Every other Sunday, The Simple Dollar reviews a personal finance book.

As many of you know, I’m a big fan of PaperBackSwap. I use it all the time to trade books – I request ones I’d like to read and send out ones that I’ve finished reading so that others can enjoy it. It almost functions like a giant online library for me, except with no late fees – I can keep the books I get from there for as long as I wish.

One thing I use PaperBackSwap for is a “wish list” feature. If I happen to see a book that would be compelling to read over a long period, I just add it to my wish list on there and, if someone else decides to post that book, it gets sent to me automatically.

And that leads us back to the Penny Pincher’s Almanac. I was intrigued from the moment I heard about it – 2,753 tips for saving money? That sounded right up my alley – but I had some difficulty locating the book for a reasonable price. So I filed the book away on my “wish list” and promptly forgot about it until one day, out of the blue, it arrived in the mail.

I wish I hadn’t waited.

The Reader’s Digest Penny Pincher’s Almanac is pretty much exactly what’s described on the cover – “2,753 surprising ideas for getting the most value out of your money, home, and possessions.” Just leafing through it gets my frugal juices going, encouraging me to try out new things to shave a bit more off of my spending.

Let’s dig in a bit and see what the book has to offer.

A Peek Inside The Reader’s Digest Penny Pincher’s Almanac
The book itself is organized into dozens of brief sections centered around specific topics: food, beauty, cars, health and fitness, and so on.

Rather than going through each section, I took a bit of a different approach: I just tried a bunch of different tactics and marked ones that stood out to me. What follows are ten tips straight from the book that really stood out from the pack.

Use a giveaway canvas bag as a diaper bag for your child. (p. 151) My wife and I have fallen in love with reusable bags – our home has a lot of them floating around. One big use for them is short-term diaper bags. Instead of hunting up our old diaper bag and making sure it’s got the things we need, we just grab a cloth bag, throw a snack and a few diapers in it, and we’re good to go.

Swap services to get a gym membership for free. (p. 108) Many gyms will provide a free membership to people willing to teach a class there. So, instead of spending cash to get your workout three times a week, teach a class there, get your workout from teaching, and get your membership for free (and maybe a bit more as well).

Use sandpaper to keep sweaters and sweatshirts pill-free. (p. 61) I had a bunch of old sweaters and sweatshirts that looked very nasty from the number of little balls of lint that had appeared all over them. A bit of rubbing with some medium-grain sandpaper and those pills came right off, making the clothes look like new.

Check your local chamber of commerce for restaurant coupons. (p. 205) In many cities, the local chamber of commerce gives out coupon booklets for local businesses to encourage people to visit them. These booklets are often given out at community events, but quite often, they’re available if you just call and ask.

Host a “jam session” at your house. (p. 210) Want to get some of your friends together for an evening of fun? Know several that have musical ability? Invite them over and tell them to bring their instruments, then encourage everyone to play together and jam. Instantly memorable evening at very little cost. (We planned one of these, but several attendees fell through.)

Stay in a college dorm while vacationing. (p. 235) Many colleges rent out their dormitory rooms at very low rates during the summer in an effort to bring in a bit of extra income. If you’re vacationing in an area, give the local universities a call and see what they have available.

Run your dishwasher at night. (p. 271) Many energy companies offer lower rates at night, plus during the summer, the heat produced by the dishwasher will have less effect on your cooling costs than a dishwasher run during the day.

Buy a car at the end of the month, near the end of the year. (p. 280) Like today, for instance. Dealers are often anxious to meet sales quotas, plus near the end of the year, dealers are also anxious to make room for new models and want to clear out inventory. Hit the car dealer right after Thanksgiving or in that week between Christmas and New Year’s.

Look into medical school clinics for inexpensive but quality health care. (p. 310) Here in Iowa, we’re lucky – the University of Iowa Medical School runs a stellar clinic with reasonable prices, and it’s often considered the place for medical treatment in the state. If you need a medical checkup, see if there’s a clinic offered by a medical school near you.

Don’t buy spaghetti sauce by the jar. (p. 41) This is one of my favorite things to make on my own because it’s so easy. Just use a can of crushed tomatoes (or, better yet, fresh tomatoes that you mash a bit), toss in a good pinch of basil and oregano, a teaspoon of olive oil, and let it simmer for a few minutes. It’s just as good as pasta sauce from a jar and way cheaper. Plus, you can experiment with it to your heart’s desire.

Is The Reader’s Digest Penny Pincher’s Almanac Worth Reading?
If you’re into frugality at all, The Reader’s Digest Penny Pincher’s Almanac is a book you will get some value out of. The sheer spread of tips is wide enough that virtually everyone will find a good idea or two.

There is one minor drawback, though. With so many tips in such a thin volume, many tips aren’t given their due diligence and receive only minimal coverage in the book. There are a lot of good ideas here, but in places, the thoughts behind them aren’t fully formed. That’s why it’s useful to supplement this book with some good internet searching for more information on specific tips.

Having said that, this is definitely one worth picking up for reference’s sake. I was able to find it rather quickly for free via PaperBackSwap, though you may be less patient.

Many of you out there reading this are hurting.

The economic news is grim, and even though I believe the only thing we have to fear is fear itself, that doesn’t change the stark reality of things.

Most of us have lost a large swath of our retirement savings in the last year. My overall retirement savings has gone down about 30% over the past thirteen months, even with late 2007 and 2008 contributions.

Some of us have lost our jobs. I have at least three friends who have been downsized in the past calendar year.

All of us are uncertain right now – and that’s understandable. We’re looking towards living cheaper and letting go of the cultural trend towards overspending that has happened over the past several years.

Right now, many of us are looking forward to December – and to the holiday season – with some joy and some trepidation.

Can we afford to travel this year?

Can we afford to put a lot of Christmas presents under the tree – or should we?

Shouldn’t we scale back this year – big time?

Don’t worry. You’re not alone. I’m asking myself these same questions, as are millions of others out there.

But the answer to it is easy – and it’s right in front of our faces.

It’s easy to get caught up in the expenses of December – the parties, the presents, and the inevitable bills.

But that’s not what the holiday season is about.

It’s about time, not money. It’s about sitting around with your favorite loved ones, telling tall tales and playing games. It’s about the bright smile on your child’s face regardless of what’s under the tree. It’s about holding your grandmother’s hand and wishing her a merry Christmas, knowing that she’s been there for you over and over again throughout your life and also knowing that she might not be there forever.

So, yes, by all means be frugal this Christmas when it comes to your money. Cut back on the extravagant presents and focus on more thoughtful items. Tone down the scale of the parties – there’s no need to have a huge bacchanal this year.

But don’t cut down on the time. Savor every minute of it.

Because in the end, the time you spend with the people around you is the most valuable thing of all. No expensive present, no ostentatious party, nothing can compare to that time.

A less expensive present than usual is quickly forgotten. What’s remembered is the time spent together.

It may be a long December for some, but few things will make it better than focusing on what’s important and letting the rest drop off to the side.

And its been a long December and theres reason to believe
Maybe this year will be better than the last
I cant remember all the times I tried to tell my myself
To hold on to these moments as they pass
- Counting Crows, A Long December

I get emails from readers all the time encouraging me to be more playful and experimental with my writing, so here’s a little experiment, posted quietly on the Saturday after Thanksgiving when no one will be reading. It’s an adaptation of one of my favorite literary passages, Claudius’s soliloquy from Act 3, Scene III of William Shakespeare’s Hamlet, in which Claudius confesses his past sins and offers repentance in his own way. I hope you enjoy it, but if not, even if you think it’s unspeakably awful, take a moment to dive into Hamlet. It is truly excellent.

O, my offence is rank it smells to heaven;
It hath the primal eldest curse upon it,
Many dollars wasted. I cannot take it back,
though my inclination is as sharp as my will.

My stronger guilt defeats my strong intent;
And I am a man to his debt bound.

I stand in pause, realizing that I must start again
to recover this neglect. What if this cursed hand
that chooses to spend so easily were weighted down?

Is there not money enough in my coffers
to wash away the interest?

Is there no mercy for the spender,
to avoid confrontation with this offense?

Perhaps I can offer up a prayer
to forestall this great fall
or to pardon my failure?

If I can fix the problem, I may look up; my fault is past.

But, what form of penance shall serve my mistake?
Asking for forgiveness of the debt?
That cannot be, for I still possess
those debts which I earned myself.

My most splendid possessions, my own greed, and my earthly desires
Can I keep these and still wash away the debt?

Oh, the banks of this world are corrupt
Their interest-heavy, gilded hands often shove aside justice
And make it easy for us to fall into greed
By our own hands.

But it is not so in heaven, or in our own life.
There is no shuffling, only facing
the truth of our own nature, and we are compelled
even in the face of excuses and desires
to give into the evidence: debts, no savings, and years of mistakes.

Now it is time to try repentance: to begin to save and pay.

But in my heart, I often wish to be free of it!

O wretched state! O bosom black as death!
O limed soul, that, struggling to be free,
Art more engaged! Help, angels! Make assay!
Bow, stubborn knees; and, heart with strings of steel,
Be soft as sinews of the newborn babe!
All may be well.

Overcoming bad financial moves is a modern struggle of the soul, much like Claudius struggling with himself in Hamlet. Hope this inspired you as much as Shakespeare has inspired me.

Several months ago, I mentioned that we’ve been experimenting with using Skype at home for many of our telephone calls, and that I was ready to switch to using Skype as our primary phone. Skype, for those unfamiliar, is a service that allows one to use their broadband internet connection as a telephone line.

In the article, I discussed a number of the benefits and drawbacks of this move. Clearly, it was cheaper than the cost of our land line on paper, but our land line was part of a bundled service with our telecommunications provider, and dropping the land line wouldn’t actually save us that much at all on our total bill. Although it appeared to be pricey on paper, dropping that land line would also cause us to lose our “bundling” discount, and the two almost completely counteracted each other.

So, for the time being, we’ve kept our land line, but I’ve continued to use Skype for many business-related calls.

That brings us to a suggestion from reader “Joe”:

I haven’t had a land line in nearly 5 years and haven’t missed it in the least. In the past 6 months, I’ve also switched to one of the low-cost cell phone providers for huge savings each month. By not having the land line, I’m saving about $40 a month, and by going with one of the low cost providers with unlimited usage I’ve gone to having a $45 a month cell phone bill. Total savings is about $80 to $100 a month versus having one of the pricier wireless providers and a landline at the same time.

Joe’s comment spurred me to do a serious re-evaluation of the telephone lines in use in our household. After all, our monthly telecommunications bill regularly runs into the three figures, including broadband internet, cable, a land line, and our cell phones.

What can we actively reduce from this expensive monthly mix?

The first step for figuring this out is accurately evaluating what we need. To do this, I started keeping careful track of the actual usage of our landline and our cell phones. Here are some key questions we asked ourselves during this process.

Were we actually taking advantage of the portable nature of our cell phones? Are we actually using them as truly mobile devices, meaning are we using them a significant amount outside of the home? If we’re not, then a prepaid cell phone may be all we need to take care of any mobile needs, reducing the monthly bill. From our evaluation, it appeared as though the majority of our cell phone usage was at home.

Were we truly taking advantage of our unlimited plans, or is our call volume low enough that we’d be better off with a plan with limited minutes? We were able to accurately track this by carefully examining our bills – both land line and cellular – over the last few months. How much were we using on each? Were we far below our limits? It turns out that we have never been close to our usage caps on our cell phone, so we requested a change to a different plan that will save us about $10 per month.

Were we using text messages significantly enough to pay for a plan for those, or would we be better off paying per message? This one was easy for us – we were only using a few texts per month, so we called and requested a switch to a “pay per message” plan that will save us $5 or so per month.

Is our cell phone service (while at home) as reliable as our land line service? In our case (luckily), the answer is yes. We live rather close to a tower that seems to be used by several providers, so almost every cell phone provider has stellar service from our home.

Do we travel significantly? With a three year old and a one year old at home, travel isn’t a normal part of our lifestyle, but it’s an important question to ask. The more travel you do, the more important a cell phone would be in comparison to a land line.

Taking all of these factors into consideration, the clear route for us (for the time being) is to wait until our contract expires, cancel our cell phone service, and get prepaid phones. This is our tentative plan, one that we’ll keep in mind as we monitor our phone usage over the next several months.

What’s the take-home message here? Walking carefully through your usage of such services can often point you towards ways to save money. Keep in mind what you’re actually using and what you actually need and you’ll eventually be led to the best deal for you.

This is the eighth in a weekly series of articles providing a chapter-by-chapter in-depth “book club” reading of Benjamin Graham’s investing classic The Intelligent Investor. Warren Buffett describes this book: “I read the first edition of this book early in 1950, when I was nineteen. I thought then that it was by far the best book about investing ever written. I still think it is.” I’m reading from the 2003 HarperBusiness Essentials paperback edition. This entry covers the seventh chapter, which is on pages 155 to 178, and the Jason Zweig commentary, on pages 179 to 187.

If you’ve been paying attention the last few weeks, you’ve probably observed that Ben Graham has a lot of ideas about what you should avoid. Defensive investors should avoid everything but large, prominent companies with a long history of paying dividends. Even enterprising investors should avoid junk bonds, foreign bonds, preferred stocks, and IPOs.

To put it simply, Graham doesn’t like risk. It comes through time and time again in every chapter of the book – do the footwork, minimize risk, and don’t swing for the fences.

So what kind of real-world investing does that lead to? Graham finally gets down to actual tactics here, finally pointing toward some specific investment choices that he actually supports! At last!

Chapter 7 – Portfolio Policy for the Enterprising Investor: The Positive Side
Graham says that there are four clear areas of activity that an enterprising investor (read: not an ultra-conservative investor) should focus on:

1. Buying in low markets and selling in high markets.
Graham says, in essence, that this is a good strategy in theory, but that it’s essentially impossible to accurately predict (on a mathematical basis) when the market is truly “low” and when it’s truly “high.” Why? Graham says that there’s inadequate data available to be able to accurately predict such situations – he basically believes fifty years of data is needed to make such claims, and as of the book’s writing, he did not believe adequate data was available in the post-1949 modern era. Note, though, that Graham returns to the notion of high and low markets in the next chapter.

2. Buying carefully chosen “growth stocks.”
What about growth stocks – ones that are clearly showing rampant growth? Graham isn’t opposed to buying these, but says that one should look for growth stocks that have a reasonable P/E ratio. He wouldn’t buy a “growth stock” if it had a price-to-earnings ratio higher than 20 over the last year and would avoid stocks that have a price-to-earnings ratio over 25 on average over the last several years. In short, this is a way to filter out “bubble” stocks (one where irrational exuberance is going on) when looking at growth stocks.

3. Buying bargain issues of various types.
Here, Graham finally gets around to the idea of buying so-called “value stocks.” For the most part, Graham focuses on market conditions as they existed in 1959, pointing towards what would constitute value stocks then. What I found most profound, though, is a brief bit on page 169. Here, Graham discusses “filtering” the stocks listed by Standard and Poor’s (essentially a 1950s precursor to the S&P 500) and identifying 85 stocks that meet basic value criteria, then buying them and finding that, over the next two years, most of them beat the overall market.

That’s an index fund, my friends. Graham had basically conceived of the idea in the 1950s – it worked then, and it works now.

4. Buying into “special situations.”
Graham largely suggests avoiding “topical” news as a reason to buy or sell, mostly because it’s hard for investors to gauge how exactly such news will truly affect the stock’s price. Instead, one should simply file away interesting long-term news for later use if you’re going to evaluate the stock. For example, recalling that a company is still paying off an incurred debt from ten years ago and that debt is about to be paid off might be an indication of an upcoming jump in profit for the company – and a possible sign of a good value.

Commentary on Chapter 7
Zweig provides a ton of supporting evidence that market timing doesn’t really work, and that “examples” of market timing that are often used to show how good it can be are cherry picked using the amazing power of hindsight.

He makes a similar argument about growth stocks, saying that there are often periods where growth stocks appear to be taking off like a rocket, but that it’s impossible to know where the top of that rocket ride is. He provides several examples of this and largely seems to agree with Graham that the only growth stocks a person should invest in are ones that are truly sound as a business and not merely the beneficiaries of a lot of hype. How can you do this? Keep a very close eye on the real business numbers of any growth stock you own.

In the end, Zweig argues that the best solution for most investors is pretty simple: diversify, diversify, diversify. Don’t put all your eggs in one basket, ever. Instead, buy lots of different stocks from lots of different industries and from lots of different markets (foreign and domestic).

Next Friday, we’ll take a look at Chapter 8: The Investor and Market Fluctuations.

If you’re in the United States, I hope you’re off somewhere enjoying a great meal with friends and family. I sure am!

Normal posting will resume tomorrow morning!

“Margie” writes in:

My husband and I are pretty frugal, but we currently carry about $25,000 in credit card debt and a personal loan. Our monthly interest is about $800 on the balances.

My husband owns his own business and has cash in hand to pay off these balances; however, he chooses to keep the money in the business because the $25,000 cash generates about $5,000 income every month– enough to pay the interest and pay about $1,200 on each one of the the personal loan and two credit cards. This way we’ll be able to pay off the balances in about six months.

I used to feel very scared about carrying so much debt, but when he explained it to me I understood that sometimes debt is necessary in order to keep generating an income (his degree is in business economics). If we were to pay off the $25,000 it would take capital out of the business and we would lose a big chunk of income-generating money. This way we’ll be debt free soon and still have the $25,000 in the business.

What are your thoughts in this scenario?

First of all, it’s worthwhile to get a bead on how bad this debt actually is. Margie reports that she and her husband are carrying about $25,000 in debt, with a monthly interest total of about $800 on that debt. That didn’t pass the smell test to me – $800 a month in interest comes out to $9,600 a year, accounting for almost a 40% interest rate.

No matter what the reason, if you hold debts that have an interest rate that’s in double digits, you should seek to lower that interest rate. There are almost always debt solutions that allow you to reduce your interest payments if you’re carrying debt at such a high level.

So, the first step is, as always, make sure that the debt instruments you’re using are good ones. If you have debt that’s being charged at a high rate, see if you can move that debt into a different loan that doesn’t have such a high rate or request a reduction in rates.

Now, on to the meat of the question. Is debt acceptable if the balance of that debt is used to generate income?

If you’re looking at a guaranteed income, then the question is really whether the interest on the debt is lower than the income generated by the money. So, if you had a completely guaranteed method to return 10% on your money and you could borrow money at 5%, then this is a very sensible deal.

The problem is that there are no guarantees in life or in investments. Virtually every time you borrow money, you’re adding to your risk.

Sometimes that risk is worthwhile. If you need a car to get back and forth to work and you have no car, then a car loan is probably worth it. If you need an education to further your personal goals, then a student loan may be worth it.

The general question that’s really being asked here is whether a business loan is worth the risk. Certainly, a well-planned business (that’s structured independently of your personal finances, of course) may need to borrow money in order to get the business started.

However, the situation as Margie describes it appears to be a loan to the business out of their personal finances. While that can be fine, the loan is clearly having a very painful effect on their personal financial situation.

No matter how secure the business, funding that business via a high interest personal debt is not a good way to go. The risk simply isn’t worth it – if the business does not succeed, you will quite likely be left in a very sticky situation.

My advice to Margie and her husband is simple: put a lot of effort into restructuring your personal debt. See if you can reduce the interest rate on that debt and get it down to something manageable. Otherwise, you’re putting your personal finances at a very steep risk in order to sustain your business – which is never a guaranteed proposition.

If you’re just getting started and looking to start a business, never fund it via your personal finances if you have to take out high-interest personal debt to do it. That’s an extremely dangerous situation to put yourself in. Instead, seek business financing or wait until you can fund the business in a safe manner.

A lot of people were curious as to what happened with my son’s birthday after his disastrous birthday party.

In short, he got over things pretty quickly and now seems to have largely forgotten about it. We basically didn’t mention it again after the day of the party and that seemed to work well in encouraging him to forget about it.

I read him quite a few of the kind messages many of you sent to him, which he enjoyed. He said a loud “THANK YOU!” to those who sent him messages. I attempted to get him saying “THANK YOU!” on a short video to put on YouTube, but he got shy and wouldn’t say anything.

In short, he got over the disappointment and recovered really, really well (in my opinion). In the end, he seemed far less disappointed than I would have had the same thing happened to me.

Anyway, here are a few personal finance links of note.

Will a Dental Discount Plan Save You Money? Most of the time, the answer seems to be “no,” especially if you have any sort of dental insurance coverage. It seems to mostly be a clever payment plan, actually. (@ wise bread)

Turn Frugal Behaviors Into A Game I find that, quite often, I learn things better when I turn them into some form of competition. That seems to be the basic idea here. (@ passive family income)

Saving Money by Mulching the Leaves My yard has almost no leaves at all in it – the wind picks them up and blows them right out of our yard. However, if your yard accumulates leaves easily, this can be a great weekend project – perhaps this weekend, since it’s a long one and the weather’s not too cold yet. (@ money beagle)

Money Is 100% Emotional This is a very bold title, but the author makes a good point. Personally, I think personal finance success comes when you realize how much emotion and psychology is wrapped up in your money choices. (@ the wisdom journal)

The Kindle Saves Space, But Can It Save You Money? I’ve heard lots of questions about the Kindle since my wife received one last Christmas. It has saved her quite a bit of money, since she’s been using it to read lots of classics and other public domain books. (@ unclutterer)