Steve wrote in with a good question recently:

What does it actually mean to own a stock? Do you own a piece of that company? Are you just gambling that you think a company’s value will go up or down? I guess I don’t really understand the stock market.

Steve asks a good question, so let’s take a simple walk through what exactly a stock is, what owning one means, and why a person would want to own a share of stock in a company.

What is a stock? The word “stock” refers to a share of ownership in a particular company. If you own a stock, you’re an owner of some very small fraction of that company. Take, for example, Exxon. Exxon has 5.28 billion shares of stock outstanding, meaning that they have divided ownership of their company into 5.28 billion pieces. Owning a single share of Exxon stock means that you own 0.0000000189% of Exxon. That’s a very tiny fraction, but Exxon is a huge company, so that little fraction has some value.

How much value does that one share have? Right now, that one share of Exxon stock is worth $90.70 (as of this writing). Shares of Exxon are traded on an open market, meaning buyers and sellers can both make offers and sales only occur when buyer and seller agree on a price, so that $90.70 is literally the dollar amount that someone recently agreed to sell a share of Exxon stock for and someone else agreed to buy it for. In other words, that’s the value that the public estimates a single share of Exxon stock to be worth.

Right now, Exxon‘s stock is worth 90.70 per share, and thus with 5.28 billion shares outstanding, that means Exxon has a market capitalization of $479.23 billion. Market capitalization is the estimate of the total value of the company based on the number of shares out there and the value that the market places on each share.

Why would you want to own a share of Exxon? There are several reasons.

First, stocks pay dividends. Exxon pays an annual dividend of $1.60 per share. A dividend is a piece of the company’s profit that a company pays out to each shareholder. With 5.28 billion shares outstanding, Exxon paid out $8.448 billion in dividends total over the last year, meaning each shareholder got $1.60. That $8.448 billion is Exxon profit that they chose not to reinvest in the company and instead pay out to shareholders.

You also own a piece of whatever would be earned if the company decided to close up shop. Exxon has a book value per share of $23.31. That means if Exxon decided to quit the business and just sell all of their assets, the shareholders would get $23.31 per share. While that wouldn’t recoup the value of the stock purchase (it’s currently $90.70 per share), it is something.

Adding the two together and one can see that a share of stock does have some cash value. It generates dividends for you while the company is in business and has some value when the company goes out of business and sells off their assets.

Larger shareholders also usually gain some voting rights when it comes to making decisions about the company. Obviously, with Exxon, an individual shareholder owns such a small portion of the company that if they allowed each such holder to have voting rights, nothing would get done with the company. Thus, there’s usually some threshold that people have to cross before they have voting rights and get to participate in corporate decision making. With some companies, that comes in the form of special voting shares – only some shares allow you to actually vote. In other companies, if you own a small amount, you vote by proxy – you basically assign someone else to vote on your behalf.

So what does that value add up to? At the moment, $90.70. The stock market is basically a free-for-all of trading where buyers and sellers can quote whatever prices they want. The “value” of a stock is whatever the buyer and seller agree on as a fair price and the $90.70 value is a recently agreed-upon value between an individual buyer and an individual seller. Other buyers and sellers then use this as a thumbnail when deciding the value of the next trade – if Exxon has good news, then it might go up to $92. If something bad happens, it might go down to $88. If things are neutral, it’ll fluctuate a bit, but stay near that value.

The chaos you see on the floor of stock exchanges is basically the chaos of tons of these trades happening at once, with people running around trying to make it happen. Much of the activity happens electronically, too.

Thus, when you buy a stock, you’re buying a piece of a company. That piece pays you dividends and also indicates ownership of a small sliver of the assets of the company. This obviously has a value, and the stronger the company is (or is predicted to become), the more value it has. Ideally, you hope to re-sell it at a higher value than you bought it for – that requires the company to demonstrate that for whatever reason it’s stronger than it was before – but in the interim, you can collect dividends and wait until you’re ready to sell it. That decision point – when to sell – is the topic of countless investment books.

If I want to buy a stock, what’s the process? In its simplest form, you basically state a price you’re willing to buy a stock for and then seek out someone willing to sell it to you at that price – this is called a “limit order.” You can also issue a “market order,” which means you’ll buy the stock at whatever price the market is currently selling it for.

Most individual stock buyers and sellers go through a stockbroker. A stockbroker is an organization that actually participates in those exchanges (it’s rather expensive to get a seat on a stock exchange). An individual, like yourself, goes to a stockbroker and pays them a fee to use their resources to get that stock for you. They might own it themselves and be willing to sell it to you, or they might have to go buy it from someone else. Either way, your fee pays for this service (and their profit margin).

Alternatively, you can buy stocks directly from individual companies. This saves on the broker fees, but it means you deal with only one company at a time and it’s also somewhat difficult to sell the shares back to the company.

In a nutshell, brokers are much more convenient for both buying and selling, but they charge a fee for the service.

So what’s a mutual fund? A mutual fund is just a collection of stocks. A typical mutual fund has their stocks chosen by a fund manager and the fees with that fund go to pay the fund manager’s salary (and the salaries of anyone working for the manager). An index fund is a mutual fund without an active manager – it operates based on a clearly-specified set of rules that do not require active intervention. Thus, the fees for an index fund are much lower. Some people prefer having an actual person manage the fund; as for me, I’ll take the index fund almost every time.

Good luck, Steve. Once you have this basic info in hand, there’s an almost infinite amount of material to learn about the stock market.

If you were to take a peek inside of our closets or on the shelves in our garage, you’d find a lot of sealed boxes with a prominent date on the outside and a label of some sort. I call these boxes our “tomorrow boxes,” and they all serve a similar purpose – they’re storing something to be utilized or re-evaluated on a certain date. Even more interesting, these boxes have saved us a tremendous amount of money and space over the years. Here are three of the best tactics we use.

A “get rid of” box Some of the boxes have a date on them that indicates when we’ve agreed to sell off or get rid of the contents because we aren’t actively using the stuff inside. For example, right now there’s a “get rid of” box in the garage with an October date on it full of about 80 DVDs – half of our remaining collection or so. The first time I notice that box after that date, I’ll know that I can just get rid of those DVDs without a worry, because we haven’t looked at them at all in almost a year. This method has convinced me to get rid of many items that I would have otherwise felt an urge to keep for some reason, when the truth is that keeping the item was totally unnecessary.

You can do this with any items that you’re tempted to get rid of but aren’t quite sure if you’ll miss it in the future. Put it in a box that says something like “DVDs to get rid of on” and specify a date several months in the future. If you haven’t looked at the box and that marked date has passed, you can pretty safely get rid of the contents of the box.

Future clothes I’m clearly in the “big and tall” clothing group, and so when I find an opportunity to buy clothes that fit me well at a cheap rate, I stock up. I actually have shoes that will fit my size 16 feet still in boxes, waiting to be worn when my current shoes wear out (I don’t need to look at shoes again until I’m 40 or so).

Rather than just stuffing my closet with a bunch of clothes, I just keep ten to twelve shirts and a similar number of pants in my closet and the excess is in storage boxes. When one of the articles of clothing gets a bit worn, I take it to Goodwill and then pop open the storage box at home to replace it.

Since I live in Iowa, I actually have “summer” boxes and “winter” boxes, and during the opposing season, I’ll just box up all of the clothes from the other season. Then, when the weather starts to warm up or get cold, I get out clothes appropriate for that season from the boxes.

This allows me to shop for clothes not based on need, but based on when I find a ridiculously good deal. That makes clothes shopping incredibly cheap for me.

Future entertainment Quite often, I’ll read a great book and realize at the end that I’ll want to re-read it again someday. At the same time, I like to keep a pretty empty bookshelf, never over-cluttering it.

I solve both problems by keeping a “future re-read” box. If I have a book I like that I’ve acquired off of PaperBackSwap or as a gift and I know I’d like to re-read it again in the future, I stick it in a box. When that box fills up, I date it about two years in the future, label it “books to read,” and stick it on a shelf out in the garage. Then, when that date comes, I pop open the box … and have a ton of fresh reading material.

Opening that box again is almost like Christmas. I usually remember two or three of the ten or so books in the box, but the rest are a very pleasant surprise and I’m really anxious to curl up with the books again. At this point, it’s basically free reading – an extremely cheap way to entertain myself for quite a while.

A tip on labeling If you actually start doing this, I strongly encourage you to use masking tape for the labels so that the boxes can easily be reused. Once the date has been reached, just empty out the box, peel off the masking tape label, and you’re ready to store something else.

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.

Dealing with professional burnout without quitting your job
Financial implications of moving back in with mom and dad early in your career
If there’s a nearly identical product in both name-brand and generic, try the generic first

And now for some great reader questions!

Now that you’ve been a full time self-employed writer for two and a half months, how is it going? Do you have any thoughts to share?
- Tim

It’s still going great and I thoroughly enjoy it. I have tons of time to spend with my children and plenty of time to write and choose topics with much more careful consideration than before.

My sole complaint is the new impression that my time is now easily borrowed. People call and visit and ask things that they’d never dream of asking of a person who was working at a 9 to 5 job. The constant time intrusions are a serious frustration – hour long phone calls in the middle of the day, guests from out of town showing up at ten in the morning instead of at four in the afternoon because they know I’ll be home, a constant “oh, you can take a few hours and take care of this” drumbeat, and so on.

This can really be solved by me taking a stern stance with people who attempt to intrude and simply give them a clear “Not now… later” response.

Aside from that, I couldn’t be happier.

“I don’t worry at all about just busting out the plastic to cover it, going home, and paying off that whole card balance out of the emergency fund.”

Out of curiousity, do you really pay it off quickly after purchasing it, or do you do it on a monthly basis?
- StackingPennies

I pay off my full credit card balance each week on Sunday when I go through the unprocessed mail for the week. I just log onto the websites, get the current balance, and pay it off in full using online banking. No muss, no fuss.

This makes it easier to use credit cards for the regular expenses like groceries, gas, and so on. I just swipe my card, don’t worry about it, then pay the whole thing off in one lump from my checking account once a week.

This procedure allows me to (a) clean up on credit card rewards, (b) get the buying protections that credit cards afford, (c) utilize the convenience of credit card purchasing, and (d) ensure I’ll never accidentally overdraft or anything like that. It works like a charm for me because I just keep the cards paid off.

The Lost season finale is this week. You’re a self-avowed Lost fan. Make three predictions about the finale.
- Mal

I think they’re going to show the funeral again from the end of last season and Locke will be the guy in the coffin – Locke’s been my guess since they showed that episode. What else? I don’t think Jin is going to die – they basically strongly implied that he was earlier this season, but I think he’s just going to be left behind. And I do think the island will actually move, and that’s why the chopper can’t go back to the island.

Actually, I have no clue what’s going to happen. I usually make guesses and they end up being massively wrong. The only big guess I’ve been right about for a long time is that Michael would be on the freighter.

Couldn’t you use a credit card instead of an emergency fund, and stash the emergency cash(sorry for the rhyme) into a higher paying investment?
- Nate

You can do that, but there’s a problem: you’re putting your emergency fund at risk. The point of an emergency fund is to be completely reliable so that you know it’s there during an emergency. In a “higher paying investment,” such as stocks, you lose that guarantee. If the stock market has a bunch of down days and then you need the fund, you may have lost a good chunk of your original amount.

If your emergency fund is enormous (a year’s worth of living expenses or more) and you’re putting it into a highly diversified investment, like the Vanguard Total Stock Market Index, then you’re probably at least somewhat protected from such a disaster. But if you know how big your fund should be, I wouldn’t invest like that unless I had at least 25% more than the amount I would normally have in my fund. That way, a 20% stock market drop would only take me down to the emergency fund level I would have normally.

For me, though, I simply wouldn’t do it. I prefer to keep my emergency fund as stable as possible, and that means in a high interest savings account.

On your Twitter feed, you mentioned you picked up Wii Fit. Any thoughts on it?
- Wilson

Frankly, I love it. It’s a very good motivator and record keeper for getting yourself into shape. I’ve been using the aerobic and yoga stuff primarily – they’re both easy at the start, but it’s not long before it gets challenging – maintaining some of the more advanced yoga poses for a long time is hard, and the thirty minute jog is a great little exercise (you run in place with a remote control in your pocket or hand).

My only criticism is that the balance board has a maximum weight limit of 330 pounds, which is very close to my current weight (I’m 6’6″ and broad shouldered – it’s not as bad as it sounds). Basically, that means it excludes some of the people who could use it the most. What’s even more strange is that the board is physically designed to support twice that much weight – it’s a software issue that keeps the weight limit at 330 pounds.

There’s been lots of information in the news about the price of food going up. Drastic language has been batted around (”silent tsunami” and whatnot) and staple grains have been rationed at Sam’s and Costco. Are you at all worried about food security in the US?
- T

It depends on where you’re talking about. I live in a rural area where we have our own garden and deer walk through our back yard all the time, plus we have several months’ worth of food on hand in our house. We both have the skill set we would need to convert quickly to making our own food. Thus, for us, it’s not a major concern.

However, if I lived in a city, I would be feeling nervous about this. People living in cities are largely reliant on people outside of cities providing their food – without that support, their food supply goes away. If it comes down to hard choices like this, farmers are going to make sure that they’re fed first and that their neighbors are fed next – in a drought, it will be the cities that are cut off first.

Another problem is the delusional view that crops can be used for fuel needs. Ethanol production is a neat trick, but if it reduces the amount of food available to the world, it’s also an expensive trick. We need to look at other forms of energy production that don’t intrude on our food supply.

What would I do if I lived in a city? I’d probably stock up on food in the basement – but I do that anyway.

I have an interesting situation. I have a credit card debt that has a total of $10,000. $3,500 of it is locked in at 0% on a balance transfer – the other $6,500 is at 18.9% APR. I’m trying to decide which debt to pay off first and I don’t know how to compare this debt to other ones. Help!
- Millie

There are a lot of approaches to this. What I usually recommend is that you figure out the current APR for that bill and use that to determine what to pay next – but realize that the APR will change over time on a bill like this, so you’ll have to recalculate it.

The current APR is easy to figure up. You just figure out what portion of the interest is at each amount. In the above example, 35% of it is at 0% and 65% of it is at 18.9%. Thus, this calculation is easy. .65 * 18.9% = 12.285% is what your APR is right now on that bill.

But let’s say you make the minimum payments over the course of a year. Depending on your agreement, the small amount of principal might come out of only the 0% part. If your minimum payment knocks the total bill down to $9,500 over a year, with $3,000 being at 0% and $6,500 at 18.9%, the proportions have changed. Your APR is now (6500/(6500+3000)) * 18.9% = 12.93% APR.

In other words, you need to recalculate the APR every once in a while to see if it changes your debt repayment plan. If the debt is now the highest APR on the stack, you should be focusing in on that debt.

Do you have any advice on how to go about finding a good financial advisor?
- Gayle

Let me be clear here: while it’s great to get some financial encouragement and some food for thought online, before you make a major financial move yourself, you should strongly consider contacting a professional financial advisor. These people are trained to do this stuff. I made my own financial choices without one, but I took a sizable risk in doing so – I stumbled into the right moves instead of having a good plan right off the bat.

Your best best for finding a financial advisor is to hit up your social network. Ask people you know if they’ve used one and if it was a good experience. Hopefully, you’ll find some good pointers right there.

If that fails, turn to the yellow pages. Here are some specific criteria you should be looking for if you want to hire one:

First, ask if they’re fee based. Commission based advisors make their money by earning commissions on the financial products they sell you, meaning they’re more biased towards selling you stuff that makes them more money. Instead, look for one that’s fee-based – those charge a fee up front and don’t earn commissions on sales, thus they’re much more likely to be shooting straight with you.

When you find some that are fee-based, meet with them. The biggest factor (in my opinion) that the person should address is knowing you and, most importantly, understanding your goals and also the level of risk you can tolerate. If the advisor is immediately feeding you a plan before you’ve told them anything about yourself, you’re wasting your time.

One big tip of advice: put the money in a safe place for a while and educate yourself first. Read some good basic books on investing and know roughly what you want to do with the money before you ever start looking. If an advisor is going strongly against the stuff you’ve learned, you’ll know they’re feeding you a line.

Would you ever discourage your kids from marrying someone who does not have any tertiary education and they have a masters and are considering getting a doctoral degree?
- Audrey

I receive questions along these lines all the time, and my answer to them is pretty much the same.

I have only two things I’d look for when my child is considering marrying someone – that the potential spouse loves my child and respects my child. Other than that, I don’t care about their social status, their economic status, their race, their gender, their sexual preference, or anything else. Naturally, there are some situations where I might want to give them a lot of pre-marital advice, but if there is real genuine love and respect there, I would be the last person to squash it out.

All I really care about in terms of my children in adulthood is that they’re fulfilled and happy with their lives and have respect for other people, no matter what path they choose. If my children wind up being social workers at an orphanage in Romania making seven dollars a day, I’ll be happy for them if they’re happy.

I am an unmarried 25 year old guy in a well-paying and stable job. I currently have approximately $21,000 sitting in my ING Direct account and have no debt. I rent an apartment and save on average of approximately $2,500/month.

You have mentioned the importance of getting started early – given my situation what would you do with the $21,000 and the $2,500/month of saving? Thanks.
- Joe

If I were in your shoes, the first thing I’d do is figure out why I was investing. What’s the big goal? Right now, it’s probably pretty nebulous for you, which means that you can have a fair amount of risk in what you do with the money since you’ve got no distinct plans for it.

The first thing I’d do is keep two months’ worth of living expenses aside for an emergency fund. Know what you spend in two months and keep that much in savings.

After that, I’d invest the rest and – given your situation – I’d probably put it fairly risky. I’d probably put it in three index funds in equal amounts – a total stock market fund (that’s for domestic stocks), a total international market fund (for foreign stocks), and in an emerging markets fund (really high risk stocks). I’d do the whole thing through Vanguard, then just sit back and watch. Don’t panic if it goes down – just ride it out and study carefully what you’re holding.

Along the way, I’d also learn – read a lot of books about investing, starting with the great Bogleheads’ Guide to Investing. Read as much as you can.

That’s what I would do in your shoes, though you should probably contact a financial advisor if you want a structured plan that matches exactly what you’re doing.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

Each Sunday, The Simple Dollar reviews a personal productivity or personal development book.

Several weeks ago, I reviewed Laura Stack’s Find More Time – and loved it. It was an excellent collection of specific tactics to apply towards maximizing time in your personal life and I have actually applied a few of the lessons successfully in my own life.

Naturally, when I read an excellent book like this, I sought out other books by the author at the library, and the first one I found by Laura Stack was this one, Leave the Office Earlier. It basically is the logical companion to Find More Time – while Find More Time focuses on time management and reduced stress in the home environment, Leave the Office Earlier looks at those same issues in the professional environment. The two books even have much the same layout and organization.

The big question, though, is whether there’s meat on the bone here. Does Leave the Office Earlier offer truly useful advice on reducing stress and improving time management in the office? Or does it recycle the usual time management advice? Let’s dig in and take a look.

Leave the Office Earlier in Detail

Much like Find More Time, I immediately liked the organization of Leave the Office Earlier. While it’s a somewhat thick book, weighing in at 336 pages, the content is actually broken down into 100 specific tactics for improving workplace time management and reducing stress, with these 100 tips organized into ten chapters with ten tips each. This format lets me read three or four very focused pages on points relevant to me and then skip on past three or four pages on a tactic that doesn’t apply to me – very helpful for absorbing specific tactical information like this.

I read through the book and selected two tips to focus on from each chapter, but I’ll note that most of the chapters had several worthwhile sections to read.

Mastering the “P” in Productive – Preparation
Leave the Office Earlier opens with a focus on planning – and not necessarily just short-term planning, but also long term goals. Without something to aim at, it’s hard to make progress towards anything.

5. Make a list of projects to accomplish and break the larger ones down into concrete steps.
Everyone has a ton of projects that they need to be working on, but many of us get caught up in busywork and lose track of the big picture of the big things we ought to be working on. Stack’s tactic of simply writing down every project you’re involved with and making a master project list is a brilliant tactic. It’s something that’s emphasized in my favorite time management book, Getting Things Done, and it’s something that when I finally really understood it and began applying it, the project list became transformative. It gave me a concrete tool to keep myself moving and accomplishing more than just pushing papers and doing busy work.

One key, though, is to not forget this list. I go through my project list about three times a week and I try to identify a next step on all of them. I usually have about fifteen or so work projects (my book, large post concepts that require research and careful consideration, etc.) and twice as many personal projects, and I do this processing with all of them each time. It fills up my to-do list quite quickly, and speaking of to-do lists…

8. Create and prioritize my to-do list each day.
Each day, I have a number of things I need to do. I empty out my email inbox. I write at least three posts. I work on a segment of my book. I do a few other things, too. I also try to touch base with some of my other projects.

With all of these things to take care of, I’d never get anything done without a to-do list. At the end of each day, I create a to-do list for the next day, usually ordering them in priority order. That way, when I finish one task, I don’t have to burn time thinking about “What do I do next?” Instead, I just move on to the next thing on the list or, if I know I need a break, stop and do something to recharge myself for a bit.

A well-prioritized daily to-do list really reduces the time one wastes in between tasks wondering what needs to be done next. You just get things done instead of wondering what you need to do.

Mastering the “R” in Productive – Reduction
While it’s nice to have all of our ducks in a row, most of us face constant interruption in our time: email, phone calls, quick tasks that need to be done now, crises, and so on. A to-do list doesn’t help with that kind of chaos – we need other tactics. Here are two of the ten Stack suggests.

11. Eliminate the cause of most problems and avoid crises.
Think of all of the sources of problems and crises at your job. Is it that wonky server in the basement? Is it one particular coworker who loves to stop in all the time?

Whatever it is, creating a long-term solution for those biggest distractors will make your day-to-day work much smoother. Make it a priority to create a long-term solution to whatever it is that continually causes distractions, problems, and crises at work. If it’s another employee, seek a solution. If it’s a job task, document how much distraction and cost it causes and develop a plan to fix the problem.

15. Recognize and eliminate personal shortcomings that lead to decreased departmental and organizational productivity.
This is an interesting one, because quite often, people don’t know what their deficiencies are. How can you fix a problem that you don’t know exists? The key is to talk to your coworkers about it. Flat-out ask people what your biggest shortcomings are – and accept what they tell you. Don’t argue with them. Instead, look at what they’re telling you and use it to improve yourself.

How does that improve personal efficiency? If you make yourself more useful to others and thus increase the productivity of those around you, that comes back to help you. Others are much more able to get their work done, and thus are more able to help you out, too. Goodwill is a very valuable thing.

Mastering the “O” in Productive – Order
Another plank in Stack’s platform for increased work productivity is order – a clean desk and minimal material distraction. In other words, uncluttering and clearing your workspace improves your productivity in a lot of ways – it’s easier to find stuff and there’s fewer elements around to distract you. Here are two tips.

26. Discard information quickly and easily.
This is one I’ve always had a hard time with. I tend to want to save articles for future reading from magazines and other such things. Eventually, I had an epiphany: all of these little pieces of information I wanted to save for some nebulous “someday” were stacking up and distracting me from the things I really needed to get done.

What I finally did was learn to chuck ‘em. I made a stack of all of the stuff to read “someday” – everything in one pile. At the start of each month, I put the whole pile in a drawer and started over. At the end of the month, if I haven’t looked at the stuff in the drawer, I chuck it all. If I haven’t looked in two months, it’s not worth it. Get it out of the way so it doesn’t build up and take over.

27. Touch paper only once.
This is a very simple but brutally effective policy. Every time a paper hits your desk and you pick it up, deal with it only once. If it requires action, do it now. If it needs filed, do it now. Don’t let a flurry of papers build up on your desk.

My desk looked like that once upon a time. I never seemed to get anything done. Now, it’s pretty obvious why.

Mastering the “D” in Productive – Discipline
The “D” here could also be distraction avoidance, because the tactics here are all about focus and staying on task. This is an area I have some challenges with. Here are two good tactics.

31. Know my natural energy cycle and work effectively during peak times.
My natural cycle peaks with writing creativity at about ten in the morning each day if I eat a good breakfast and get the day started right. My low point always comes at about two thirty in the afternoon. It’s almost like clockwork. So what does that mean for my day? I do my chief creative tasks in the morning. I do drudgery that doesn’t take much concentration in the afternoon. For the most part, that cycle works brilliantly for me.

Stack suggests noting your energy level at very regular intervals over a week or two to see where you naturally peak and naturally trough. Then, put intense creative tasks at your peaks and mundane drudgery at your valleys.

32. Control perfectionism, realizing that some things are “good enough.”
This is always a challenge for me. I get hung up on making some little detail perfect, get behind schedule with the bigger picture, and wind up hating myself when I end up turning in an overall project that isn’t that great. I’m really worried about doing this with my book, especially when I find myself focusing in on one little point for far too long.

How can this problem be solved? Stack suggests doing things “good enough,” then if there’s time later on, polish it further. For my book, that means just churning it out and not worrying about any of the details, then editing and reviewing it and polishing it later. The question is can I talk myself into doing that? It’s something I definitely need to focus on.

Mastering the “U” in Productive – Unease
Here, Stack focuses in on stress-reducing tactics. For me, the most profound thing I’ve done to control my stress is to make a career change – my stress level was simply getting too high too often and something significant needed to change. Now that things are in line for me, I can look at Stack’s other tactics.

43. Control my stress and emotions by monitoring my self-talk.
In other words, don’t beat yourself up. If you’re telling yourself negative things, you’re not going to get anywhere. While it’s great to let yourself know where you need to improve, forcing yourself into negativity gets you nowhere.

I often get frustrated with my own writing or when people misunderstand it. Things tend to go much better if I just back off, look at the positives, and move on with life. I need to focus on doing that more often.

48. Refuse to let stressful situations or people bother me.
Of all of the tips in this book, this is by far the most challenging for me. When I see a problem, I often chase after it like a sledgehammer after a nail, stressing me out. That persistence often helps me by keeping me vigilantly on task, but when I can’t hit that nail, it becomes incredibly stressful, not just for me, but for those around me.

The piece of Stack’s advice that helped me the most is to judge things by the average, not by the worst. If I write ten good articles and one bad one, I need to focus on the average instead of obsessing over the mistake. No one is perfect. I’m not perfect. Nor is anyone else.

Mastering the “C” in Productive – Concentration
On the other hand, this is the piece that I’m very good at. I can focus in so intently on things that the rest of the world seems to go away – I can almost do it at will. In fact, I’m so good at it and can slip into it so easily that it sometimes annoys my wife, who often has to really push to get my attention.

55. Focus on one thing at a time.
This is often a big part of it. If you need to focus, close the email program, turn off the television, and unplug the phone. Close all of your other documents and folders and items and just focus in on that one thing. It’s the only thing that matters.

What about when you have a stray thought? My tactic is usually to just jot it down quickly and then excise it from my mind. I’m able to do that because I know the idea is stored somewhere and I can focus on it later.

59. Get absorbed in a task and achieve a state of “flow” or “momentum” where time seems to fly.
This is so important to me. If I had difficulty with this, I would never be able to write as much material as I do. Everything just disappears and often I’ll look up at the clock and be shocked at how much time as passed.

Stack’s tips for getting in the flow are great, but the big one for me really comes back to elimination of distractions. Eliminate everything – or as much as you possibly can. Every time you get interrupted and get pulled out of that “flow,” it takes time to get back into it and you’re going to lose far more time than the small sliver of time you used for that interruption. Put up a “Do Not Disturb” sign and deal with them later.

Mastering the “T” in Productive – Time Mastery
I tend to find creative ways to waste time before and after I get into my groove. I’ll web surf, play games, or find things around the house to do to waste time, and this often gouges my day. I think to a degree that a bit of a break is good, but the trick is to box it in and not let it get excessive. Here are some tips.

63. Know and avoid my biggest time wasters.
My biggest time wasters are political blogs. I am an absolute political junkie, but I really don’t get too much into the “personality” aspect of the candidates. I like digging deep into stances on issues, the mechanics of how campaigns work, and the really fascinating emotional and intellectual appeals that candidates make. I can burn hours doing this, so it’s a danger every time I even think about it.

My solution to this, actually, is to block a list of political websites each morning on my Mac. I use the Invisibility Cloak script from Lifehacker to block all of my worst political websites until 3 in the afternoon, after which I’m winding down anyway. Even if I’m tempted, they’re blocked.

66. Know how much my time is worth and eliminate those things that are a a waste of my time.
I’ve often talked about one’s true hourly wage and how you can use that to determine whether a task is worth your time. Stack believes in the same thing. Is it worth your time to change your own oil? For some, it may be – for others, not so much. What about mowing the grass, or cleaning the house? If you can work at your job and get that hourly rate worth of value out of it, it might be worth your time to think differently.

Once you figure this value up and start looking at the things around you through this prism, you start seeing things differently. For example, I spend fifteen minutes each time making six batches of homemade laundry detergent, meaning it eats an hour and a half all told. Since each batch saves about $8.40, that’s $41.20 for an hour’s worth of work – definitely worth my time. But is the same true for something that only saves $5 for an hour of work? Not really. It’s all about maximizing your value.

Mastering the “I” in Productive – Information Management
I used to be very bad at this. Once upon a time, I had 1,600 emails in my email inbox and it was a mental weight on me, knowing I had a seemingly insurmountable amount of information to deal with.

71. Understand I can have too much information and try to reduce “information overload.”
Almost everyone in the modern world suffers from information overload. That’s why it feels so utterly relaxing when we go out on a trip in the country and sit on an old wooden front porch – there’s no information glut weighing us down. I’ve found time and time again that I simply feel better when I turn off access to information for a while and do something with minimal information, like play in the yard with my kid.

Try this: one day this weekend, expose yourself to the absolute minimum amount of information you can. No television, no books, no internet, no anything. At the end of the day, think about how you feel. Every time I do this, I feel incredibly relaxed. That’s why I love camping so much.

74. Use my phone as an effective productivity tool.
Stack offers a lot of tips for this, but my favorite is very simple: unplug it when you need to focus. This is anathema to some, but it is one of the biggest secrets to how I’ve managed to get things done throughout my life. There is no work-related call that can’t wait if you’re focused on a task. If it’s truly urgent, someone will get off their behind and come and tell you. Otherwise, it can wait.

I never regret unplugging my phone during times when I need to focus. Alernately, I can think of many times where I would have never accomplished an important task if I had left my phone plugged in. A phone is a tool, not a requirement.

Mastering the “V” in Productive – Vitality
Make sure that your body and your sensory environment are maximized to help you work. Without your body’s optimal health or your environment in tune with your body, your level of optimum work will be reduced.

85. Maintain a noise level in my office that is conducive to productivity.
This does not mean silence. This means finding a noise level that works for you and sticking with it. For me, actually, I work best with music on very loudly that either (a) has non-English lyrics, (b) no lyrics at all, or (c) lyrics I know cold. I know this works best for me – I’ve been doing it almost every work day since 2002.

The key, really, is to try different things and see what gets you in the groove. I would never have believed that West African dance music played loudly would get me in a creative groove, but it works like a charm.

89. Drink the proper amount of water each day.
I went through a long period in my life where I drank inadequate amounts of water and what I found was that when I returned to drinking a healthy amount (at least 64 ounces), everything just sort of brightened up. I felt more energetic, happier, and much… well, healthier inside.

It’s easy. Just start each meal off with a 16 oz. glass of water – that way, you’re reminded to do it three times a day. It’s a great way to start increasing your water intake level in a respectable and safe way.

Mastering the “E” in Productive – Equilibrium
The final chapter in the book is about work-life balance, something that’s near and dear to my heart. I made a career change primarily because of work-life balance. That balance is key in making both parts tick – if the balance gets out of whack, both sides suffer.

92. Achieve my ideal life balance and don’t accept “close enough.”
You know what your perfect balance is, and you also know when that balance starts getting out of whack. When you know there’s something wrong, fix it now. If you don’t, it will become a steady and constant irritant, building slowly into something that can disrupt every aspect of your life.

If this means working less, so be it. You may need to make a tough call about what’s most important to you in your life here, but if you know something’s out of whack, listen to it and don’t let it grow.

98. Turn off the technology whe I’m with my family or on personal time.
My tactic is to simply shut everything down when my family is at home – my work doesn’t interfere with family time, period. No phone, no computer, no anything – just time preparing supper, playing in the yard, and enjoying the people I care about the most.

Is Leave the Office Earlier Worth Reading?

Leave the Office Earlier is a very good book with a lot of solid advice in it. Many of the tactics overlap with other time management, anti-procrastination, and stress management books I’ve read, but Stack does an excellent job of isolating very specific tactics that you can apply piecemeal. That, to me, makes for a useful book.

Here’s a good way to judge if this book is right for you. Read through the twenty points I picked out above. If they all seem old hat, you can probably skip this one. But if you find two or three (or more) that really seem applicable to your life and you’re yearning to try them, Leave the Office Earlier is a worthwhile read. I know I was in the latter camp, even though I’ve read tons of time management books – there was still meat here for me to digest and apply.

Laura has a third book out very recently, The Exhaustion Cure, and with the quality of her first two books, I’m eager to read and review this new one here on The Simple Dollar.

Over the last few weeks, I’ve been carefully considering the above question. I’m twenty nine years old, in good health, with a wife and two young children at home. I don’t commute for work, either, vastly reducing my chance of a disabling accident. In other words, my chance for long-term disability is pretty small.

How small? It’s a question that’s almost impossible to research. Almost all of the data out there on the topic was produced by the insurance companies themselves, meaning that I have to read them with a very skeptical eye.

For example, the American Council of Life Insurers claims that one third of all Americans between the ages of 35 and 65 will become disabled for more than 90 days. Intuitively, this seems like an incredibly high number, and because of the source, I have a very high degree of skepticism about that number.

Another scary industry statistic comes from the Health Insurance Association of America, who claim that 1 in 7 people can expect to be disabled for five years or more. Again, this number seems very high to me and could only be even remotely reasonable with the widest possible definition of disability.

The only real statistics I’ve seen on the subject come from the Census Bureau, which report that about 20% of Americans meet their definition of disabled, but only 23% of those disabled people actually qualify for disability benefits. Why? The vast majority of disabilities that the Census Bureau considers to be disabilities are ones that people work through – vision impairment, hearing impairment, and mobility impairment are all considered disabilities, but are ones that strong and self-motivated people can work through.

The obvious solution – the one that most Americans wind up following – is to just say forget it, believing that the risk is too minimal to bother with – and I can understand that conclusion. I know that’s the assumption I’ve operated on throughout my adult life to this point, and I’m willing to bet that it’s the assumption that many of you have operated on as well. However, as five cent nickel puts it, it makes sense to insure what you cannot afford.

The first question thus becomes could I afford the consequences of not having long term disability insurance? A quick examination of my finances says yes – but only over a fairly short term. We’d be fine over the course of a year to eighteen months. Beyond that, things would get very difficult for my family.

Next question: does my employer provide long term disability insurance? Right now, I am self-employed, so I don’t have the benefit of employer coverage. My wife does have this benefit, which would replace 60% of her salary 60 days after a disabling accident, so she’s covered. That still leaves me out in the dark, though.

Given those two questions and the thought process behind them, what I actually need is pretty clear. I need a policy that kicks in in six months to a year after a disabling incident and covers enough income that my family is able to get by, and I only need the insurance over the timeframe that I would actually need it – probably until at least my children are moved out. My impression from these criteria is that the cost of insurance would be quite low.

The next step is to get quotes on this insurance, and this is the step where I’m at. Most large insurance groups offer long term disability insurance and I’ve requested information and quotes from several such groups, including the group that handles my life insurance.

Come on… is this really worth it? This thought has crossed my mind regularly throughout this process, likely because long term disability insurance seems to be an uncommon thing outside of a job benefits package.

Any insurance you buy is a personal risk-reward analysis. Any time you choose not to insure something, you’re taking on some amount of risk. Insurance eliminates (or vastly reduces) that risk. Life insurance? The risk is the loss in income to your family if you were to pass on. Health insurance? The risk is high health care costs, especially for complex procedures. Auto insurance? Homeowners insurance? Renter’s insurance? They all insure your property against unknown disaster.

Long term disability is another risk you can insure against. If you judge the risk (long term disability where you survive but are unable to work) as being smaller than the cost (the monthly or annual premiums), then you’ll probably not take any out, but that balance is different for everyone.

For me, I’m leaning strongly towards acquiring insurance for a very long term severe disability. I can afford it, and knowing that my family would be secure if something rendered me incapable of writing is very reassuring – a risk and reward balance well worth it for me.

What’s your take on long term disability insurance?

Over the last few weeks, I’ve had a long conversation with a reader I’ll call Jenny. Jenny has one big thing she loves to splurge on in her life – she likes to take long weekend trips about once every three months, leaving on a Thursday night and getting back late on Monday. Those are her “vacations,” and she goes all over the place on them. She’s been to just about every major European city, much of South America, almost everywhere in the United States that one could even conceive of going, and so on. Aside from this, Jenny is ultra-frugal – in fact, she initially wrote to me with questions about my homemade laundry detergent.

An interesting mix – and so I asked her to explain it in a nutshell.

Travel is *the* thing I splurge on, nothing else. I love seeing the world – it’s the one thing I enjoy above all else. I love going to other places, trying local foods and enjoying local experiences. Because I know that’s what I love to do with my spare time, I’m highly frugal about everything else. I save my nickels and dimes up and then travel every three months or so. I usually try to save twice as much as I’ll need for a trip, then invest the other half, so that I can keep doing this for the rest of my life.

I think what Jenny is doing is brilliant and perfectly matches my definition of frugality – finding the maximum value for you and not for anyone else. Jenny figured out what she values most with her spare time and that’s travel, so she devotes her spare time to maximizing that.

Some additional thoughts:

She’s figured out her passion. She knows that the thing she’s passionate about is travel. Not clothes. Not handbags. Not a flashy car or the latest technology. She wants to travel.

She doesn’t let unnecessary things get in the way of that passion. Compared to that, the rest is all secondary – so why devote money to it? If she spent her money on the latest fashion trends or a new computer every year, she’d travel a lot less – and feel a lot less fulfilled in her life.

But she’s willing to spend to make that passion top quality. She’s taking a weekend-long (Thursday night to Monday afternoon) vacation every three months or so. That’s a pretty hefty expense to incur, without a doubt. Is it excessive? It somewhat depends on Jenny’s financial state, but we do know one thing…

For every dollar she spends on travel, she saves another one for her long term future. That indicates to me that she’s following the right plan. Travel is the one thing she splurges on, and she makes sure that splurge doesn’t get in the way of long term planning. Saving for the future comes way before a weekend of travel – and that’s a healthy personal finance plan.

What about my splurges? Not too long ago, I finally realized that I had to give up some of my hobbies if I ever wanted to achieve financial success. I gave up expensive hobbies like golf (I still have some of my clubs, but haven’t played in about a year) and Magic: the Gathering and focused in on just a few key pastimes (two of which, reading and playing with my kids, are basically free). Nowadays, my biggest splurge is occasionally buying a game for my Wii or DS – much better than the weekend golf outings (with a nice expensive trip to the golf store included).

One thing that frequently happens when people go through a personal finance and debt epiphany is a big sell-off of their unnecessary purchases. They look around their house at all of the unnecessary stuff they’ve purchased and want to get rid of it. The logic behind this usually comes from one or more sources, among them:

The stuff itself can be a mental block. The presence of a 2,000 CD collection can be a pretty blunt reminder of the foolishness of their spending ways, and it becomes a big mental weight after a while. You just want it out of there to get a fresh start.

The stuff has some cash value that can be turned into debt repayments. That 500 DVD collection has some cash value just sitting there, and now I more or less see it as a waste. Why not turn it into some cash and get rid of that debt a little faster?

It simply feels like a way to take action. When the sense that things really need to be turned around hits people, they often respond with a fervor and want to take action now. Selling unnecessary stuff off is one way to act on that fervor.

I did a big sell-off myself, getting rid of more than a thousand CDs, two hundred DVDs, three video game consoles, about sixty games, and a small mountain of baseball cards – and quite a few other miscellaneous odds and ends that I barely remember. This big sell-off was almost entirely channeled towards paying down my personal credit card debt, eliminating a sizable portion in one swoop.

Here are several tactics to consider if you’re looking at doing a big sell-off.

If you’re unsure, sell it. I started off with just the opposite attitude and I wound up just keeping stuff I didn’t use for very obscure and minor sentimental reasons. Only keep the stuff you’re sure you want to keep – if you’re feeling unsure, either directly specify your reason for keeping it or toss it. If you find that you miss it later on, buy it used – after all, you’re selling it used, right?

For most large collections, identify the individual items that have significantly higher individual value and sell those individually. For example, with my DVD collection, I separated out the box sets and sold them individually on eBay. With my baseball cards, I did the same thing, more or less – I sifted out singles that had obvious value and sold them individually.

My rule of thumb was this – if I felt I could get more than $10 for an individual item, I sold it individually – that’s profit, after all fees and such. My way of doing that was to search any items I thought might be that valuable on eBay. If they exceeded a sale price of about $12 or so, I took the effort to sell them individually.

Why? I estimated I would invest about forty five minutes per sale, all told, and I valued my time at about $10 per hour. I figured that with bulk selling I might be able to recoup a couple of dollars per item, so effectively I was deciding to make at least $8 for my 45 minutes of work for those items over $10 – about right, I’d say.

I almost exclusively used eBay for the individual item sales. eBay allowed me to get more for those individual items with some value than reselling ever would have, assuming of course that the individual items had value themselves. If you’re looking to sell a single film DVD or a single CD, for instance, or any individual baseball cards from the late 1980s, eBay probably won’t fetch you much at all as compared to the time invested, so focus only on individual items with significant value.

Sell the remainder in bulk. What about the mountains of stuff left over? The best approach in terms of time investment is to sell it in bulk. There really are two options – either create some bulk auctions online (like a specific number of DVDs per auction – say 10 – and collecting ones that might have value to the same buyer together) or just take them down to your local used media shop.

Bulk selling online can be tricky, as it relies quite a bit on multiple interested parties discovering and being interested in your small collection. Thus, if you decide to try to sell bundles of DVDs online, consider carefully how to label them. Make sure to include the most well-known items in the title of the auction.

For me, at least, I decided the time investment in selling DVDs and CDs in this fashion online was too much of a time investment and chose to sell them at a media shop. Although I’m sure I could have made more online, the time investment would have been significant.

Don’t just immediately throw that cash into debt repayment. Look down the road a little bit and ask yourself if there aren’t other moves that will pay off more, like putting that cash into items to make your home more energy efficient (like energy efficient lighting, air sealing your home, a water heater blanket, or a programmable thermostat), thus permanently reducing your home energy bills – items like these truly are an investment, as you put in money at the beginning but they pay a lot of dividends over the long haul. Then, each month, you can roll that energy bill savings into debt repayment and, over the long haul, wind up in better financial shape because of it.

Good luck with the liquidation! I’ve rarely missed all of the stuff I sold, but I’ve certainly enjoyed the freedom from oppressive debt.

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

One particular aspect of personal finance that has always fascinated me (and this should be pretty obvious to long-time readers of The Simple Dollar) is the idea that most of our money decisions are fueled by a bunch of conflicting signals – the signals we get from others, the signals echoing forward from our childhood, the signals society gives us, and the signals from our own heart. Part of the challenge of modern money management is that we have an overflow of signals – the media is much more pervasive than before and we’re still learning as a society how to filter all of those signals.

When I first picked up The True Cost of Happiness, I was frankly attracted by the cover, which appeared to be newsprint and stood out from the other books on the library shelf. But when I opened the cover to read the dust jacket, it immediately began to talk about those signals – and thus I was intrigued.

Does the book itself hold up to that intrigue? Or does it dissolve into “ordinary” personal finance talk? Let’s dig in and find out.

A Walk Through The True Cost of Happiness

1 – Working Together
On the very first page, The True Cost of Happiness hits upon something interesting by listing what the authors describe as “The Big Three,” or the three major influences behind our choices aboutmaking and spending money: the lessons we learned about money growing up, the messages society tells us about money, and the messages we tell ourselves about money. In a very succinct fashion, it sums up a strong sense that I’ve had about money for a long time – and it’s that same sense that drives me to things like obsessing over the messages I’m teaching my kids and extolling the virtues of the grocery list. Your money choices are often the result of a lot of signals – but which ones should you focus on and which ones should you ignore?

2 – A Little Awareness Goes a Long Way
One idea I’ve often mentioned on The Simple Dollar is that at some point there is a “switch” that goes on in your head. That “switch,” which I talked about before and referred to as a “fundamental choice”. Choosing to be frugal and careful with your money versus spending everything you earn – that’s a fundamental choice, and it alters how you deal with your financial life and, by association, the world as a whole. That’s basically the same argument that this chapter provides, arguing that the little glimmer of awareness that surrounds that fundamental choice is the key to changing your financial life.

3 – The Big Picture: What You’re Planning For
Long term goal setting. That’s the story here. What are your goals over the next five years – and longer? Just saying “uh… retirement?” isn’t enough. Dream big, define that dream in detail, and then break it down into what you need to do today – and it probably involves not buying that $4 latte. That’s the real key.

4 – The Price of Pleasing Mom and Pop: Are Your Early Lessons Working for You or Against You?
I’ve written a lot about my early money lessons – especially the painful ones. Tisdale and Kennedy argue here that those lessons are often key in forming the financial mindset that we grow into – and unless one is mindful of this phenomenon, we’re often doomed to repeat the mistakes of our parents. While reading this chapter, I spent some time really thinking about the money lessons I learned from my folks – I learned how to be frugal, but I also didn’t really learn how to save or invest.

5 – Social Messages
From there, Tisdale and Kennedy move on to the messages society tells us about money: the media, our friends, our acquaintances, and so forth. We often get very false ideas planted in our head – ideas that our self-worth is represented by the possessions we have, that people that appear “rich” are living a lifestyle we should gravitate towards, and that we let issues of gender and race affect how we see money and our personal goals. For the most part, Tisdale and Kennedy encourage brushing all of that inside – they do this in something of a “workbook” format, in which they ask a lot of very good introspective questions.

6 – The Songs We Play in Our Heads
The third piece of the puzzle are the messages we tell ourselves. We can’t do it. We’re inadequate. We need this thing. The chatter of ideas between most people’s ears is enough to drown out most rational thought. Mostly, these messages are just excuses to let us make the easy choice, when it’s often the hard choice that leads us down the path to our dreams.

7 – Life Planning for Two
There’s really only one thing you need to do to be a part of a financially successful couple: communicate. That’s really what it’s all about. Tisdale and Kennedy even go so far as to recommend monthly financial meetings where you sit down and go through all of the statements and financial choices of the last month and agree on spending for the most month. The book even advocates spending “allowances” for partners, where each partner gets to spend a certain amount each month, no questions asked.

8 – Teach Your Children Well
Tisdale and Kennedy claim that there are three things you can do to get your children on the right financial page: be a good example, give them experience with money, and communicate with them about money. Most families fail at at least one leg of this puzzle. The book spends several pages describing how children should be involved in monthly family money meetings, something I wholeheartedly agree with. Why involve them in your financial decisions? The reasoning is simple: you get an opportunity to be a good example for them when it comes to money, communicate a bunch about how money really works, and even give them a bit of experience with regards to how the adult world of money management works.

9 – The Truth About Change
Making a significant change in your life is hard. I look at it as being like a well-worn trail – it’s much easier to stay on that trail than to get off the beaten path. The beaten path is our current habits – that hard route through the forest is the change we want to make. This chapter offers loads of suggestions – I find that the best way for me to bring about change in my life is to do it a tiny bit at a time. Want to start exercising? Park your car 1,000 feet farther from your workplace, or do some leg lifts in the evening when you’re watching television. Let the baby step become the new routine, then add another one. And another one. You get the idea.

10 – Your Bottom Line
This section discusses in detail the “bottom line” concept – in other words, exactly how much do you have to spend each month to maintain your minimum standard of living? What’s the real bottom line here, once you strip away all of the stuff that’s really unnecessary? This, to me, gets back to the “wants versus needs” dilemma I talked about in the past – what really are your actual needs? Tisdale and Kennedy believe that answering that question is vital to building a strong personal finance foundation.

11 – Saving Money
From the chapter 10 calculation of one’s bottom line, Tisdale and Kennedy recommend adding to it, starting with savings. Not retirement savings per se, but more along the lines of an emergency fund or a savings account for a future large purchase, like a car or a house down payment. These should be the first thing added onto your stripped-down bottom line.

12 – Debt: Wipe the Slate Clean
After that emergency fund is built and you have stable savings plans in place for your big future expenses, Tisdale and Kennedy recommend hammering the debts hard. They advocate a split into “good debt” and “bad debt” – for the most part, it’s really a split between interest rates and purpose. Anything with an interest rate above approximately 10% and anything incurred for something you don’t need is a bad debt – everything else (like a car loan or a home loan or a student loan) is a good debt to Tisdale and Kennedy. They advise paying off your bad debts as rapidly as you can and, more importantly, avoid incurring any more. Once you’re down to just good debts, you can keep moving forward.

13 – Living Longer and Stronger: The New Retirement
The next step is to set up a retirement plan, and the usual advice is offered here. The best bet for most people is to fund their 401(k) at work up to the employer’s match, then fully fund a Roth IRA, then dump anything extra you wish to save into the 401(k). There are a lot of formulas out there to use for calculating this – I’ve found that once you’re doing both the 401(k) up to the match and the Roth IRA and you’re under 30, you’re in great shape and you should focus hard on other goals.

14 – Covering Your Assets: How to Choose the Right Insurance
The chapter starts off with a long list of insurances you must have (health, dental, long-term care, long-term disability, homeowner’s/renter’s, and auto) and ones you might want to have depending on your situation (life, short-term disability, accidental death and dismemberment, umbrella liability, and possible riders on your homeowner’s insurance). These are all covered in a whirlwind in this chapter. Personally, I’ve got the health, dental, auto, homeowner’s, and life covered and I’m considering long-term care and long-term disability, just in case – they’re both really cheap at my age.

15 – Investing for Your Future
After this, start investing. Invest for big, long-term goals that maybe you can’t articulate yet (or maybe you can). The book recommends starting conservative so that you don’t overshoot your personal level of risk – and I completely agree. Put your money in something relatively low risk as an investment goes, with just enough of a real taste of risk that you’re not scared away. I usually recommend a very broad-based index fund from Vanguard, something like the Total Stock Market Index, so that you own bits of thousands of stocks and thus you’re largely unaffected by one of them tanking.

16 – The Real Cost of College
I was very happy to see that The True Cost of Happiness didn’t go down the easy road and just start talking about financial preparations for college. Instead, they looked at the many, many opportunities that exist in a child’s life to prepare them for college, open them up to other kinds of financial aid and scholarships, and grow as people. For instance, they suggest getting your children involved in working for volunteer programs – this makes them eligible for other kinds of financial aid that aren’t available to those who focus solely on their 529 balance and their FAFSA.

17 – Giving Back
Charity. That’s this chapter in one word. I’m a big advocate of just budgeting a piece of your annual spending for charity, whether it be church or secular charities, and sticking to that, and that’s largely what Tisdale and Kennedy advocate here as well. I find it much better to send out a few really big checks to charities that are most important to me each year and then saying “no” immediately to other charities that contact me – I can offer the rejection completely without guilt.

18 – Estate Planning
This chapter very briefly covers the absolute basics of estate planning, covering wills and other basic documents that everyone should have. Everyone should spend an afternoon taking care of this stuff – without it, your family could be out in the cold should you kick the bucket unexpectedly.

19 – A Final Thought on Your Finances
Update your plan once a month (yep, during that monthly personal finance meeting with your family) and look at your bottom line each day. For me, that “bottom line” is my children – a living reminder that I don’t really need a lot of the stuff that I try to talk myself into.

20 – Staying on Course
This is one aspect of personal finance that I find particularly challenging – once you start down the right path and start seeing some success, it’s easy to give it a break and lapse right back into your old habits. The book suggests a ton of fixes, most of which make sense – I find that constant reminders of the right thing to do (and my reasons for making those choices) work best for me.

21 – Change Happens
Our lives change over time, and change is often hard to deal with. Tisdale and Kennedy advocate the value of talking often to people you trust about your finances and about what you’re really thinking and feeling, just to get another set of eyes on your situation that can help guide you through changes. That’s brilliant advice – I firmly believe my wife is the best asset I have because of the wonderful advice and perspective she gives.

22 – Getting the Help You Need
This is important. If you have financial questions, the place to go is a fee-based financial advisor. Don’t go to one that earns commissions – choose one that will advise you with a fee. Your financial situation is unique and deserves to be treated as such – if you don’t know what to do, turn to a real expert.

Should You Read It?

This is a very good primer on basic personal finance, and it stands out a bit from the crowd because of the whole analogy of starting from the absolute bottom line and building up from there. I think that provides a very strong view of one’s own financial situation, because it forces you to discern clearly between want and need and, once you make that separation, allows you to build upon your needs in order of importance – a rational and carefully considered plan not trapped in the impulsiveness of buying.

That being said, there are a lot of what I like to call “primer” personal finance books out there – they offer the basics of what a person needs to know about managing their money but don’t offer anything exceptionally beyond that. This book falls into that category – it’s a good example with a good perspective, but it doesn’t take that extra step to jump out from the crowd.

If you’ve never read a book of this type before, this one’s definitely a good read with a lot of strong, sound advice, but if you’re familiar with the theme, it’s not one of those exceptional books that stands out from the pack or offers a completely new spin on things.