My brother recently got a new job with much higher pay than he was previously making. After getting the job, he bought himself a motorcycle, something he’s wanted for a while, and he’s incredibly happy with it and proud of it, even driving it to work to save on fuel costs. For him, it was a good purchase – he’s worked hard and has desired a motorcycle for a long time, and acted on it when the situation finally presented itself.

Naturally, this whole experience got me thinking about my own purchases and I made a pretty interesting realization.

The single biggest change I made to my spending habits is that I finally became aware of the total experience of a purchase.

When you buy something at a store, many people think that the experience of the purchase ends as you walk out the door or as you’re enjoying the product. Not so. The total experience of a purchase ends when you’ve completely recovered the value spent when you made that purchase. Let me give you a clear example from my own past, in mid-2005 (before I had my financial crisis and was still spending without much control).

My Total iPod nano Buying Experience
In September 2005, Apple rolled out their iPod nano. I was already an iPod owner at the time, but the new nano models were so small and neat that I just felt compelled as a gadget lover to run right out and buy one, blowing $200.

That initial purchase rush was quite fun. I gave over the $200 and got my nifty new iPod, which I quickly loaded up with music and pictures and took around to show my friends so they could be suitably impressed by my new gadget. Those first few days were pretty fun.

But, you see, I already had an iPod, and besides that, I didn’t even use that iPod a whole lot. I would use it while walking around, but I did most of my music listening directly from my computer or out of my stereo system at home.

I also found that after just a week or so of light use, my nano was already developing little scratches. I started storing it in a pouch, which helped, but at that point it began to seem indistinguishable from my older iPod, except with less storage. My positive feelings were definitely beginning to mellow.

Of course, I’d bought that iPod nano on credit (much like many of my other purchases during that period in my life). So when the credit card bill came in, I didn’t have enough to pay it off, even though there was a nice new $200+ charge on the bill. Instead, I made the minimum payment and a bit more and felt pretty sick to my stomach about my rather large credit card balance. Yep, more negative feelings as a result of the purchase.

The next month came and went. My nifty new iPod didn’t get used very much. I couldn’t find the charger for it for a while, so it sat unused while I primarily used my old iPod. I’d see it sitting there, unused, and feel bad. Another credit card bill came, packaged up nicely with some more negative feelings.

It took me almost a year to get that credit card paid off. All told, that nano probably cost me $250 – and the net feelings and use that it generated were negative.

Using That Experience Today
That experience, along with several similar ones, has left me with a very strong sense of the whole picture of what I’m actually buying when I make a purchase. I’m not just taking home something nifty to enjoy – I’m also taking home the bill. I’m not just taking home something to play with today – it’s something that I should be enjoying over the long haul if I’m putting significant money into it. Could I perhaps get this item cheaper elsewhere, or do I even need it at all?

Is this purchase going to be a net positive, or is it going to be another iPod nano?

I ask myself this each time I go to make any kind of purchase that might even be slightly unnecessary. That thought process has talked me out of countless purchases over the last couple of years.

In the past, I’ve strongly advocated using the ten second rule whenever you’re considering buying an item. The questions above are the questions I ask myself during those ten seconds – and they usually talk me right out of buying the product.

The more I dabble in investing, the more I realize that it’s something of an “opposite world” compared to the principles I use in day to day life. Things that make intuitive sense in the real world are actually failures when it comes to investing. Here are ten great examples of that phenomenon.

Be the best – settling for average is a loser’s game.
In real life, it’s always helpful to strive to be the absolute best person you can be. Putting in the sincere, concerted effort it takes to be the very best at what you do is a strong path towards success, as the lion’s share of the credit and respect go to the people who are the best. The basic principles for being the best are consistent over time: work very hard, respect and care for others, step up when leadership is called for, and handle difficult situations well. No matter what situation you’re in, those tenets will guide you towards being the best.

In investing, constantly striving for the absolute best returns will often lead you down a dangerous path. In order to achieve those kinds of “best” results, you have to take on a huge amount of risk by reducing your portfolio diversity and buying heavily into a small number of investments. Doing that puts you at a big risk – if one company runs into trouble and you’re heavily into their stock, your gains go away very quickly. The actual truth is that you’re far better off as an investor trying to get the average return at the lowest cost possible over the long haul, and that usually means being very diverse and very steady with your investments, not seeking the big win.

Self-confidence can get you far.
In real life, the appearance of success often implies the presence of success to others. Dress in an expensive suit, drive an expensive car, and act with confidence, and people will believe that you’re successful at what you do and place some confidence in you, whether founded or not.

In investing, self-confidence often leads straight to failure. Self-confidence causes you to believe you’re an expert investor and that everything you touch turns to gold. No one has the Midas touch – not even Warren Buffett or Peter Lynch. You will suffer failures as an investor, and if you’ve been too self-confident about your investment choices (resulting in behaviors like putting all your eggs in one sure thing basket), you’ll get burnt badly.

Let your heart lead, not your mind.
In real life, your internal moral code, conscience, and instinct are great guides in leading you through the labyrinth of human interactions. Gut instincts are often the result of watching many, many patterns over time, and because basic human behavior is often at least somewhat predictable, our gut instinct often leads us down the correct response path. Whenever my gut and my mind are fighting over what to do when in the real world, I usually let my gut win.

In investing, gut instincts have the opposite effect. Your gut instinct tells you to make conclusions based on recent behaviors and behaviors you’ve witnessed in the past. Thus, a short-term uptick signals a gut instinct to invest for most people. The only problem is that short term investments in most markets are extremely chaotic. They go up and down for reasons far beyond our quick perceptions, and thus just relying on our natural instincts has very little value at all. In fact, often it has a negative value, because we may interpret a natural fluctuation as being something more than the little trend it is, so we buy on the peak or sell short at the bottom and end up eating our shorts.

When in Rome, do as the Romans do.
In real life, this is an excellent principle to live by. Adopting some of the social norms around you helps you blend in much more quickly and begin establishing relationships instead of appearing as an outsider to the rest of the group. Fitting in can often be the key to defusing a social situation and making it work. Not only that, imitation is a great way to learn a new skill.

In investing, listening to CNBC all day and using their “advice” will get you nowhere. “Fitting in” with a group of people who are recommending stocks either because they’re invested themselves or based on minimal research is not a safe way to invest. Neither is reading the papers and seeing what the “hot” new investment of the minute is. If you’re reading about fantastic results and are thinking it’s time to “do as the Romans do,” it’s already too late to get the big returns – and you’ll often wind up being the one who ends up holding the bag. The same is true when there’s a selloff – the time when everyone is selling is the time for you to buy, not to sell. Do your own homework and pay no attention to the delusions and madness of the crowds.

Listen to the advice of people wiser than yourself.
In real life, it’s a great idea to heed the recommendations of experts in a field. I have a friend who is a tremendously good golfer, so when he recommends golf balls or a golf club or a training item, I’ll listen. Another friend is a tremendously good woodworker – if he recommends a router, I’ll listen. If a friend makes a suggestion about my own life when I ask for advice, I’ll listen.

In investing, listening to most recommendations will usually just lead you astray. The talking heads on television, often described as stock pickers or experts, have notoriously bad track records and often are just recommending whatever stock they have a lot of at the moment. That’s not expert advice. If you want true expert advice on how to invest your money, seek a fee-only financial planner, not someone on CNBC telling you to put all of your cash in Lugubrious Whing Whang (LWW).

A very specific focus will reap great rewards.
In real life, becoming a top person in a specific field can reap huge rewards. Take musicians, for example – one does not become an expert musician overnight. It takes focus, intensity, and dedication to master a musical instrument.

In investing, a focused intensity will keep you from properly diversifying and can leave you very open to sudden downturns. While it’s good to know what you’re investing in, if you focus in on one sector so intently that you lose sight of everything else, you’ll get burnt badly. Just ask the people who got downed by the tech stocks in 2001, or the Enron true believers in 2000-2001.

You usually get what you pay for.
In real life, this is often a solid rule of thumb for purchasing. For the most part, less expensive products are made with inferior parts and tend to wear out quicker. Being an intelligent shopper means knowing how to balance what you get with what you pay.

In investing, the cost of the type of investment advice that might help you squeeze out another percent or two is often more expensive than the financial gains you earn from the advice – not to mention the time reading it, absorbing it, and acting on it. You’re far better off figuring out a simple investing strategy on your own, one with low costs, and simply executing it yourself.

The best way to guess what will happen is to look at the past.
In real life, our previous experiences are what we use to make decisions in life. We remember early experiences and quickly translate those experiences into an educated (and often correct) choice today.

In investing, past performance is no indication of future results. A mutual fund that does great one year might be atrocious the next. A stock that’s been in the basement for years might suddenly catch fire. From 1997 to 2000, Enron’s stock quadrupled, and then 2001 happened. You can’t guess what will happen tomorrow.

Short term milestones work well to make sure you’re progressing towards your goal.
In real life, using short term milestones to move towards a big goal can be a powerful way to get you moving towards something really big. You can mark your progress slowly over time as you add more and more effort to the pot.

In investing, short term investment results are extremely volatile and are hard to use for any sort of indication of progress. Stock investments really only work over the long term – if you’re looking at the short term (and you’re not daytrading), there’s little real meaning there at all. You can’t use a month’s worth of growth or loss in your portfolio as a unit of progress towards your bigger goal. The only metric you can use in the short term is that you’re consistently investing more over time.

If everything’s crashing around you, now’s the time to stand up to the plate and take action.
In real life, the people that take action during a crisis are the ones that are seen as leaders, and they deservedly get much of the rewards for taking on that challenge.

In investing, people who spring into action during a fall in stock value are almost always making a bad move. The only time one should change an investment is when the fundamental reason for owning the investment changes. Did the company itself change? Did the company’s market situation change? Those are the questions to ask, and they have nothing to do with a short term crisis in the value of a stock, which could be caused by any number of reasons. Successful investors don’t immediately act during a crisis – they evaluate the situation carefully and don’t make rash moves.

It’s for these reasons that I prefer automatic investing. I just figure out my plan (centered around very broad-based and low cost index funds), set up the automatic investment each week or month, and then just forget about it. I rebalance once in a while, but only in that I change my contributions around so that my investment will eventually turn back into my desired allocation. And that’s it. No listening to the “experts,” no rash picks in a crisis, no believing I’m some sort of super investor. Slow and steady and calm.

It might go against my personal instincts, but it works.

Each Friday, The Simple Dollar reviews a personal finance book.

Lately, as my parents and my wife’s parents begin to inch towards retirement, I’ve become quite interested in looking at the financial issues they face at this point in their lives. Their situations are very different – the one thing they have in common is their age, and the title of this book makes it appropriate for all of them.

Along these lines, I’ve read The Number (long on entertainment, short on solid advice) and Start Late, Finish Rich (solid, but repetitive if you’ve read other David Bach books), and thus I’m still searching for a truly strong book on retirement-related issues to recommend to readers who ask.

Since I highly enjoyed It Pays to Talk (Schwab’s excellent book about talking to your loved ones about money issues), I had high hopes for this book. Does it really offer thought-provoking and strong advice on retirement issues, or does it fail to stand out from the pack? Let’s dig in and find out!

Inside You’re Fifty, Now What?

1. Investing Strategies for the Second Half
Schwab’s basic approach is pretty simple. If you’re under 50, you should invest aggressively for retirement – mostly in stocks (and even pretty aggressively within that). When you get over that age, every five years, you should inch it back, moving your investments from stocks into bonds bit by bit.

Even more important, Schwab recommends managing it all yourself. It’s not that hard, the amount that you learn getting your hands dirty in the process, and it’s also cost-effective – if you’re not paying someone to manage your funds for you, you’re putting it in your pocket. I’m hugely in favor of doing it yourself – the ten hours you might spend learning about what’s going on is quickly repaid over a lifetime of superior investments – even a 0.1% improvement annually in your retirement can add up to tens of thousands of dollars over your life, and basic knowledge and good choices are worth a lot more than that.

2. Adding Up What You Have
Calculate your net worth. That’s basically the point of this section of the book, offering up a ton of compelling reasons for doing so and providing a solid guide for walking you through the process. Schwab focuses pretty heavily on the assets part of the balance sheet, for better or worse. I know many people who have a lot of assets coupled with a lot of debt and thus if they focus solely on their assets, they seem rich. Debt is an important part of the picture and I think Schwab doesn’t focus on it enough here, though it is mentioned.

For me, net worth is an essential part of the personal finance picture. I use my (and my wife’s) net worth as the primary gauge of where we’re at financially – not how much money we have in our accounts. Assets minus debts – that reveals the real picture and it’s the only fair way to compare today to the past.

3. Estimating How Much You’ll Need for the Second Half
Schwab uses a rather … interesting calculation to determine how much money you’ll need in retirement. In a nutshell, he says to take your annual expected living expenses, divide them by 12, and then multiply that number by 230 in order to get the amount you need to save. For example, if you want $80,000 a year in retirement, you should divide that by 12 and then multiply by 230 to get you $1.541 million.

The 230 number is pretty arbitrary (Schwab admits it) and is even more arbitrary the farther you are from retirement (inflation has much more time to be a big factor), but it is a pretty compelling calculation. Later in the chapter, Schwab (smartly) suggests adding in an inflation multiplier based on the number of years you have until retirement. For me, that’s about thirty years – a multiplier of 2.8. If I wanted that $80,000 threshold above, I should then be targeting somewhere in the ballpark of $4.2 million as a total the day I retire – a pretty hefty number, indeed, but it’s based on significantly more spending than I do right now. A more realistic number for me is half that – $2.1 million.

4. Choosing Investments for the Second Half
For the most part, Schwab recommends staying at least somewhat aggressive until you’re at least 80. Seriously – he recommends keeping at least 60% of your retirement fund in stocks until you’re 80. That’s pretty aggressive – definitely on the aggressive side of investment advice that I’ve seen.

On the other hand, Schwab is pretty optimistic about retirement itself. He implicitly states that he believes most retirees will live into their eighties, exceeding current life span estimates by quite a bit. In other words, he’s betting on continual improvement in medicine and diet, which will lead to extended lifespans for retirees.

I agree with Schwab’s optimism, actually. I tend to believe that “retirements” will get longer and longer and longer as the years pass and that it’s good to assume that you’re going to live to a ripe old age.

5. Cash Flow in the Second Half: Creating a Paycheck for Yourself
Schwab recommends taking 4-5% per year out of your accounts as a retirement “paycheck,” but no more than 5% each year. With the relatively aggressive portfolios that Schwab recommends in the previous chapter, this effectively ensures that you’ll be able to live forever on your retirement nest egg, which is a good thing.

On the other hand, if you determine that a 5% annual withdrawal across all of your retirement accounts isn’t enough to live on, you need to keep working and socking money hard into retirement. Retiring before you’re ready tacks extra years onto your retirement and also depletes your retirement much more quickly, leaving you much more likely to be without funds in your final years when you need the money most.

What did I learn? Save now, when I’m young.

6. Monitoring and Rebalancing Your Portfolio
This chapter serves as a good primer on portfolio rebalancing whether you’re focused on retirement or not. Once you’ve figured out your target portfolio, the principles of rebalancing are pretty much the same. If one piece of your portfolio is low and another is high (compared to your “ideal” portfolio allocation), buy more of what’s low instead of selling what’s high. If you can, do most of your rebalancing within a retirement account that’s tax-deferred. In other words, pretty typical rebalancing advice.

The most interesting part (to me) is Schwab’s subtle indication that index funds are the way to go. He encourages readers to use comparable index funds as the benchmark to compare their current investments. For example, if you have a large cap fund in your portfolio, use the S&P 500 as your benchmark to make sure the investment is up to snuff. The logical conclusion (to me) is why not just invest in the benchmark and buy something like the Vanguard 500?

7. Getting Help If and When You Need It
Here, Schwab discusses how to find a financial advisor – in other words, how to “talk to Chuck.” Ignoring the expected bias, Chuck actually does a good job here of describing how one should select a financial advisor, including a pretty frank discussion of fee-only, fee-based, and commission-based financial advisors (and not too subtly making a strong case for the fee-only ones unless you need someone to completely manage everything for you).

I confess to expecting this chapter to have a lot of bias towards financial advisors, especially commission-based ones, because that’s how his company makes the most money, but his advice really is pretty solid. Do the research and make the choice that’s right for you. For me, I doubt I ever turn to a financial planner – I get much more value from figuring things out for myself.

8. The Assurance Called Insurance
Health insurance, long-term care insurance, disability insurance, and life insurance – these are the four things that you need to have covered in retirement, according to Schwab. These four insurances together create a safety net, protecting your family against anything that might happen to you.

This advice really applies to anyone of any age, particularly if you have a family that could be severely impacted by a lengthy illness, a disability, or a sudden death, something I mused about recently. Anyone who has a family should at least strongly consider all of these types of insurance.

9. The Fine Art of Estate Planning
The penultimate chapter focuses on estate planning: wills, living trusts, and so forth. Schwab often assumes that the reader has a rather large estate to worry about, something that doesn’t really apply to a young professional. In other words, Schwab’s estate planning advice really does apply to the titular fifty year olds.

The key thing that Schwab mentions here (and it overlaps well with his other book, It Pays to Talk) is that this is a family moment and should be adequately discussed with everyone involved. Secretive decisions do nothing but foster resentment and hard feelings, which are perhaps an unwanted part of your legacy. If you’re making a difficult choice in your planning, have the courage to talk about your reasoning openly with the people involved.

10. Giving Something Back: Some Thoughts on Charitable Giving
You’re Fifty, Now What? closes with a brief look at charitable giving. Schwab’s key advice is straightforward: know what you’re donating to in detail (meaning do the research, don’t just hand cash to anyone that asks and seems to have a decent cause) and also take advantage of any tax benefits that the donation gives you (remember, if your donation is tax-deductible, that effectively means you can donate more).

Schwab doesn’t give any specific charity recommendations, but does advise that if you’re giving a significant amount, you should work with the charity and with a lawyer to maximize the benefit to the charity. It may be that giving money in multiple sums has tax benefits for you or for the charity and thus may allow your donation dollars to stretch further – don’t overlook it.

Appendices
One aspect of this book that I really like is the inclusion of some very fact-heavy appendices on specific subjects. Doing this enables some specific areas to receive the detailed, fact-based coverage that they need without completely bogging down the main part of the book – things like discussions on durable power of attorney for health care and how to read a mutual fund prospectus. The print’s a little smaller and the writing is dense, but that’s perfect for this type of material – it’s fact-heavy and the specific bits don’t apply to everyone. This is an approach I’ll look at if I write a book in the future that could use such support.

Is You’re Fifty, Now What? Worth Reading?

If the title of the book fits you – you’re between ten and twenty years away from retirement – then this is the best book on retirement planning I’ve seen. It really addresses the needs of people who are in that particular demographic range, like my wife’s parents, for example.

On the other hand, if you’re outside of that demographic area, it’s not all that helpful. From my perspective, much of the material was either not applicable at all or applicable only in a theoretical sense. I’m more interested in longer-term retirement advice, as I have thirty years (at least) until I retire.

This is a book that I think is great for my father-in-law and my mother-in-law to read. I can see very clearly how the advice would apply wonderfully to their life. As for me, I think it’ll go back on the bookshelf and wait for another twenty years or so. In other words, the title is very appropriate and accurate – if it interests you, the book will interest you, too.

I love baking soda. It’s one of those things I can scarcely resist buying. Whenever I see a huge quantity of it for sale at the local warehouse store, I’m always tempted to pick up a big box of it, as you can get a twelve pound bag of baking soda for $5.76.

Why? It has nearly infinite uses and is extremely inexpensive to acquire – the two elements of a purchase that make my frugal heart go pitter-patter.

I originally started listing out dozens of specific uses of baking soda, but as I was doing research for this article, I came across a free book online that extolled the many frugal virtues of baking soda. It’s entitled Resourceful and Ingenious Uses of Baking Soda and the entire book is available for free at that link. Check it out!

I thought I’d highlight twelve of my favorite uses for baking soda found in the above book, along with my own notes from using baking soda for that purpose. The book has many, many ideas I’ve never considered – looks like our big bag of baking soda is about to get used pretty heavily once again.

General cleaning Whenever something needs to be cleaned around the house, I just mix about four tablespoons of baking soda into a container of very hot water and mix it until it’s dissolved. The solution just cleans up almost everything quite nicely, from spots on the hardwood floor or linoleum to spots on the windows. If there seems to be any residue left behind, just wash it off again with a damp rag – just fine.

Caked-on food removal If you have a casserole dish that has food that’s been caked on that’s almost impossible to remove, put some scalding water in the pan, then add about two tablespoons worth of baking soda and mix it into the water until dissolved. Let it sit for about an hour and the food comes off much easier. If that still doesn’t work, I like to clean out the pan again, then soak it in scalding water with about two bottle caps worth of vinegar for an hour, then dump that out and do the baking soda soak again. It’ll foam up some when you first put the baking soda into the water after the vinegar soak, but this makes all of the caked-on food practically fall off.

Facial cleanser Even at twenty nine years old, I regularly get oily skin, and I find that making a paste from roughly equal amounts of hot water and baking soda does a great job of taking care of the oil on my face. If you have a severe issue, you may want to talk to a dermatologist, but I’ve found it does a great job on the oily areas on my face.

Bad breath Halitosis can be a very disgusting thing. One sure way to combat the bad breath effects of halitosis is to brush your teeth with baking soda each day. Just keep a saucer with some baking soda on it near the sink, and when you go to brush, moisten your brush, dip it in the soda, and brush away. The taste is foul at first, but it does a very good job, and you can follow it with a good rinse and a brushing with normal toothpaste if you’d like a fresher taste in your mouth.

Bee stings/poison ivy/mosquito bites/itchy skin Whenever the skin is stung or irritated, particularly when it’s itchy, just make a paste out of baking soda and water (roughly equal amounts of each) and spread it on the irritated area. This paste helps slow swelling from bee and wasp stings and takes the edge off of itchiness from other conditions. I do this all the time with mosquito bites and it really helps.

Heartburn/acid indigestion/upset stomach Instead of turning to Pepto Bismol or Maalox when I’m feeling queasy, I just put a teaspoon of baking soda in a glass of warm water and drink it down. It really helps – it neutralizes stomach acid just as well as the other stuff (though the other stuff tastes better).

Garbage disposal odor Recently, we began to smell a faint odor from our garbage disposal, so we got out the old reliable baking soda and dumped some in there, about 1/4 cup, along with a couple squirts of dishwashing soap, followed by some warm water for a bit, then running the disposal with the warm water running. The odor went away immediately.

Cutting boards I learned this from my great grandmother, who used to have a big wooden butcher block for a cutting board. After she was done with it, she would scrub it a bit with water, then sprinkle some baking soda all over the surface, then scrub it again. Her board always smelled fresh and clean – and she used it for cutting up everything under the sun.

Sweat stains If you have a shirt with some sweat stains, just get the area of the stain wet, sprinkle some baking soda on it, and rub it into the stain. This gets rid of the sweat stain every time for me, even on white tee shirts.

Light rust removal This is a trick an auto body restorer showed me once that the book repeated, and it works surprisingly well. If you have an item with light rust on it, just take a potato, peel the skin off it, dip the potato in baking soda, then rub the potato vigorously on the rust. Keep repeating it. Amazingly, the mix of the potato enzymes and the baking soda takes the rust right off! Afterwards, you may want to treat the item with rust protectant for long-term protection, though.

Smelly shoes When I was a kid, my shoes used to smell awful. My mom’s treatment for the problem worked like a charm, though. She’d just sprinkle some baking soda inside the shoes as soon as I removed them. It reduced the odor inside the house and wasn’t noticeable at all when wearing them.

Cat litter A few years ago, we owned two cats (both were given away to nice homes – an elderly couple and a family member – when cat allergies were discovered) and this is a trick we often used. Just sprinkle a few tablespoons’ worth of baking soda in with the cat litter and the odor absorption of the litter goes up tremendously, plus the soda absorbs some of the wetness, all without harming your cat a bit. Our cats seemed to like it just fine.

The free book offers tons more tips for baking soda use, including one I’m anxious to try, but seems a bit dangerous.

Considering the cost of baking soda (I can get it for far less than $0.50 a pound) and the diversity of use, I consider baking soda to be one of the best bargains out there.

Very soon, I will be celebrating my 30th birthday, and I thought it would be interesting to take a look at my retirement portfolio as it currently sits. I’ve rounded each amount to the nearest $100 to make the math easier as I evaluate where I’m at and what my future plans may be.

My Current Retirement Portfolio
My retirement portfolio consists of two different 401(k)/403(b) accounts and a Roth IRA. The investments are currently as follows:
I hold $27,500 in an international equity index fund in a tax-deferred account
I hold $22,800 in a small cap stock index in a tax-deferred account
I hold $1,200 in the Vanguard STAR fund in my Roth IRA, which I just founded this year

This gives me a total of $51,500 in my retirement savings. In the near future, I will be setting up a SEP IRA through Vanguard to hold additional retirement savings.

In addition, my wife has a pension from the state, as well as a 403(b) plan which holds $22,000 as of her last statement, but I’m focusing on balancing and maximizing my own portfolio for now.

How Am I Doing?
In order to compare my savings to a realistic picture of my living expenses, I’ll use my income from my previous full time job in 2007, where I earned about $47,000 (I don’t have enough data yet to make a fair estimation of what my annual income will be as a self-employed worker). This means I have about 1.1 times my annual income in retirement investments – right about where I want to be at age thirty. I use Money Magazine’s retirement benchmarks for this conclusion:

Assuming you want to retire at age 60 and plan to have no pension and no job in retirement, you need to have…
1.6 times your salary in savings at age 35
3.5 times your salary in savings at age 40
5.8 times your salary in savings at age 45
8.5 times your salary in savings at age 50
11.9 times your salary in savings at age 55
16.0 times your salary in savings at age 60

Using those benchmarks, I would say I’m in fine shape, considering that even without any additional input, my portfolio would likely grow enough to meet the target for age thirty five (and I plan on contributing more, so it should be a cake walk).

Where Will My Portfolio Go in the Future?
Right now, I’m young. I’m not quite thirty yet, and my retirement portfolio is very aggressive. Let’s look at it in terms of percentages.

53.4% international stocks
44.3% small cap stocks
2.3% large cap stocks

In other words, my portfolio right now is 100% in stocks, and some of the options are fairly risky. Within two years, I’d like to smooth things out and have the following allocations:

40% international stocks
30% small cap stocks
20% large cap stocks
10% emerging market stocks

Again, very risky, but I’m looking at a retirement age that’s still almost thirty years down the road. I plan on keeping that portfolio until I’m forty, then slowly easing back by reducing the risky stocks and moving them into more stable stock investments, like a total stock market index fund. As I approach fifty, I’ll start moving things towards bonds gradually, too.

How will I do that? The key is to fully fund my Roth IRA each year and also open an SEP IRA, then use all of the accounts together to achieve my desired proportions, rebalancing each year to keep things in alignment. Steady, small contributions here on out will win the race – right now, for example, I’m contributing $100 a week to the Roth IRA and putting aside $100 a week with the intent of putting it into the SEP IRA once I’ve decided how I want to execute that plan (likely through Vanguard as well, but I’m still reading the rules and contrasting it with a SIMPLE IRA).

Can You Do the Same?
So now the question comes to you. Can you do the same type of analysis over all of your retirement accounts? Are you hitting your targets, and are you in line for future milestones? If you’re behind, now’s the time to kick your contributions up a notch. If you’re looking good, feel happy about it – but remain vigilant. If you have no idea where you’re at, it’s well worth your time to sit down and figure it out – it took me about twenty minutes to put the above numbers together, but I had a pretty good grasp on where I was at before I started.

Good luck with planning your future!

Recently, my wife and I had some guests over to visit. While here, one of the guests used the restroom on the main floor of our home, where we have a large closet where we store supplies over the long haul. She observed that there were about twenty bars of soap, several bottles of Old Spice body wash, several large bottles of shampoo, and six boxes of our son’s favorite breakfast cereal (Yogurt Burst Cheerios) stowed away in there, and when she came out, she made a half-curious and half-sarcastic comment about them.

Here’s the real scoop: every item listed above cost us less than a dime. In each case, we saw a tremendous buying opportunity matching coupons to a sale and we simply stocked up big time on those items, leaving us with a large closet stuffed full with unusual items. I like to call it anticipation buying.

Anticipation buying revolves around four distinct principles.

First, there are some items that we will continually use over time. Soap, shampoo, oatmeal, Yogurt Burst Cheerios (without them, our son would riot), flour, sugar, some fruit juices, milk, coffee, razor blades, toilet paper – these are items that we use over and over again and continually need to stock up on. Because we’re aware of this, we can use a specific plan of attack for these items to get low prices on them.

Second, there are irregular opportunities to find such items on sale. These items pop up on sale on a completely irregular basis. Brand A shampoo might be on sale one week, then two weeks later Brand B will be on sale. Not only might national brands be running a promotion where items are on sale in stores, but individual stores might select different loss leaders to get people in the door.

In order to keep up on these individual sales, we just follow the grocery flyers in our Sunday paper (and in other flyers we get in the mail throughout the week). I usually have flyers for all of the local grocery stores and I keep an eye out for their big sales by reading their flyers each Sunday over breakfast.

Third, there are irregular opportunities to find strong coupons on such items. I clip every coupon for items in the above categories that are of acceptable brands from the Sunday paper, and if I see a very good coupon, I’ll stop at the local convenience store early on Monday morning and ask for the inserts out of the old Sunday papers (the cashier always says “Sure” and I start scavenging for coupon inserts). Sometimes, I can get as many as fifteen of the good coupons – if they’re for $1.50 off an item I know we’ll use frequently, it’s like cash in the pocket.

So, we patiently clip all coupons for these items and save them until there’s a sale, then stock up. I have the coupons. I have the flyers. I then just wait for them to sync up. Usually, it happens about a month or so after I clip the coupons (yep, the one month coupon strategy at work).

Another tactic to note: quite often, individual store flyers will have coupons that match the manufacturer’s coupons you have. Often, you can use these coupons simultaneously. So, let’s say my local Fareway ad has a coupon letting me get Herbal Essences shampoo or conditioner for $1.99 a bottle (limit 6) and I have three “save $3 on 2 bottles” coupon from the manufacturer. I just take all of them there and walk out with good shampoo and conditioner for $0.49 a bottle.

Here’s a real-world example. Recently, I had several copies of a coupon that permitted me to save $3 on any two bottles of Old Spice body wash. I waited until I noticed a sale – and not long ago, there was one at a local Walgreen’s. The individual bottles were $1.79 on sale there. I took in my wad of coupons and picked up ten bottles, paying $0.29 a bottle. I walked out of the store with ten bottles of soap, having spent less than $4 total – and it was just a five minute stop on my normal shopping trip. That’s how you save money.

What’s the long-term effect? The result from doing this regularly is quite interesting. Our regular shopping lists almost never have these “anticipation” items on it. Instead, they almost always just list the food items we need for the week, which means that at the grocery store, we rarely even visit big sections of the store. We mostly visit the produce aisle, the meat counter, the dairy area (for milk, etc.), and a few other specific places (pasta, canned items, bread when I’ve not made any), and that’s about it. Our grocery bills are cheaper and our shopping trips are actually quite a bit shorter because we’re not going over to the far side of the store to pick up shampoo or toilet paper – the time invested in executing this strategy is partially redeemed on ordinary shopping trips.

When I first started The Simple Dollar, I had a very simple coupon strategy that didn’t save me a whole lot of money. It’s been fun to watch the strategy evolve over the years – first syncing it with a grocery list and evolving that strategy a bit, then discovering the figuring out how sales and coupons synchronized and now evolving that strategy a bit. I used to believe that perhaps coupons weren’t worth the time invested, but I’ve found more and more that if you do it intelligently, there are some serious savings to be had – and it doesn’t take as much time as you might think.

Right now, I’m in the middle of “crunch time” with my book, as I hit a big deadline for it on June 1. I’m basically obsessing over it at this point, polishing little pieces here and there and wondering if it’s good enough. My June 1 deadline is that I have to turn in a very rough draft of the manuscript, with a “final” delivery date of July 1 for a version that can go through their editing process.

So, for this week’s roundup, I went back to my big grab-bag of the best posts from a mountain of personal finance blogs and found ten more gems worth sharing.

Why You Can’t Trust Real Estate Agents When Buying A House Our agent was a friend of ours who did a spectacular job for us. Touch on your social networks and see if you can get a personal connection to an agent – that’s worth more than any ad. (@ quest for four pillars)

10 Things that Bring Success in Personal Finance #8: Live a Frugal Life I truly believe that frugality is the key to any personal finance success. If you can’t master the “spend less” half of “spend less than you earn,” you’re going to have a lot of problems. (@ prime time money)

Putting $70,000 into Prosper.com Sorry, I would never put that much money into peer-to-peer lending. The trust factor on Prosper isn’t high enough for me to feel comfortable there. (@ dual income no kids)

Poverty to Prosperity This is simply some good all-around advice. (@ free money finance)

Bridesmaid Dresses – We Need a Solution! For my wedding, my wife and her sisters collaborated and found some pretty cost-efficient bridesmaid dresses. They just all shopped around a lot – during that timeframe, I was finding every reason possible to not see yet another pastel dress. (@ mrs. micah)

Hack Your Credit Score? Using Prosper as a middle man to guarantee loan repayment? Interesting. (@ lazy man and money)

The Laws of Simplicity – Law 1: Reduce This is basically decluttering, something I’ve found a ton of value in over the last year or so. (@ financial understanding)

Why We Rent Another compelling case for renting. I think it highly depends on what area of the country you live in. (@ pinching copper)

Putting My Teenage Son on a Budget This is something that would work well if you have a good relationship with your teenage son. For some kids, it would result in an even bigger war. (@ debt free revolution)

The Money Spectrum Over the last two years, I’ve watched myself slide from one extreme end of this spectrum to somewhere approaching the other end. Nice. (@ millionaire money habits)

Frugality runs through our lives like a quiet, gentle stream: subtly, beautifully, and often without notice.

12 AM Our programmable thermostat has automatically adjusted for the night, letting the normal outside temperature control the temperature in the house while we’re sleeping. The cool Iowa night-time air rarely gets above 80 degrees at night, meaning our house doesn’t use any cooling during the night time hours. We leave our windows open on clear nights to let the wind gently blow air through our bedrooms. Money is saved while we sleep.

1 AM Our outdoor solar lights finally flicker off, well past any time we would be up and about. These lights use no additional energy and provide perfect ambient lighting when we’re outside relaxing in the evening.

2 AM The snails and slugs and worms slowly crawl around in our garden, moist with dew. They naturally process the soil, help take care of pests, and make our vegetables more healthy when we harvest them. The cost of gardening is minimal compared to the bounty of fruits and vegetables we get out of the garden.

3 AM Our clothes, hung out to dry the night before in the guest bedroom, slowly dry in the cool night air. An occasional gentle breeze blows in the window, drying out the laundry instead of using the dryer. A bit of money back in our pocket.

4 AM Our tightly packed deep freezer kicks on for the first time today. It rarely kicks on because it’s full of frozen food – the temperature rarely changes inside, so it doesn’t use much energy. The food stored inside is a huge savings – we were able to buy a quarter of a cow’s worth of beef at once directly from a meat locker, saving us a lot of money.

5 AM We start to wake up and begin our day, starting with a diaper check on the young ones. The cloth diapers are dry from hanging in the guest bedroom, so we put them on our children, saving money from the cost of disposables. Wiping is done with a reusable cloth and a gentle spray of water (usually the “extra” insert cloth from the cloth diaper), saving money again from the cost of wipes.

6 AM A family breakfast consists of homemade oatmeal, a very inexpensive and tasty favorite that provides a great way to fuel the day. We use our own homemade oatmeal packets, making each of our delicious breakfasts cost just pennies.

7 AM My wife and the kids leave for the day. Since I work from home, there’s no fuel costs or miles put on my vehicle. Instead of burning through a couple gallons of gas each day (read: $8), I stay at home and save some cash.

8 AM Instead of going to the gym, I stay at home and do my own exercise routine, using free online tools like Gyminee and Wii Fit to track my progress and the motivation of my friends to help me move forward.

9 AM At work, my wife uses her breast pump to produce breast milk for our infant daughter. Our daughter has eaten 80% breastmilk throughout her infanthood, making our formula costs minimal and also improving her health by providing natural disease resistance and appropriate proteins for growth.

10 AM I do a batch of laundry, using our homemade laundry detergent, which has completely replaced store-purchased detergent use for us. Each load is now eighteen cents cheaper than before.

11 AM My wife takes advantage of her work benefits, snagging a healthy lunch from the cafeteria for free. This is a valuable perk afforded to her and she doesn’t hesitate to catch it every day.

Noon I enjoy a nice lunch made up of leftovers from the night before with some additional spices on top. Flavorful, healthy, and very cheap – active use of leftovers means we can prepare more for meals to begin with, which opens up more bulk buying opportunities. That reduces our overall food cost dramatically.

1 PM It’s a warm day, but instead of cranking up the air conditioning, I turn it off and open up several windows to encourage a natural breeze through our home. A couple of small well-placed fans encourage the natural air flow – far, far cheaper than running the full house air conditioning.

2 PM During an afternoon break, I go grocery shopping. But instead of just heading out to get the two or three things I know we need (and likely winding up with several more things on the cart), I make a shopping list and take along the coupons that match what we need. Sticking strictly to the list keeps the tab at the checkout in check and keeps me from going home with impulse buys – I’d rather have cash than that impulsive bottle of a new flavor of Mountain Dew.

3 PM I come home and take a nice shower. We have a low-flow shower head, plus the shampoo and the soap in the shower were bought almost for free using the one month coupon strategy. Total cost? Almost nothing.

4 PM Late afternoon arrives and I need some informative entertainment. Instead of staying glued to the computer, I shut it down and turn on a small transistor radio, tuning it in to the local NPR station, and get started on household chores. NPR is hugely entertaining and informative and I can get it on my radio for almost no cost at all, not even energy – the tiny radio uses very little juice.

5 PM The family arrives home and instead of eating take-out or something like that, we work together to watch the kids and prepare a homemade supper. The cost benefit is amazing – we often eat a nutritious and tasty dinner for less than $1 a head.

6 PM Evening entertainment time, and it doesn’t involve the television. We play in the yard, or sit somewhere nice and read books checked out from the library.

7 PM My mother calls using Skype. We talk for free, then switch onto videoconferencing mode so she can see the kids before they go to bed. She lives in another state, but the total cost of the call and the video is next to nothing.

8 PM The kids are in bed, so it’s time for evening chores. We fill up the compost bin with scraps from supper, which not only reduces the amount of trash we throw away (keeping our trash removal bill in check), but provides us with free organic fertilizer for the lawn and for the garden. Let some mature compost dry out and you can spread it quite easily wherever you need it.

9 PM Time to relax with my wife. We could fire up the television and the DVD player and start sucking down the watts, but instead we enjoy a cool summer breeze out on the deck and watch the sun go down while sharing a glass of homemade wine. Bliss… and it only costs pennies.

10 PM We curl up with books or play a game to unwind, or find something else free and enjoyable to do together (use your imagination).

11 PM We go through the house and turn off all of the lights and most of the electronic devices before bed. Eliminating 500 watts worth of electricity means saving 9 kilowatt hours of energy between now and 5 PM the next day (when we might turn stuff back on) – that’s a $0.90 savings for a minute worth of walking through the house as part of the bedtime routine.

Around the clock, a little here and a little there, the savings add up and, before you know it, your debts are shrinking and your life seems far less complicated than it did before.