Each Sunday, The Simple Dollar reviews a personal productivity, personal development, or business/entrepreneurship book of interest.

When I look at my life, it becomes quite clear to me that if I ever wanted to start a small business (and, no, I don’t quite consider my solo writing gig to be a small business, although big swaths of this book do apply to my wife and I), I would need the blessing of and a lot of support from my wife. She really is the cornerstone of so much of my life – without her working hand in hand with me, I would never be able to get any significant project off the ground.

Honey, I Want to Start My Own Business has the same perspective: a successful small business owner that’s married already has a business partner. Only by working in concert with your spouse can you really hope to achieve great success in business, whether it’s through direct support (i.e., your spouse is helping you with the business) or indirect support (your spouse is understanding of the challenges and helps you find the space you need to get things done).

Let’s see what insights Azriela Jaffe has to offer us in this book.

1. Exploring Self-Employment Alternatives: Considering Family Issues
Two big things stood out at me in this first chapter.

First, in a completely unusual move for a book on this topic, there were three pages of additional suggested resources on the topic of exploring your self-employment options. This book didn’t profess to have the answers on finding the right small business for you – it sticks right with the target area, which is how that small business will relate to your relationship with your partner.

The bigger one, though, was a list of fifty questions to consider if you’re looking into self employment. Before I quit my desk job and started The Simple Dollar, I really believed I had considered every angle of the decision, but this list of fifty questions spurred dozens of discussions with my wife. A sampling:

38. How does this business option mesh with your partner’s work and livelihood? Is it synergistic, harmonious, and complementary? How will it conflict?
42. How will this business option improve, solidify, or sustain your relationship?
43. How could this business option jeopardize or deteriorate your relationship?
48. Do you hope to pass the business along to your children?

These (and many others) were all issues I hadn’t really considered before, and they were well worth considering.

2. Combining Marriage and Entrepreneurship: Three Models of Joining Together on the Entrepreneurial Journey
This chapter discusses three potential different models for a entrepreneurial household: full partnership (where both partners are involved in the business), dual entrepreneurship (where both partners are involved in separate businesses), and a supportive spouse (where only one partner is involved in the business). Each type is given about fifteen pages of coverage, outlining the specific considerations for that type of relationship.

Obviously, the third one (a supportive spouse) applies best to my situation, and most of the description there is pretty apt. My wife and I find a lot of creative ways to be flexible around each other’s needs, and that’s really the key to being a supportive spouse.

3. Financial and Family Planning: Planning Ahead to Avoid Disaster
Here, Jaffe offers ten guidelines for financial and family planning:

1. Acknowledge the existence of risk.
2. Identify your risk personality and that of your partner’s.
3. Clarify how much you and your spouse are willing to risk materially to be self-employed.
4. Form mutual agreement about material risk.
5. Hope for the best, but plan for the worst-case scenario.
6. Establish guidelines for money management and decision making.
7. Allow the differences between how you and your partner handle money to work to your advantage.
8. Discuss money issues at a time and place that will be productive.
9. Define your boundaries for personal sacrifice.
10. Plan for the details of entrepreneurial family life.

These ten guidelines make a great deal of sense and deserve some careful attention during the early stages of any self-employment or entrepreneurial initiative. Each one is given a few pages’ worth of individual attention in the chapter.

4. The Joys and Challenges of Working at Home: How Working at Home Can Work – and When It Can’t
This portion of the book felt the most familiar to me in my current situation. It was a real and honest assessment of the good elements and the bad elements of working from home, not just a whitewashed projection of how things should be or ought to be.

For example, in my own situation, the flexibility that working at home has given to me has been tremendously enjoyable, but that flexibility has a powerful flip side – it also means that interruptions become much easier. This chapter actually projects such a phenomenon, as well as the interesting challenges of working at home with little kids who don’t understand (and shouldn’t be expected to understand) the need for “work time” and for “play time.”

5. Communication Skills: Understanding Your Partner and Getting Your Point Across
At this point, the book somewhat switches gears and begins to focus on basic relationship issues. Why? Jaffe makes the case that entrepreneurship works best in the context of a strong relationship and that having the tools to make your relationship successful will make it much easier for you to make your entrepreneurship successful.

Jaffe starts off with the idea that communication is fundamental, something I strongly agree with in any relationship. My favorite insight? “Imagine that your partner is an animal from another kingdom. He or she may be nurtured, sustained, and excited by very different experiences than you are.” For example, after some significant time learning and observing, I discovered my wife truly loves very gentle back rubs over the full length of her back – they can actually put her to sleep. So about once or twice a week, she falls asleep to this. It’s a simple thing that takes very little effort from me, but it makes a world’s worth of difference to her. If you can find some things you can do like this for your partner, it’ll make a huge difference in your relationship.

6. Win/Win Conflict Resolution: Resolving Conflict at Work and at Home
What about the inevitable conflicts? Jaffe again offers some strong advice, starting with the suggestion that you figure out how to resolve the conflict within yourself before addressing your partner with it. If you can figure out a healthy solution on your own, you eliminate the need for direct conflict.

If you do feel the need for conflict, figure out what you actually want to communicate and what you hope to get out of the conflict before you go in, and make both of those very clear right off the bat. Be realistic in both, however; your partner has needs and wants, too. The less clear you are about your reasons for being upset and your desired solutions, the less likely it is that you’ll get the resolution that you want.

7. Keeping the Romance Alive: Creative Ways to Protect and Nurture the Intimacy of Your Relationship
Set aside time. That’s the real key. When both members of a relationship have very full lives, it’s often hard to find time to focus on your relationship.

For my wife and I, the way we’ve found to make it work is to simply spend an hour or two together before bed, just talking about things, doing simple household chores, or reading right next to each other. For example, this evening we’re going to spend the hour or two before bed preparing appetizers for a party this weekend, talking and just enjoying each other before we go to sleep.

8. This Isn’t What I Bargained For: Coping with Hard Times and Coming Out Stronger
The book closes with a brief look at crises and some suggestions for fixing them. My suggestions largely match up with hers, but really boil down to having two things at all times, no matter what you’re doing. You should have an emergency fund with several months’ worth of living expenses, and you should have a backup plan for what to do if your current endeavor completely falls apart. I’m very thankful that we have both.

Some Thoughts on Honey, I Want to Start My Own Business
This was a very thought-provoking book for us. Here are a few of them.

After reading this, I don’t feel like I adequately thought through all of the ramifications of my career shift. There were so many aspects of the choice to become self-employed that I didn’t really give enough thought to, and that made me feel both a bit guilty and quite energized to talk through the decision again with my wife. I feel like it really was the right decision in the end, though.

My wife really makes this site possible, in so many ways. It’s easy to forget how much she supports my day-to-day life when I’m writing and working feverishly in the office with the door closed by myself. When I open the door, she’s there, though – her smiling face, creativity, and wonderful deeds make this all work.

I wonder how many couples don’t think about these things at all when making a major leap. I thought we had handled it in great depth, but there were many areas we didn’t even really talk about at all. In a less communicative couple, I can see one person just making the leap largely without the spouse on board, and that just seems like a recipe for disaster.

Is Honey, I Want to Start My Own Business Worth Reading?
If you’re in a long term committed relationship and you’re either considering self-employment or a small business or are already involved in such a situation, read this book with your partner and, more importantly, talk about it with your partner.

Honey, I Want to Start My Own Business has started more conversations with my wife than any other personal finance or business book I’ve ever read (except for possibly the venerable Your Money or Your Life). On almost every page, there was something that came up that I jotted down to discuss with my wife later, and we spent several hours in the car recently mostly talking about how my writing endeavors intersect with our home life, almost entirely fueled by concepts from this book.

This one is a hidden gem. It’s not one that’s on every bookstore’s shelf, but if you can get a copy of it and you’re in that audience, it’s a very rewarding read.

A reader, Jimmy, wrote in with an interesting question recently.

Where do you come up with your ideas? I know you read a lot, but what do you read for personal finance ideas? Just the books you review?

I thought, in response to Jimmy’s question, that I’d list all of the materials I read regularly for ideas and inspirations for The Simple Dollar.

Personal finance blogs I read several of these on a daily basis and I go through fifty or so every week when I prepare my weekly roundup. The ones I enjoy reading the most right now include Frugal Dad, Get Rich Slowly, Gather Little by Little, Queercents, Money Saving Mom, and Wise Bread. All are pumping out a lot of interesting stuff right now. If you’d like to see some of the other sites I read, check out the list of sites on the right hand menu of any Simple Dollar page.

Other thought-provoking blogs I regularly read about the same number of non-personal finance blogs, too, and they often give me interesting insights and angles I hadn’t considered before. Chief among these (my daily reads) are Seth Godin, Reddit, Lifehacker, Glenn Greenwald, and Consumerist (which trends pretty hard toward personal finance). I dip into many others about once a week, usually when I do my roundups, because occasionally I’ll find a relevant link in a non-personal finance blog.

Personal finance magazines I read the “big three” personal finance magazines once a month in the reading room at the local library. This includes Money, Kiplinger’s, and SmartMoney. I usually have a notebook with me to jot down thoughts – I’m usually more inspired by single sentences and pictures than I am by the articles, though. I find Money to usually be the most relevant, but also the most repetitive.

I subscribe to The Economist and I find it to be the most informative thing I read each week. It’s my primary source for keeping up to date with what’s going on in the world and also for learning more about how economics is applied today. I almost always have a few interesting ideas after reading an issue, and it’s one of two that I make sure to read cover to cover during a week, the other being…

Business Week is the other strongly related magazine I subscribe to. It’s not quite as good as The Economist – it has an American business focus to it – but like The Economist, it inspires lengthy trains of thought. I tend to read this one cover to cover as well, with a pen in hand so I can scribble on the pages and circle things that make me think.

Other well-written general magazines I also subscribe to The New Yorker, The Atlantic, and a few cooking magazines. While I read all of these intensely, they rarely inspire thought about personal finance, to tell the truth. They do, however, often inspire me to write about other things.

Personal finance, personal development, and business books As readers of this site know, I review two books a week, usually one that’s generally describable as a personal finance book and another that would be a personal development, business, or entrepreneurship book. I tend to read two and a half books in this genre a week, usually quite speedily since much of the material is now familiar to me. I tend to slow down if the book is entertaining or offers ideas I’ve not really heard before.

Challenging fiction and nonfiction of all kinds I usually get through about another book a week on a completely separate topic. I read all kinds of stuff, from philosophy to the latest Michael Chabon novel. Much like the general magazines I read, I occasionally get inspired about personal finance from these books, but not often. They mostly help me with other trains of thought and with mastery of language.

How do you read so much?
This is a question I get all the time. The truth is that I usually set two to three hours a day in the middle of the day aside for devoted reading related to The Simple Dollar, then an hour or two in the evening is spent with other reading choices. Add on top of that the fact that I can read pretty fast and it’s clear how I can get through so much material.

I find that it’s easier to come up with interesting ideas when you constantly hit yourself with a wide variety of ideas and facts. That’s why I read so much and it’s why I rarely have difficulty coming up with topics to write about for The Simple Dollar.

It’s a sad story that I hear time and time again. One spouse is trying very hard to get their financial life back on track, while the other one is hiding a bunch of spending under the table. When it comes out – a misplaced bill is found, a credit card is rejected, a check bounces – it results in a mountain of hurt feelings and is usually coupled with some serious fighting. On at least one occasion I’m aware of, it’s resulted in divorce.

It’s always going to be hard if you set clear personal goals and then later find out that your spouse, either intentionally or otherwise, has been taking actions in the opposite direction of your goals. You feel betrayed, let down by the person you care for the most. You often feel angry that all of your efforts have been tossed aside so effortlessly. You feel helpless – after all of your efforts, you’re right back where you started.

This moment is make or break time. It’s one of those times in your life when you figure out what you’re made of – and what your spouse is made of, too. Here’s how I would handle it.

First, take a breather
As soon as you find out that your spouse hasn’t been on the same financial page as you, you’re going to be upset in some fashion. You might be angry. You might be sad and disappointed. You might want to just walk out and not come back.

Don’t.

Sit back and breathe for a while. Don’t say or do anything about it for a day or so, but don’t let it boil up, either. Instead, find another medium to vent. Write down what you’re feeling. Punch a pillow if you need to. Go for a long walk. Just don’t start discussing this when emotions are overwhelming you or else it won’t end well.

Think about what caused the situation
It’s also important to give some consideration as to what caused this situation. Obviously, if you’re upset right now, you’ve got a different vision of your finances than your partner. This leads to some important questions.

Are you sure your spouse was aware of your feelings about money? In many relationships, a partner might adopt a new set of ideas about money without ever properly discussing it with their partner. If you’ve turned over a new leaf of frugality without really discussing it with your spouse and they’ve just done like they’ve always done – spending money if it’s in the checking account, etc. – then you need to communicate with your partner a bit more. Your partner’s probably completely confused as to why you’re so upset right now.

Is your partner actually on board with financial progress? Another potential situation is that you talked things over with your partner, but without your partner’s buy-in. You might have had all of these big plans, but if your partner wasn’t really invested in all of these plans or if they felt like you were just preaching ideas at them, they probably have no real motivation to change anything.

Did your partner simply make a mistake? Everyone is human and makes mistakes, and overcoming a pattern of spending is a very difficult thing. Perhaps your partner is committed, but their will faltered a time or two. It’s a very human mistake, and forgiveness is always the correct path to take here.

If they were intentionally lying to you or misleading you, deeper marital issues may be involved. You may want to consider seeking a counselor, or at the very least address these concerns face to face. If your partner is being deliberately misleading, there’s likely a deeper problem that needs to be addressed.

Have a rational discussion about it
Once you’ve calmed down and reflected on the situation, have a discussion about it. Explain why you were upset and listen to the reasoning that your partner gives to you. Most of the time, the problem is the result of a lack of communication or confusion in communication, so make sure you both understand what the other is thinking.

The key is listening. Clearly, if you were shocked and surprised by a financial choice that your partner made, he or she is thinking differently than you are. Sit back and listen to your partner’s perspective without comment and make an effort to understand their perspective.

Don’t get angry. Anger solves nothing in a long-term relationship. Save your anger for later when you have a healthy channel for it. If you find yourself getting angry, excuse yourself and deal with it in another room, then return when you’ve calmed down.

Re-evaluate your shared dreams and goals
One common problem that often triggers such a divergence in behavior is that you’re not on the same page with your goals and dreams. You might think your partner has the same dreams that you do, but in fact in their heart they want other things. Or, perhaps you feel a goal can be achieved pretty quickly, but your partner feels that the goal is far off in the future.

Be honest, and ask your partner to be honest, too. If you’re planning things that he or she is not fully committed to, they’ll undermine those plans, whether consciously or otherwise. A long term shared goal doesn’t work unless you both want it, and you won’t know whether your partner truly wants it unless you’re committed to being honest.

Recognize that your partner may have different dreams than you. You might desperately want a bigger house, for example, but your partner might have no interest in such a thing and was simply acknowledging your dream. Instead of dragging your partner along for the ride, look for big dreams that you both share.

Let your partner lead. Let your partner identify the goals he or she finds deeply valuable, then identify the ones that you can share. Letting your partner lead in this process gives him or her a sense of ownership over setting the goals and defining the plans, and that means more commitment and emotional investment in success.

If all of this fails…
If you try all of these things and nothing seems to help the situation, a marriage counselor might be in order. Long-term relationships are built on trust and communication, and if either of those two aspects are failing without a clear root cause, you need to find someone who can help you find that root cause.

Good luck.

The single biggest money mistake I’ve ever made was the day I decided that my future self would pay for stuff that I wanted (not needed, but wanted) now.

The amazing part is that I remember it like it was yesterday.

I was twenty years old and a junior in college. I had taken the advice of a family friend and applied for a credit card about six months beforehand, but I hadn’t used it for anything during those six months.

I had spent most of an afternoon playing GoldenEye 007 with several friends. For those unaware, GoldenEye 007 was a “spy versus spy” video game where multiple players would attempt to eliminate the others by being stealthy. You had to, in essence, find good places to hide and snipe the other players.

Anyway, I thoroughly enjoyed it, and later that night, I went back to the tiny apartment I shared with several other people, kicked back on my air mattress in the corner, and watched some television.

But I kept thinking about GoldenEye. I wanted to play it. I was bored. I had been the worst player of the four of us earlier and I wanted to improve my skills before our next session.

And then I made the big mistake. I flipped open my wallet and saw the credit card and I thought about it.

I could go get an N64 and GoldenEye right now.

I’ll be able to afford it later. I’ll have a great career.

I could have it in an hour.

I’m so bored. It would me much more fun if I had it.

I can just go look.

So I got up and went to the local department store, which had the game in stock. I stood there looking in the case, mulling it over … and then I called over a clerk to get the items out for me. Not just an N64 and not just GoldenEye, but a second controller and two other games as well. I plopped about $400 on the credit card and walked out of the store.

I’d like to say I felt some twinge of guilt when I was leaving, but in all honesty I didn’t. I was just incredibly excited to go back to that apartment, hook up my new console, and play some games. I stayed up most of the night playing my new games and thoroughly enjoyed them.

What I didn’t enjoy was what came later. I received a bill for $17 in the mail a few weeks later. I paid it. It was the first of many bills, ones that became a constant part of my life. Soon, the bill was $30, then $50, then I was receiving multiple bills.

Those bills were drastically reducing my financial breathing room, and since I was already accustomed to using the plastic, I just kept living like I was before, just using the plastic to leverage spending.

Eight years later, I finally reached the meltdown point, and just like that earlier night, my financial future turned in a moment.

Those eight years taught me one incredibly crucial lesson. Every choice you make today, you have to live with tomorrow. If you put something you want on plastic, that bill is going to come in eventually, and it will cost much more than whatever the value of that item you’re buying is. If you make a friend today, that friend will help you tomorrow. If you make an enemy today, that enemy may just stand in your way tomorrow.

This one choice, the seemingly simple decision to go for it and buy something I wanted without really thinking about the long term consequences, shaped my life in a negative fashion for years. One moment in time can shape so much.

Feel free to share your own moment in the comments, if you have one.

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

I picked up this book to challenge my own thinking, nothing more, nothing less. Before I opened the cover to this book, I did not subscribe at all to the idea that there is “good debt” and “bad debt.” I believe that all debt is bad, and the wretchedness of the debt depends entirely on your interest rate. After all, all debt has to be repaid out of the pocket of your future self, right?

Jon Hanson takes the opposite perspective. Good Debt, Bad Debt centers around the idea that there are in fact some forms of debt that are actually good, because they move you (at a low cost) towards a big goal, like home ownership.

Does his argument have the necessary meat to convince me? Let’s find out.

One: The Debt Effects – The Invisible Hand of Debt
Hanson does start off with the premise that debt is a negative, pointing out that debt is a pretty poor bargain with four nasty side effects: loss of freedom, loss of cash flow, loss of time, and loss of opportunities. He argues that the only acceptable debts are the ones that don’t have these negatives: loans to get an education (which increases cash flow over the long haul), start a business that you’re prepared to start (ditto), or a real estate loan (a mortgage, for example) that you’re properly leveraged in (which could theoretically increase your cash flow if we weren’t in a disastrous housing market). Basically, Hanson argues that all debt is bad except debt which leads directly to greater cash flow. I can at least understand that philosophy, even if I think the lines are fuzzy – for example, if you need a car to get to your job, wouldn’t that make a car loan good debt? Hanson’s not really clear on the delineations – I think they vary from situation to situation.

Two: Emotional Hostage – How Do I Get Free from Me?
Here, Hanson makes another major point that I largely agree with. He states that we’re largely guided by emotion and that it takes self-discipline in order to not just be guided by whatever our heart wants. We have to be mindful and watchful of our choices, because without thinking about the choices carefully, we’re very prone to just following our inner emotions, which can be easily swayed. In other words, he urges people to trust their minds and not their hearts any time there’s money involved.

Three: Burn Rate – Spending, Not Income, Determines Wealth
Another astute point: “It is hard to see spending as a problem while all of your existing needs and many desires are being met.” I think that statement does a beautiful job of explaining why many people in America live paycheck to paycheck or, even worse, in a state of perpetual debt. Hanson eventually proposes that people focus on cutting their spending instead of a perpetual focus on increasing income, because, as he argues, income comes and goes but spending habits stay with you.

Four: Delayed Gratification – Don’t Wait to Get It
Hanson basically argues in favor of applying “the six month rule” here. Whenever you’re tempted to buy something unnecessary, wait six months. If you still want it, buy it. The reason this works is that you’re often prone to completely forget about the item you want, and even if you do remember it, it’s likely that your interests and passions will have changed by then. Of course, this presents another problem: it requires you to separate yourself from immediacy and the type of purchases you *have* to make in order to put up a false appearance of wealth.

Five: I Don’t Know About My Past – Buy My Future Is Spotless!
Hanson tells some of his life story here, and I found a lot there to identify with. He grew up as I did, in a household without much money that spent whatever they had as soon as they got it. Don’t let your past motivate you – the “I’ll show them” attitude, when manifested through purchases, is a very dangerous motivation, because it causes you to spend money on things you completely don’t need (or even want) in order to “show” someone who doesn’t really care one way or another.

Six: What If You Live? – Make Work a Stage of Life – Not a Life Sentence
The “I’ll spend money now because you only live once!” excuse is extremely weak. If you do live, you set yourself up for many years of misery in order to have a few trinkets and flashy experiences now. The real problem with this excuse, according to Hanson, is that people fall into that trap because they view work as being a giant weight around their neck. In truth, work is just one little stage of life – not the whole thing. Work hard, succeed, sock the money away, and work will be truly behind you instead of just temporarily delayed by some escapism.

Seven: Real Estate – Buy Five Houses – Get One Free!
This chapter is mostly a primer on real estate investing, a topic that doesn’t hold much interest for me at this stage in my life. Hanson’s advice is straightforward, however – buy properties that are in good shape and have value that will hold up over time and hold onto them until the time is right. In other words, Hanson advocates a “buy and hold” strategy for real estate – buy it if the price is right, then wait until someone wants to buy it for a price you want.

Eight: Driving Your Life Away – Are You Driving Your Retirement into the Ground?
The incessant need for a new car is a tremendous cost. Your best bet for maximizing your car’s value is by buying lower-end cars and driving them until they fall apart. The real key? Minimizing the cost for each month of driving. The average new car depreciates at a rate of $250 a month – that money, invested, can make a huge difference later on in your life.

Nine: Do I Have Records? – My Pulse Began to Quicken
Keep track of your spending very carefully and then use that data to figure out what you’re actually spending money on. Not only will this information help you figure out where you’re spending more than you should, it can also help you determine areas where you can make cuts (like eating out all the time).

Ten: You Married Who? – The Ultimate Good Debt – Maybe
The book winds down with some advice on marriage and family. His advice boils down to this: you find a good spouse by knowing them deeply as people before you get married – and that means talking about everything, including money. As for children, your best bet isn’t to talk to them about money. Children don’t learn much from talk – they learn from example. That means if you want your children to have some financial sense, it’s time for you to step up to the plate and show them how it’s done.

Some Thoughts On Good Debt, Bad Debt
Surprisingly, given the title, I agree with most of what Hanson has to say. The “good debt, bad debt” dichotomy wasn’t nearly as dramatic as the cover made it seem and it was really only discussed in the first and eighth chapters.

Good Debt, Bad Debt is not a good name for this book. The main theme of this book is actually that getting your spending under control is the key to wealth. I wonder if a lot of readers were surprised by this?

Was I guilty of making unnecessary purchases to “show” my friends and family? When I look back at the “heavy spending” stage in my life, I can’t help but wonder if I wasn’t spending at least a little bit to impress others. While I did watch them fanatically, I did enjoy showing my enormous DVD collection to others when they’d visit.

Is Good Debt, Bad Debt Worth Reading?
If you’re expecting an intensely helpful workbook to assist you in getting out of debt, this book’s probably not for you. On the other hand, if you want some realistic and well-written musings (with a lot of cultural and literary references) on debt and the modern financial lifestyle, this one’s quite a good read.

Good Debt, Bad Debt was one of those few personal finance books that was purely fun to read on its own, not because the topic was insightful or informative. Mostly, it just covered the basics of the premise “spend less than you earn,” but Hanson’s style made the book go down easy and quick.

If you want some enjoyable bedside reading on basic personal finance topics, Good Debt, Bad Debt definitely fits the bill. Just don’t expect it to answer every personal finance question you might have.

Most people are familiar with the status quo bias. In simpler terms, it simply means that people prefer things to stay relatively the same. We talk to the same people, follow the same path to work, go through the same daily routine, and so forth. We enjoy little changes – like reading a different book, going on a different trip in the summer, or watching a different movie – but radical changes? Not so much.

The only problem is that the status quo bias costs us money all the time. Because we prefer to stick with the familiar, we often choose to stick with things that are less cost-effective than the alternative. Here are nine common ways that status quo bias can cost an average person money.

1. Taking the same route to work you’ve always taken. Usually, the route to work you’ve always taken is not the most optimal one, so you’re losing cash every day simply because it’s a “risk” to try to find a better path.

2. Sticking with your old bank. If you’re getting hit with ATM fees, no interest on the checking account, and less than 1% interest on the savings account (as many people are), then your bank is gouging you. Sure, it’s convenient to stay put – you don’t have to spend a half an hour switching to a new bank – but is it worth twenty dollar bills leaking out of your pocket each month?

3. Always going to the same old grocery store. Instead of using a basic price book to actually figure out which store is the cheapest for what they buy, most people just get familiar with one store and do all of their shopping there. Even for me this is difficult – I’m trying to transition to using the much-cheaper Fareway as my primary grocery, but my natural instinct is to continue to shop at the more expensive Hy-Vee.

4. Repeatedly going out for slight variations on the same old “night on the town.” Dinner at an expensive restaurant with friends once a week adds up big time, as does a drink twice a week after work with “the gang.” They’re repeated activities that repeatedly swallow money from your pocket.

5. Stopping at the coffee shop for the daily “pick me up.” This is a routine mixed with a physical addiction to caffeine, bringing not only the status quo bias to the table, but a chemical reliance problem as well.

6. Buying the same version of the same product over and over. When you walk down the grocery aisle and buy the same version of the same item without really thinking about it, the status quo bias is at work.

7. Staying in the same house instead of looking for housing alternatives. It’s much easier to keep paying extra for your current housing than it is to look for a new place to live that might be much cheaper.

8. Keeping the same cable or satellite service. There’s a reason the cable and satellite companies offer amazing introductory deals, but their standard price after a year is really high. They know about the status quo bias.

9. Keeping the same cell phone service. Similar to the cable or satellite service, cell phone companies offer great introductory deals because they know it’s likely you’ll just stick with what you’ve got.

Fighting the Status Quo Bias
The solution to fighting the status quo bias is simple. Each week, try something new. Try a new route to work. Try finding a cheaper coffee place. Look at other options for your cable service. Do something completely different for your after-work recreation. Go to a new grocery store and see if the prices are better.

One little change, every week. Focus on repeating that change a few times without reverting back to your old path. See if it suits you and, if the old path is actually better, go back to it. Then, during the following week, seek another new routine.

Eventually, over a period of time, you’ll find yourself shaving quite a bit of spending out of your life, slowly but surely. Plus, you may have found some new routines that you thoroughly enjoy. Good luck!

About two weeks ago, a friend observed that since I started The Simple Dollar, I seem to have become really goal-oriented. Then he asked two big questions that really made me think:

Will you ever reach your goals? And what will you do when you get there?

I’m a goal-oriented person. I find it much easier to accomplish the things I want to do in life if I set clear milestones and aim straight for them. One big aspect of my personal finance success is that I began to set goals that focused on getting my money straight – before my turnaround, I used to focus on other things.

I have small goals, like my list of 101 goals in 1001 days. I have big goals, like complete debt freedom, financial independence, and raising emotionally and intellectually centered children.

These goals drive me on a daily basis. Each day, I get up intending to push myself towards one or more of these goals, and every once in a while, I feel the relief of accomplishing one or more of them.

What happens, then, when I reach my goals? Where will I be at if my children grow up and have healthy and normal lives, I’ve achieved financial independence, and I’m completely free from debt?

I move on to new goals, ones that I’m not able to reach for right now because I haven’t achieved enough in life yet.

I would love to spend a few years doing volunteer work in a poverty-stricken nation, where people don’t have access to the basic food and water they need. I would love to be able to work for a foundation that pushes for basic personal finance education in all schools. I would love to be able to just drop everything and write the novel I know I have inside of me. I would love to be able to start a granting agency to financially support and promote people who go beyond the call of duty in their lives for social work – something of a MacArthur Genius Grant for social work.

But I’m not there yet.

These dreams are the really big ones, the ones I won’t be able to reach for for twenty or thirty years. These are the dreams I have that might just help change the world. But they require me to have a platform of support that I can leap from.

To a degree, I’m working towards one of them now. My dream about pushing for basic financial education in schools is coming true in part because of The Simple Dollar, and I’m going to do a few things over the next year or two to push that idea even further.

What do these things have in common? They all seek to uplift as many people as possible through communication. It’s a common thread through almost every big life-altering dream I have.

Some people refer to this general idea as a vocation, that your career is just one element of your true role. I look at it this way: what is the purpose of your life? It’s a difficult question for many people to answer, and I’ll confess that sometimes, when I’m troubled, I wonder what my purpose is, too.

So, will I ever reach my goals? Probably not, because each goal I have is just another step in a life’s journey. I’m just thankful that I have at least some semblance of an idea where I’m going and why.

Just sit down for a minute and think about it. What do you want to do with your life? Do you have an answer? Mull it over in your head for a few days, and realize that you have many, many years ahead of you to make it happen. If something begins to take shape in your mind, think about what you can do to get there. It starts with a goal for tomorrow, a goal for next month, and a goal for the next decade.

Your money and your career are just small parts of that bigger picture. Good luck in finding it.

Over the last few days, I’ve received a ton of questions about so-called “hard pulls” and “soft pulls” on your credit report and how they affect your credit score. In order to get the full scoop, I did some extensive research on the subject, and here’s the best information I can find. Let’s start off with the basics.

What’s a credit report?
A credit report is a record of an individual’s history of borrowing and repaying. This includes information about lines of credit, late payments, bankruptcies, credit defaults, and so on.

In the United States, three companies, called credit bureaus, are in the business of maintaining credit reports on each person who obtains any form of credit or debt. These three companies – Experian, Equifax, and TransUnion – effectively operate in the same fashion. They have arrangements with almost every major financial institution to report to them the status of their consumer debts. These companies then collect this information and create reports on individuals, then sell these reports to other companies who are interested in issuing credit or loans.

So, for example, let’s say you have two student loans and no other debt. The student loan companies have shared the status of your loan with the three credit bureaus (this is standard procedure, part of the agreement you signed), and the three bureaus have assembled reports on you containing information about these debts. Then, you apply for a credit card. The credit card holder contacts one (or more) of these bureaus and retrieves your report, showing you have two student loans, how much you owe on each, and whether you’ve kept up with your payments. They’ll use this information to decide whether to issue you that credit card.

Because this information is shared by … well, almost everyone, it’s financially worthwhile to keep your nose clean. All sorts of companies rely on your credit report to determine what to charge you and how big of a risk you are, from insurance to mortgage and car lenders. If you make late payments, sign up for mountains of credit cards, or default on loans, you’re seen as a pretty big risk, and you’re going to be charged more for many services because of it.

Why are there three separate bureaus if they operate in almost the same exact fashion? For starters, the three companies collect and report information largely independently of each other (there is limited data sharing, but not full). This is actually useful for you, the consumer, because if one company makes a mistake, then the other two companies can be used as supporting evidence of an error. If just one company existed, it would be somewhat harder to identify and prove errors.

What’s a credit score?
A credit score is just a single number that summarizes most or all of the information in your credit report. Think of it as an “executive summary” of your credit report – all of the information boiled down to just one number.

How is that number calculated? Each of the credit bureaus uses a slight variation on the same formula, but that formula isn’t publicly known. From Equifax:

Why is my Equifax score different from my Experian and TransUnion credit scores?
There are several reasons for variations in your credit score among the different credit reporting agencies and even among different credit grantors:
+ First, your credit score from each credit reporting agency is based on the information in your credit file at the credit reporting agency, and the credit history information each credit reporting agency has about you can differ. This can result in your score at the other credit reporting agencies being different from your Equifax score.
+ Second, there is a slightly different FICO credit scoring model at each of the three nationwide credit reporting agencies due to the differences in credit history information they each have about you. Remember: your FICO score at a given credit reporting agency is only based on the credit data that credit reporting agency has about you.
+ Third, although the FICO® credit scoring model is the score used most often by lenders, each of the credit reporting agencies, including Equifax, has their own scoring models. These other models may evaluate your credit file differently from the FICO® model and, in some cases a higher score may mean more risk, not less risk as with FICO® scores.

The “FICO” mentioned above refers to the Fair Isaac Corporation, a company that developed a fairly standard method for calculating a credit score. Their methods are in standard use by all three bureaus (with slight variations, as mentioned above) and by all of the other lenders and credit-issuing companies that use these reports.

Surely we must know something about how it’s calculated! Fair Isaac has a very consumer-friendly site about FICO scores called MyFICO, which offers these basic guidelines:

FICO scores are calculated based on your rating in five general categories: Components of the FICO score
Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%

This provides a general recipe of things you can do to keep your credit score high (and your credit report clean).

What’s a “hard pull” and a “soft pull”?
The terms “hard pull” and “soft pull” are very generic terms that describe different features offered by the three credit bureaus. “Hard pull” and “soft pull” each refer to a specific kind of credit report check offered by the bureaus. In general, the big difference is that hard pulls are ones where you’ve granted permission, they indicate that you’re actively seeking credit, they show up on your credit report for everyone to see, and they tend to have a slight negative impact on your credit score. Soft pulls, on the other hand, don’t require your permission, don’t indicate anything about your interest in seeking credit, only show up on the credit report you see, and have no impact on your credit score.

Let’s look at the offerings from each company.

TransUnion refers to “hard inquiries” and “soft inquiries” that generally match the definitions described above. Here’s what they have to say:

What are inquiries?
An inquiry is a record of someone checking your credit information. Inquiries come in two distinct categories: “hard inquiries” that occur when a business views your credit report for the purpose of an application and “soft inquiries” that occur when your credit is checked for other reasons. If you apply for a new credit card, a hard inquiry record will appear on your credit report and may impact your credit. When you check your own credit report, or when it is checked for a pre-approved marketing purpose, it is considered a soft inquiry and will not harm your credit score.

Experian does much the same thing:

Requests by others to view your credit history will show you who has received information from your credit report and who was given your name during the recent past, as allowed by law. According to the Fair Credit Reporting Act, credit grantors with a permissible purpose may inquire about your credit information without your prior consent. This section includes the date of the inquiry and how long the inquiry will remain on your report.

On your personal credit report ordered directly from Experian, information about those who inquired for the purposes of extending a pre-approved credit offer are included for your information. These inquiries are not revealed to creditors and do not impact your ability to obtain credit.

Equifax makes it a bit more confusing:

+ Inquiries are a record of companies and others who obtained a copy of your Equifax credit file. The Fair Credit Reporting Act (FCRA) requires that Equifax disclose to you who requested copies of your credit file. Depending on the reason your credit file was accessed, Equifax generally retains these for one to two years.
+ Some types of inquires you might see on your Equifax Credit Report™ are not reported to others or used in credit score calculations. These include:
– PRM Inquiry. A promotional inquiry in which your name and address were provided to a person who made you a firm offer of credit or insurance, such as a pre-approved credit card offer. These inquiries generally remain on your credit file for 12 months.
– AM or AR Inquiry. An Account Monitoring or Account Review inquiry in which one of your creditors performs a periodic review of your credit file in connection with reviewing your account. These inquiries generally remain on your credit file for 12 months.
– Equifax, ID, ACIS, or UPDATE Inquiry. Internal inquiries that indicate Equifax’s activity in response to your contact with us, for either a copy of your credit report or a request for research. These inquiries will generally remain on your file for 24 months.

To summarize, all three companies allow others to access your report and also record those who access it. A good rule of thumb is whenever you give someone permission to look at your credit report, it will be on your credit report for everyone to see and will give you a slight short-term negative on your credit score. Those are generally referred to as “hard pulls” – anything else (where you didn’t give permission) is a “soft pull” and won’t affect your credit score.

Recently, many banks have begun doing a “hard pull” on your credit report when you sign up for a new savings or checking account (asking for permission in the initial agreement). Not all banks do this (yet), but a sizeable number do.

Another tip: if you’re shopping around for a mortgage or an auto loan, don’t worry about hard pulls. According to Trans Union, the FICO model accounts for this:

You can still shop around for a loan; multiple inquiries for the same purpose in a short amount of time are commonly grouped into one less harmful inquiry session. Inquiries are also helpful for consumers because they can notify you of a potential identity thief applying for accounts in your name.

In general, you shouldn’t worry too much about the occasional hard pull, especially if you don’t have any major loans coming up. The “cost” of a hard pull is slight on your credit score, often not nearly enough to impact anything. You should only worry if you’re applying for a bunch of different kinds of credit very quickly or if you are looking at a major loan in the near future.

What can I do to maximize my credit score?
There are several very basic things you can do to keep your credit high, and the tips come from the components of the FICO score mentioned above:

Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%

In other words…

Pay your bills on time. Don’t get behind on any of your bills. Pay them on time and make sure that at least the minimum payment is made.

Keep your debts low. Don’t push your credit cards to the maximum. Instead, keep the balances as low as you can.

Keep your oldest credit cards. If you cancel your oldest card, you reduce the length of your credit history. Keep it around with a zero balance in a safe place.

Don’t apply for new credit cards on a whim. For example, if you’re at a store and you’re being offered the store credit card, just say no, especially if you’re going to be using your credit report for something else in the near future.

Having no debt but credit card debt looks bad, too. If you have a bunch of credit cards and no other debts, you look potentially risky. If you are debt free, keep the credit card count low.