. I told her that I was trying to figure out ways to “Buy some happiness.” (As I explained the issue, it began to dawn on me, dimly, that I might be becoming a happiness bore.)

She became quite indignant at my suggestion. “That’s so wrong!” she said. “Money can’t buy happiness!”

“You don’t think so?”

“I’m the perfect example. I don’t make much money. A few years back, I took my savings and bought a horse. My mother and everyone told me I was crazy. But that horse makes me incredibly happy — even though I end up spending all my extra money on him.”

“But,” I said, confused, “money did make you happy. It makes you so happy to have a horse!”

“But I don’t have any money,” she answered. “I spent it all.”

“Right, because you used it to buy a horse.”

She shook her head and gave up on me.

Rubin undertook her happiness project because she realized, “I wasn’t as happy as I could be, and my life wasn’t going to change unless I made it change.” This realization is so important. Too many folks sit back, waiting things for to improve. That’s what I used to do with money. But it wasn’t until I actually too charge of my own life that I was able to defeat debt and build wealth. And it wasn’t until Rubin decided to be responsible for her own happiness that she was able to make the little changes that brough about increased well-being.

Making resolutions
The section on “finding fun” — one of the subjects of chapter 5 (”May: Be Serious About Play”) — literally moved me to tears. As I read about Rubin’s love of children’s literature, how she rediscovered her passion for scrapbooking, and her general quest to make room in her life for fun, I realize that’s something I’ve been missing. For the past few years, everything I’ve done has been very very Adult. I’ve reaped adult rewards for adult effort, but it hasn’t been a whole lot of fun. I need to make room in my life to enjoy myself just for the sake of pleasure. So, that’s one of my goals for the next few months: Find more fun.

But Rubin draws a distinction between goals and resolutions:

You hit a goal, but keep a resolution. “Run a marathon” makes a good goal. It’s specific, easy to measure success, and once you’ve done it, you’ve done it. “Sing in the morning” and “Exercise better” are better cast as resolutions. You won’t wake up one day and find that you’ve achieved it. It’s something you have to resolve to do every day, forever.

As you know, I’m a fan of goals and, generally, I refuse to set resolutions. But I see Rubin’s point. As a result, I’ve decided to set some resolutions of my own. I’ll be tracking the following with Joe’s Goals:

• Eat real food (avoid processed food and excess sugar).
• Be active (get regular exercise).
• Avoid strong drinks (reduce intake of alcohol and caffeine).
• Read for pleasure (make time to read comics and science fiction, etc).
• Kiss Kris (be sweet and loving to my wife).
• Write daily (focus on my calling).
• Be tidy (I’m a slob by nature; this will be tough).
• Purge Stuff (continue to reduce the Stuff in my life).
• Be friendly (spend time with friends, and be amiable to people I meet).
• Be true to myself (or, in other words, “be J.D.” instead of trying to be who I think other folks want me to be).

Some of these will be easier than others. I write nearly every day because I cannot help myself; I’m drawn to it. Tidiness? Real food? Being true to myself? These things will be tougher, but I really think they’ll make me happy.

I’m tempted to say that The Happiness Project is one of the best books I’ve ever read, but I know that’s just me engaging in hyperbole. Instead, it’s probably better to say that this was the perfect book for me to read for where I am in life. It spoke to me. I can’t say for sure that it will speak to you, but I’m willing to bet that for many GRS readers, a personal happiness project could lead to increased wealth — financial and otherwise.

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This is a story about a relationship between two people and some money.

Part 1
Boy meets girl. Boy moves in with girl. Household expenses are split and all seems well. Years pass. Boy wants to change cities for professional reasons. Girl wants to finish grad school. They make a deal: They’ll move when the degree is finished.

Warning signs: She is paying a greater share as the years go by and her career advances. He doesn’t take any concrete steps toward advancing his own career. He has sold his car ‘to save money’ and relies on her to drop him at the train station for his job. He has no real friends and his ‘project partners’ (in six years, there’s only one finished project) all seem to be women. And then:

Part 2
The degree is finished and true to the deal, she starts organizing a move. She researches new jobs cross-country. She rents a truck, makes hotel reservations, and arranges for a friend to drive the car in caravan with them. Oh, by the way, she’ll pay the friend’s airfare home. She puts down the money on an apartment. She lands a job, but he says he needs some time off work to get things going. They make a new deal: She’ll cover the rent for a while so he can concentrate on jump-starting his career. Years pass. His career hasn’t started. The subject comes up fairly often, but she hates to fight.

Warning signs: By the end of three years, not only is she paying all living expenses, she’s giving him an allowance to cover his “career-building” expenses. He hasn’t held a job since the move. His ‘project partners’ still all seem to be women. He has built no social or professional network and does not participate in her social life. (This didn’t bother her much when she was in grad school, but life is different now.) She doesn’t really want to live alone, and she tells herself he isn’t costing her much more than it would cost to live alone; but their relationship has become that of roommates. And then:

Part 3
She takes up an activity she’s passionate about. He isn’t interested. She meets someone new and tells her roommate she wants to pursue the new relationship. He panics. He asks her to marry him. He argues. He threatens. He marches her into the bank and stands at her back while she takes cash advances on six credit cards, a total of $30,000. He deposits the money in his own account. She tells him that they can’t continue to live together, and she can’t afford to move because she doesn’t have the money for a deposit. He won’t move out. She starts spending most nights and weekends away.

Warning signs: The whole situation.

Part 4
After months of misery, she is able to finally get him out by renting a truck, packing it with almost all their possessions, and driving it to his sister’s home nearby. With the expenses of the move, her own living expenses, and the extortion debt, she is barely making ends meet. She has no savings and no assets. She talks things over with the new partner. They decide bankruptcy may be the best solution. She asks around and gets the name of a firm of attorneys.

Part 5
The attorneys hear the story, go through all the paperwork, and agree that going after the ex in court would be both expensive and unlikely to result in restitution. A bankruptcy petition is prepared and filed, at a cost of a few hundred dollars. She has to appear in court. She feels like an idiot, a failure, a disappointment to herself. The judge hears a brief statement of her reasons for the petition, nods, signs off. That’s all. Ten years later, the bankruptcy is off the credit report. Had she not filed, she would still be making payments on the debt.

Author’s note
This is a true story. I’ve heard similar stories from half a dozen women, and a couple of men, in my city. At least I never married him. At least I didn’t have to smuggle my belongings to my office and store them under my desk until I had all the essentials together, and leave for a new state from the office, like one of my friends did. At least I wasn’t that scared.

In hindsight, perhaps I should have either moved out immediately or had the bank call the police. But I didn’t want to feel responsible if he hurt himself, I surely didn’t want him to hurt anyone else, and his behavior was sufficiently frightening that I believed one of those outcomes was possible. So I bought him off.

What is the moral of this story?
Don’t cover expenses for another able-bodied adult without a contract, and don’t make financial deals that only favor one party.

Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

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As always, coming home was overwhelming. It’s a shock to come back into the U.S. and be instantly bombarded by the constant flood of commercialism and, especially, the mass media. Plus, there’s so much junk food! For an entire week, Kris and I ate healthfully (well, except for the beer), and then the first thing I ate in the Houston airport? A pretzel dog. My stomach rebelled! Don’t get me wrong — I love this country — but it’s far from perfect, and very very insular. I wish we, as a culture, were more willing to look at what other countries get right.

Speaking of rebellion, it looks like there was a fuss over certain posts I picked for my absence. The life insurance post on Friday especially took some heat, some of which was deserved, and some of which was not. When I requested that post, I hadn’t yet written the chapter in Your Money: The Missing Manual about insurance (including life insurance), so I felt I needed an expert to respond. If I were to do it again, I’d field the question myself, and would write (as I did in the book)

The bottom line: For most people, the best choice is guaranteed renewable term life insurance.

But term life isn’t always the best answer. Cash-value policies make sense for some people, especially those with high incomes, large net worths, or small businesses. These folks should consider whole life coverage. But one point is correct: Seek advice from an independent adviser, not from somebody who has a vested interest in selling you an expensive policy.

By the way, Your Money: The Missing Manual went to the printer yesterday. It’s now available for pre-order from Amazon, and should be hitting shelves in your local bookstores in the next couple of weeks. Meanwhile, I’m already starting to think about Book #2, which would be much more of a “J.D. book”, I hope — more about my personal journey and how the lessons I’ve learned can be used by other folks, too. (Your Money: The Missing Manual has some of this, but it’s much more focused on the nuts and bolts of personal finance.)

So, the book is done, I’m back from vacation, and I’m ready to blog!

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Penny recently wrote with the following question:

I’m interested to find out how one sets out a financial plan for life and how much insurance does a person really need because there are so many insurance plans, some are regular savings, some are a combination of investment linked insurance. How much does a person really need and what type of insurance does a person on a budget need the most?

J.D. asked me to write about this since he isn’t an insurance expert himself, so I’ll give you some ideas about how much and what type of life insurance you need, but first let’s start off by helping Penny set out a basic financial plan for life. Once you get some planning done, you’ll have a better idea of your life insurance needs.

Starting down the winding road
Think of a financial plan as a roadmap for a life-long journey. Your starting point is where you are financially right now. Begin by listing all your assets, such as the equity in your home and your savings accounts, and then subtracting what you owe, like the balance of your mortgage and credit card debt. This will give you a good idea of where you stand.

Once you’ve figured that out, think about your future obligations, such as getting your kids through college, saving for a comfortable retirement, achieving your goals, and making dreams a reality. You can find online savings calculators to help you estimate how much you’ll need to save for each of these, from a trip around the world to a little place on the beach to spend retirement.

Where does it all go?
Next, it’s time to gather all of your bills for the last few months so you can see where your money goes. This should include everything that you’ve spent money on — period. Be honest about any seemingly small expenses, and make reasonable estimates. You may be surprised to find out how much you’re spending on things you may not need, like eating out or your daily espresso habit.

Make a budget that includes enough savings to meet your obligations and goals, and — this is the really important part — stick to it.

Insurance is your contingency plan
When it comes to insurance, first you need enough to at least cover your obligations in case something happened to you tomorrow — that’s your base line. From there, it’s time to look into the future and prepare for what’s coming down the pike. Don’t underestimate how much you need. If your kids will be starting college ten years from now, you need to cover what it will cost then. (And it’ll probably cost a lot more than it does now!)

After that, you can decide what type of life insurance is best. Term life insurance is the cheapest, but it’s exactly what it says it is. If you get a term policy for 20 years and find that you need coverage after that, you’re out of luck. You’ll have to apply again, when you’re older and maybe not as healthy. Also, if you outlive the term of your policy, you don’t get anything back. Betting against your own longevity to save money may seem like a good idea now, but you might end up kicking yourself — or worse — down the line.

Permanent life insurance, which comes in different flavors (such as universal, variable, or whole life insurance) provides coverage for as long as you live, so you know there’ll always be a payout. Each has different savings features and can build up cash, which you may take or borrow against. The same coverage will cost a lot more than term life insurance, but you can count on it always being there.

Your bottom line for life insurance
Since Penny is on a budget, term life insurance sounds like the way to go — right now, anyway. She should make sure she has enough coverage for as long as you need it. Later, when her situation changes and she can loosen her belt a little, she may want to get some permanent insurance. At that point she’ll be able to take full advantage of its savings features, as well.

Remember, insurance is there for when things go wrong. It might mean the difference between putting your kids through college and putting them up to their eyes in debt, if something were to happen to you. It’ll be important for you to keep remaking your budget as things change in your life, as they always do. Don’t worry, though; it gets easier every time. Just remember that insurance is your way of playing it safe, no matter the odds.

J.D.’s note: I’ve done more reading on life insurance since I first asked Sanford to answer Penny’s question. I actually think term life is the best choice for most people (but not everyone). There’s certainly no shame in taking out a term policy. If you think you might want permanent insurance down the road, look for a convertible term policy, which will let you switch over.

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Moving to the D.C. area after my twins were born, we transformed from a family of three living comfortably, to a family of five struggling to make ends meet on one income. I had to get creative with our family budget, and one of the biggest line items to tackle was clothing. Four years later, I finally have a handle on it. Shopping for clothes for my three kids has been fine tuned into a system that keeps us humming along season by season. How?

1. I get the best quality I can within my budget.
2. I take good care of what we have (and teach my children to do the same).
3. I resell my kids’ clothing in good condition to recoup my costs.

Buy Quality Clothes — For Less
You can save on sturdy kids’ clothing — I get great longevity from Lands’ End and Gymboree — by only shopping sales and clearance. In her article about the best time to buy almost everything, April mentioned which days are best to shop the clothing stores, but knowing the seasonal clearance schedule is helpful as well. For example, I send my kids to their first month of school in shorts and wait for the jeans/pants/leggings to go on sale in late September and October. Winter coats are on clearance in February; be ready to shop ahead for next year.

You can shop online, but do it wisely. I never shop online without coupon codes, and I always shop through a cashback site like Ebates. Shopping online gives me a larger selection of clearance items than local stores. Additionally, shopping online helps me stick to my list and budget, whereas in a store I am tempted to make impulse buys. Finally, most online retailers allow you to return clothing to the store for free if they don’t work out.

Another way to save is with used clothing, especially in the early years (infant to age four). Considering the amount of wear, tear, and washing these clothes go through, you’re better off saving the “good” clothes for church, holidays, and photo opportunities and dressing little ones in used clothing for everyday wear. Whether purchased at yard sales, thrift stores or consignment sales, look for those high-quality brands, the ones that hold their shape and color for years. (J.D. has shared his 18 tips for thrift-store shopping.) I’ve also found new-with-tag clothes at yard sales. The ultimate way to save? Get kids’ clothing for free through Freecycle or handed down from family and friends (don’t be shy about asking!).

Take Care of What You’ve Got
When you take care of the clothes you have, you stretch your dollars by giving items a longer life and better value. I’ve taught my children to care for their clothes by returning to the old-fashioned notion of “playclothes”. My son has learned to come home from school and change from his khaki pants (bought on sale with a coupon, of course) into sweats or other playclothes. These clothes are for running around outside, getting muddy, doing art projects, and the rest of childhood life. We all wear jeans at least twice before washing, and I tackle stains early so they don’t set in. If long-sleeved tees become stained or too worn, they become undershirts for layering.

Resell Clothing When You’re Done With It
I choose my best-quality items to resell at my multiples club’s consignment sale or eBay, sell some at yard sales, and donate or Freecycle the rest. By doing so, I not only recoup some of my initial cost, I also avoid the expense of storage space and keep my kids’ closets clutter-free. The only clothing I keep from my son are those I’ve bought with my twin girls in mind — raincoats, pajamas and other unisex items in neutral colors like red and blue (which my girls prefer to pink, anyway). I even resell my children’s shoes, though that phase is almost over; older children’s shoes get worn out before they’re outgrown.

While I’m sure I’ll have to adjust my system a bit as my kids reach the tween years, adding their opinions and peer pressure to the mix, I’ve set the groundwork for reasonable clothing expenses. My 6-year-old knows we have a budget set aside for clothing and we discuss why a Pokemon T-shirt costs more than a plain one. Already, I see him making choices with his allowance that come from our discussions about wants vs. needs.

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