I’m currently in the midst of my first Iowa winter as a stay-at-home writer – and it’s fairly tough. Many days, after taking the kids to daycare, I’m trapped at home for most of the day completely by myself. It’s too cold to go outside very much, although I do sometimes go outside anyway (and feel like I’m freezing). I tend to exercise at home as well, doing my usual fitness routine and such.

The end result of all of this is a touch of the winter blues, mostly manifested by a sense of being tired during the day. Usually, this tiredness lifts in the evening, mostly because of the interaction with my wife and kids, and weekends are pretty normal.

But there are times, during the work week, where I’d be happy to just spend the whole day curled up on the couch reading a good book and taking a nap or two.

I can’t wait for spring. I really want to open up my office window and let a breeze blow in. I can’t wait for the sun to change angles so I can get some direct sunlight into my office for the first half of the day. I’m really looking forward to restoring my daily walk outdoors.

How Much Money Would it Take For You to Compromise Your Principles? I guess it depends on the principle. If you’re talking about core principles, there basically isn’t a price. You could not pay me enough to harm my children, for example. Minor principles – like my intent to never miss a meeting I’m expected to be at – could be broken much easier. (@ get rich slowly)

How to Make Extra Cash from Your Hobbies This is a very simple breakdown of a theme I often talk about – doing what you’re passionate about and earning money at it. (@ dumb little man)

Homemade Laundry Detergent Not for Us This is actually a solid rebuttal to my recipe for homemade laundry detergent. Is it really worth it? (@ frugal dad)

How to Care (Not Worry) About Your Finances I think I alternate between these two states. And I would certainly agree that “worry” is far less healthy. (@ prime time money)

How to Start and Manage a Debt Snowball I really liked this summary of how a debt snowball works – nicely written and very clear. (@ mrs micah)

Over the last several months, I’ve seen a continuous increase in the number of advertisements out there for gold. For me, this reached a fever pitch yesterday, when a local radio station I often listen to apparently sold a one hour infomercial in which two pitchmen were incessantly talking about how great an investment gold is in the current marketplace – and, obviously, talking about their own business from which you could buy gold.

Obviously, these ads have popped up because of the current economic conditions. The fear in the air is thick, and it is considered conventional wisdom that gold is a safe place to hold your money in times of uncertainty.

Unsurprisingly, these salesmen are capitalizing on that sense of fear. These individuals were cherry-picking quotes from news stories to prove their suggestion that the economy is in meltdown. They mentioned such things as a 4% plunge in retail sales during the holiday season, the sixteen year high in unemployment, and other rather disconcerting news stories about the current economic situation.

Not mentioned, of course, were other news articles like the recent sharp drop in new unemployment claims or the fact that business and individual balance sheets are getting healthy fast or the presence of many signs that we’ve reached the bottom.

What’s the next step in the sales job? They make it seem easy and safe to invest in gold. They provide all the help you’ll need with just a single phone call or a click – an easy solution to all this fear.

There’s nothing at all unusual about what they’re doing. It’s salesmanship 101 – and much of our economy runs on it. It’s all about creating the appearance of something better than what you have now.

But it works particularly well with gold, and here’s why.

Almost every investment is driven by supply and demand. If there’s more of something available – meaning there are more people selling it than buying it – then eventually it will cost less. Think of it in terms of the Beanie Baby phenomenon of the late 1990s – when the price was rising, there were many more buyers than sellers, but once the buyers dried up (or turned into sellers), the price fell rather quickly.

Gold is no different. When there are more buyers than sellers, the price goes up. When there are more sellers than buyers, the price goes down.

However, gold has a special factor that doesn’t really exist with many other investments: hoarding. Most of the gold that exists in the world is being hoarded by someone in the form of jewelry, gold coins, and so on. Think of wedding rings – once these items are made, they’re essentially hoarded. Large banks often do the same thing – they have tons of gold and they just sit on it, never intending to sell it.

That means that, quite simply, there isn’t that much gold available to be bought and sold at any given time – and that means that even a slight increase in the number of buyers can send the price skyrocketing and even a slight increase in sellers can send the price downwards. That’s why the price fluctuate so much – if one big hoarder decides to sell, it can easily affect the whole market.

That leads us back to our salesmen. They’re talking fear and proposing buying gold as a way to make things safer. If you follow their suggestion, you become a gold buyer – without another seller joining the party. That means the price goes up slightly – you take some gold off the market and hoard it. Not only that, they make a little bit in the process by serving as your broker.

No wonder the economic downturn has brought out the gold ads in abundance.

I’m not claiming that gold is in any way a bad investment – it’s not. But it’s not the be-all end-all solution that it’s often being sold as. Gold is fine as a small part of your overall financial situation, but don’t move all of your money into one asset, ever.

And, as always, be most cautious when a salesman is using the hard sell to convince you to do it.

My three year old son has officially graduated to the “Why?” stage.

Most parents – actually, anyone who has spent much time around a three year old – know exactly what I’m talking about. He’s basically asking “Why?” about everything that happens, from the simplest mundane household things to complicated issues like the nature of life.

In other words, there’s a lot of explaining going on around the clock here at the Hamm household.

There’s another piece to this puzzle, though. With our little boy wandering around constantly asking “Why?”, we have become much more careful about our specific behavior choices. Let me give you some examples of what I mean.

We’re at the grocery store. I’m standing there examining the different kinds of milk and my son asks what I’m doing. When I tell him I’m trying to decide what kind of milk to buy, he hits me with the why. Why am I buying milk? Why am I choosing the particular kind of milk?

We’re in the basement. An incandescent light bulb burns out, so I replace it with a CFL. The only problem is that when we flip the light switch, the bulbs light up at a different rate. My son notices and hits me with the why. Why do the bulbs light up at a different rate? Why do we have different kinds of bulbs?

We’re on our way to daycare and we see one of the neighbors headed off to a different daycare. I point the girl out to my son and tell him to wave. He asks where she’s going and when I tell him, he drops the why. Why does she go to that other daycare? Why don’t I go there?

With the why‘s coming in right and left, I’ve automatically begun to start thinking ahead about what I’m doing, coming up with solid answers for the things I expect him to ask. Doing that, of course, makes me think about why I’m doing things in the first place. Am I doing this for a good reason? Is this action setting a good example for my son?

Here’s the kicker: this is a key time in my child’s life in terms of learning how to behave and acquire knowledge. It’s quite important that I actually come up with correct answers to his questions, even if they seem simplistic or really repetitive. Even better, the answers (and anything we do to bring about the questions) need to indicate good, healthy adult behavior.

This is actually a great frugality motivator. My son has become yet another psychological tool that I can use to convince myself to make good financial choices. The ten second rule? The thirty day rule? Try the three year old child rule – if you can’t explain a purchase or a financial choice to a child without resorting to “because I said so,” it’s probably worth considering more carefully.

I’ve actually reached the point where I use this “why” question no matter what I’m doing and no matter whether my son is there or not. It makes me consider my actions much more carefully – and that results in better buying decisions and better life decisions, too.

One of the most amazing parts of raising a child is that you go into it thinking that you’re going to be doing all the raising and answering all the questions, but as time goes on, you find that the child often teaches you as much as you teach the child.

After my recent article about new restrictions on used children’s clothes from the Consumer Product Safety Improvement Act (CPSIA), I received a flood of correspondence from angry and confused readers who were quite upset with the proposed changes. I compiled a number of these emails and forwarded them on to a few email addresses at the Consumer Product Safety Commission and to my local congresspeople.

On January 8, the Consumer Product Safety Commission issued a clarification of the law (emphasis added):

The new law requires that domestic manufacturers and importers certify that children’s products made after February 10 meet all the new safety standards and the lead ban. Sellers of used children’s products, such as thrift stores and consignment stores, are not required to certify that those products meet the new lead limits, phthalates standard or new toy standards.

The new safety law does not require resellers to test children’s products in inventory for compliance with the lead limit before they are sold. However, resellers cannot sell children’s products that exceed the lead limit and therefore should avoid products that are likely to have lead content, unless they have testing or other information to indicate the products being sold have less than the new limit. Those resellers that do sell products in violation of the new limits could face civil and/or criminal penalties.

What does this mean?

Used children’s clothing will still be available at Goodwill and other places. These stores can continue to sell the clothing even without lead and phthalate testing. This would also apply to people who resell used children’s clothes on eBay and so on.

However, items that do not meet the new standards for lead and phthalate content are still banned. Even though you can re-sell used children’s items without testing, that does not mean that you can legally sell items with too much lead and phthalate content. If you’re selling them, you may be fined.

What’s the solution? Simply avoid reselling items that may have high lead or phthalate content. Most clothes should be fine, but you may want to be careful about reselling toys. The CPSC offers a bit of guidance in that press release:

While CPSC expects every company to comply fully with the new laws resellers should pay special attention to certain product categories. Among these are recalled children’s products, particularly cribs and play yards; children’s products that may contain lead, such as children’s jewelry and painted wooden or metal toys; flimsily made toys that are easily breakable into small parts; toys that lack the required age warnings; and dolls and stuffed toys that have buttons, eyes, noses or other small parts that are not securely fastened and could present a choking hazard for young children.

Your best tool, if you’re considering reselling such items, is the internet. If you’re suspicious that an item you are considering reselling may have high lead or phthalate content, do an internet search and see whether your suspicion is true. If I were considering reselling children’s items, I would probably just avoid the categories mentioned by the CPSC above.

So, what did I learn from all of this? My biggest lesson was that there are sensible people in charge of consumer issues. This was really the most sensible solution to the problem – it protects kids without driving resellers out of business. The CPSA was on the ball here in clarifying the rules.

Another lesson was that awareness helps. This issue affects a lot of people – virtually all parents, as well as anyone working for a clothing resale organization, were affected by the basic interpretation of that ruling. I was one of many blogs that chose to talk about the issue – many newspapers and trade groups also spoke out loudly on the topic. Awareness attracts attention, and attention gets things done.

Normally, I won’t delve into specific consumer issues like this one, but I felt that it was a good example – from beginning to end – of how consumer laws affect everyone (sometimes in surprising ways) and how speaking out about things can help bring about a better solution.

At the very least, now I can resell my kids’ outgrown clothes without worrying a bit about the CPSIA.

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. Here are some thoughts on preparing to add an additional child to your family.
The Financial Implications Of A Second Child
The Financial Implications of a Third Child
Money and the Two Year Old Child

And now for some reader questions!

My daughter graduated college in May and has a pretty good job working for salary plus commission. She is still living at the college level – sharing a house, living low on the status chain, etc. She has no debts. She is also saving 10% of every paycheck (it’s in CDs and ING at the moment). Where would you suggest she invest her savings? I figure she is in a great “no lose” situation with regards to the current stock market and should be buying in, since it’s so low. Is this a good idea? Where would she go to accomplish this?
- Debbie

I don’t particularly believe in market timing when it comes to personal investments. We do not know what the future holds, though we can make some reasonably educated guesses about it.

The question one should really focus on is their personal risk tolerance. Are you okay with putting your savings at risk in the stock market given ho turbulent it can be? Take a look at the annual returns of the S&P 500 from 2003 to 2007 – -23.37%, 26.39%, 9.00%, 3.01%, 12.80%, and 3.81% – and I’m not even including the nightmarish 2008 return in that. That kind of turbulence is enough to make many people’s stomachs churn.

Talk to your sister about her goals and find out about how much risk she can tolerate. Those will be your best signs as to how she should invest.

What games do you usually play with your wife during the kid’s nap time?
- Ed

For those unaware, I mentioned before that on days when my wife and I are both at home and the children are napping, we tend to play a game together while they sleep if there’s nothing pressing that needs to be done.

We usually play board games, actually – ones that work well with two players. Our favorites include Ticket to Ride and Puerto Rico.

On occasion, we’ll play video games, and when we’re playing together it’s almost always Wii Sports or Guitar Hero: World Tour.

Aside from making more money, do you have any advice for someone who might suddenly have a school-age child to take care of?
- Griffin

Spend as much time as you possibly can with that child. Quality time, too, where you’re both engaged in an activity together. Communicate extensively. Ask lots of questions about what the child is doing and let the child follow up.

At the same time, don’t be a pushover – you are the guardian and you need to set boundaries and rules.

A strong relationship with the child is far more important than having plenty of money. Many career-oriented parents who focus on working themselves to the bone so their child can have “everything” sometimes forget that, even though their hearts are often in the right place.

Do you ever find it difficult to come up with topics to write about?
- Meg

Not usually. I sometimes have a hard time getting back on track after I take an extended break from writing, like when my family goes on vacation. The week after such a trip is usually pretty painful, as I’ve fallen out of my writing routines.

The best antidote for that is to simply keep my idea notebook with me at all times. I just keep a little notebook that fits in my pocket along with a pen, and whenever I have the nucleus of an idea for a post, I grab that notebook and jot my idea down quickly. Then, when I’m faced with a period of writing, I simply turn to my notes and I’m ready to go with plenty of ideas.

How do I deal with parents who have absolutely no idea how to manage money? They have declared bankruptcy once, and are close to doing it again. My mom literally has a room full of clothes, but not enough money to fix the car when it breaks down. My husband and I have our financial house in pretty good order, and sometimes I just want to shake them and yell, “It’s not that hard!” What can I do? Is there anything I can do? I hate seeing them head down this path, but I honestly feel very hopeless. Thanks!
- Michelle

You can’t make people have a money epiphany – they have to find that path for themselves. The best thing you can do is keep your financial house nice and tidy and set a good example as to how to manage your money.

The question I would have in your situation is how your parents are planning for retirement. Do they have any plans? Are you their plan?

Other than that (because it will impact what you’re doing in the future), you need to let them live their own life. Just make it clear to them that if they want to talk about money, you’re ready, willing, and able to talk about it.

Is the new version of Your Money or Your Life worth picking up if you have the old one?
- Bill

In the new version, virtually nothing has changed conceptually from the earlier book. Based on my browsing of the new version, there seems to be just a bit of updating and modernization, but Dominguez and Robin’s message is basically untouched.

You know what? That’s how it should be. Your Money or Your Life – or at least the basic message of it – is timeless. There’s no need to update it. There’s no reason to update it, other than to polish up a few numbers and specifics.

It’s simply the best personal finance book I’ve ever read, and I wouldn’t change a word (unless it were to polish up a fact).

What back-up is there [for online banking] if there is an overall problem with the internet? Or satellites? Will you have a record of your money, and be able to get at it easily?
- kristine

This isn’t just a concern with online banking. Virtually every bank is run electronically – all of their records and data are stored in databases, and there are many disasters that could put a serious crimp in your ability to clearly and fairly access your money.

My solution is to just print off regular statements from my online banking account (I use ING Direct). I have a printed-off record of transactions, account information, current balances, and so on.

In the end, this is the same protection you have with your local bank. The mere fact that there happens to be a branch office down the road doesn’t really make that much of a difference. You can march in there and demand all you want, but if an apocalyptic scenario happens, the door will likely be locked.

When you went away to college, did you have friends that you knew from high school at college or were you “on your own”? How did you make friends? I’m leaving for university in the fall and I know no one that attends the school. I’m not particularly social, but I have nightmares about sitting alone in my dorm room all the time.
- Len

I was “on my own.” I knew no one at the school I attended, at least for the first year (the next year, my wife-to-be started attending and I had already known her before college).

I met most of the people that I became close with on my dorm floor. I simply made a conscious effort to meet everyone on the floor and eat with all of them in the cafeteria a few times to see who I clicked with. One of the people I met on my dorm floor wound up being the best man at my wedding seven years later – another one drove ten hours to attend the wedding.

I also joined a lot of groups on campus that were centered around my own interests. I wound up becoming heavily involved with one of them, built friendships with two other people who attended my wedding (each driving about three hours to attend), and that group wound up paving my way directly into my first post-graduation job.

What are your feelings about investing in gold bullion?
- Arne

While I can see the use for investing in rare metals if you have a very large portfolio and you want to diversify further, I don’t see a strong case for actually having gold coins or gold bars in your home. How exactly will you easily liquidate those assets? Will gold coins and gold bars suddenly become valuable?

The only scenarios I’ve seen where a good conclusion comes from owning a bunch of gold at home are ones that involve a global financial meltdown like the world has never seen without a resulting civil war or other catastrophe.

Natural disasters don’t cut it, either – did you see people trading in gold after Hurricane Katrina hit New Orleans?

While it might be symbolic to directly own a bit of gold bullion, if you’re going to invest in it, just buy a rare metals fund from a reputable brokerage (like Vanguard).

What personal finance guru do you like the most? The least?
- Charlie

For the most part, I think most of the “personal finance gurus” provide sound advice, and I don’t really have anything against most of them. Your Money or Your Life is my favorite personal finance book, but I’m not sure if I’d call Vicki Robin a “personal finance guru.” I’d probably have to vote for Dave Ramsey – his debt plan is simple and easy to follow and he’s got the “coaching” aspect of it down cold.

My least favorite is Robert Kiyosaki. I found Rich Dad, Poor Dad to be largely insulting, although I can see how it might be inspiring to people who are entrepreneurial but haven’t actually invested any time in deep reading or deep contemplation about what they want to do. I have no respect for anyone who refers to people who choose to work a 9-5 job as “hamsters”.

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

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

One of the most common complaints I hear about on The Simple Dollar is that I’m writing financial suggestions for people who have already “made it.” To a certain extent, it’s true – many of the situations I write about assume you already have a certain level of income and financial security.

But what of those situations where such financial security isn’t a given? I hear often from readers who are truly stretching every dime they can get, even without the burden of a house payment or any significant debt – they simply aren’t bringing in much money, and they have to be creative with their choices. What can we learn from them?

That’s basically the premise behind Scratch Beginnings. The author, Adam Shepard, decided to take on the myths about what it takes to be successful in America. He started off with $25 in cash, the clothes on his back, and a gym bag (no job or anything else) and attempted to build the American dream in one year without using any of his contacts or personal accomplishments (in other words, a blank resume). His goal was to have, after one year, $2,500, a working automobile, and a furnished apartment.

Why do this? The point is to see how far away the American dream really is for a person with limited resources – no money, no assets, no contacts, no resume. Can that situation be the starting point for financial success? Let’s see if Adam was able to pull it off.

1 – Welcome to Crisis Ministries
Upon Adam’s arrival in Charleston, with only $25, a sleeping bag, a duffel bag, and the clothes on his back to his name, he makes his way to a homeless shelter in a rough part of town – the aforementioned Crisis Ministries. The place looked neat enough from the outside, but was squalid inside – dirty floors, unclean showers, bathrooms that appeared to have never been cleaned. Even worse, the homeless shelter is surrounded by drug use and other temptations, and unscrupulous employers are constantly getting workers from the shelter and employing them in very difficult, low-opportunity jobs. In other words, virtually every easy opportunity at the bottom rung is fraught with challenges.

2 – EasyLabor
Adam’s first full day in town was spent working for one of the employment agencies that recruited homeless people. Unsurprisingly, he worked for less than minimum wage that day, but it did earn him enough to buy some clean clothes and a bit of extra food (for lunches) at the Family Dollar. The intriguing part of the tale comes later when Adam converses with the other people living at the shelter and they swap background stories – almost all of them are variants on the same story. Several little pieces of bad luck – any one or two of which could have easily been dealt with – added up to a fall to this lowest rung on the socioeconomic ladder.

3 – Another Day, Another Dollar
Three real lessons stuck out from this chapter that can really apply to anyone in a low wage situation. First, never turn away an opportunity for help. If you’re in a situation where you have little or no income, contact social services and see what’s out there for you. The programs are there for you – take advantage of them, or else the resources simply go to waste. Second, utilize your library for as much as possible. When Adam stopped by the library to use the free internet access, he found that a lot of the homeless people from the shelter – at least the ones with a degree of self-motivation – were already there, using the ‘net for job searches and other things. Finally, connect with people in your situation, because they likely have at least a strategy or two that you can use to help your situation. Adam learned quite a bit simply from listening and connecting with others at the homeless shelter.

4 – Big Babies
Right here is where I fell in love with this book, because Adam really begins to use frugality to his advantage here. From delayed gratification – passing up a tempting meal that would have cost him $5 and waiting instead for a lesser but free meal at the shelter – to simply pinching pennies by washing his clothes in the free shower and hanging them out to dry instead of dumping coins in the washing machine, Adam saves dollars time and time again, and with little income (earning only $14 after taxes and “fees” for a day’s work, for example), it makes a huge difference. Another lesson – don’t look down upon people. Adam and his temp-job compatriots were given the bum’s rush several times – and outright lied to – by various employers for no good reason. From their perspective, resentment (and likely some anti-social behavior) actually makes some degree of sense – and that can cost you.

5 – Sundays with George
Don’t look down upon any job that can earn you a solid wage. I often hear stories about how Americans simply won’t do certain jobs and thus immigrants tend to take them. That is a huge mistake, especially if you can earn good money doing it – and good money means you take home more per hour than you would doing other things. For example, Adam literally spends two hours shoveling dog feces for $10 in cash an hour. That’s far, far more than minimum wage, but it’s a humiliating and exhausting job – but it’s a worthwhile trade if you’re really committed to getting ahead. Another key lesson – join a church. Most churches will go a long way to help out a member who is truly in need.

6 – Hustle Time
Another key lesson: do whatever you can to earn a few extra bucks. In Adam’s case, he became a cigarette reseller. He didn’t smoke, but he invested some of his cash in a carton of cigarettes, kept a pack in his pocket, and sold them for a quarter a pop. That earned him $5 a pack – $50 a carton – and that made for a very tidy little profit for him. Find whatever you can – that little edge, particularly one done with little effort, can make a big difference.

7 – Job Hunting 101 with Professor Phil Coleman
If you read one bit about this book, let it be this one. One particular anecdote from this chapter inspired me. One of the people at the homeless shelter that Adam was staying at had lived there for almost a year, doing odd jobs and seemingly keeping his nose clean, but not seeming to really go anywhere with his life. One evening, he suddenly revealed his plan to his caseworker by pulling out his wallet and showing her thousands of dollars in cash. He had been saving every dime he could while living at the shelter and intended to use that cash to put a down payment on a duplex across town, living in one half and renting out the other half. The man was thinking ahead and using what little resources he had in hand to build something grand for himself. That earns my respect, indeed.

8 – Put Up or Shut Up
If you want a job, sell yourself. Don’t submit a tired old resume. Don’t go into a job interview with a bunch of “yes” and “no” answers. Sell yourself. It doesn’t matter what job you’re applying for – a programming job or (as is the case with Adam) a moving job. Go in there and tell the boss exactly why you’re the person for the job. Doing so can do nothing but help you – at the very least, you’ll stand out from the crowd of applicants.

9 – “First and Last Day”
The biggest difference between people who get ahead and people who stick in the same rut is the motivation to make that change. When you get up in the morning, do you bemoan the fact that you have to head off to a job, or do you feel happy because of the opportunity that you’ve got and intend to work hard to get ahead? That simple question is often the one that separates the wheat from the chaff.

10 – Adventures in Moving
The primary lesson here is playing the game with the hand you’re dealt. If you spend all your time complaining and griping about the situation you’re handed, you’re going to simply miss out on tons of chances to succeed. For example, one night Adam failed to get back to the shelter on time. He could have spent much of the night complaining about it – instead, he immediately found a blanket and then located an isolated place to sleep outside for the night, ensuring that he got plenty of rest so he could still be productive at work the next day.

11 – Movin’ on Up
Persistence is another key to success in the workplace. You might be forced to work with a person you don’t like – but if you keep your focus on the task at hand and don’t let those others grind you down, eventually things will change. The problem comes when you let those other negative factors make you negative – and then you become part of the problem. Even through a broken toe and an awful partner at his moving job, Adam kept working and rolling – and eventually, he wound up with a much better partner, earning more money and getting better moving jobs while the troublemaker found his way out of the company.

12 – Workers’ Consternation
Here, the valuable lesson is actually for managers and business owners, particularly those who employ a staff of low-wage workers: treat the employees like people. Be there for them when they need you. Eat lunch with them. Know things about their lives. Compliment them when they do well, and stand up for your employees even at times when it might cost the business some money. Do those things and you’ll earn far more money than you will by cutting every corner and fighting for every penny. Everyone values being respected.

13 – Winter with Bubble Gum
Eventually, Adam found himself in a common position for people beginning to stretch out on their own: he sought a roommate. Through his social connections that he’d built over the first half-year of his experience, he found someone interested in getting an apartment that was also fine with getting a very low-end place that would be cheap – and that they could focus on fixing up. This saved them a lot of money in two ways – cheap rent, plus free time eaten up with home repair tasks.

14 – Culture Shocked
Largely, this chapter discusses socializing without a budget, and that mostly revolves around simply searching around for compatible people, which you can find in many places if you’re willing to look for them. Adam hangs out with a lot of co-workers and through them meets a cadre of interesting people.

15 – Fighting for Respect
On the surface, this chapter retells a fist-fight that Adam gets involved with, but the true nature of the story is that Adam is actually developing a place in the world, with strong relationships with other people, a sound financial base, and a lot of promise for the future.

16 – One Last Move
The book largely winds up here, with Adam leaving town to take care of an ailing parent, having succeeded on his quest. His concluding remarks, spread out here and through an epilogue, largely focus on the fact that no matter what life throws at you, you can take ahold of it and make something better out of it.

Some Thoughts on Scratch Beginnings
Here are three things I think I think about Scratch Beginnings.

Adam does have a few advantages here. Although he starts off with just $25, his clothes, and a blank resume, he has much more than that – a social personality, a strong work ethic, and good health. Not everyone has those elements, but I think this book makes a profound argument that those elements can easily be used to pull yourself out of a bad situation.

Frugality underlies everything. None of this would have worked if Adam hadn’t been trying every frugal tactic he could think of, particularly early on. His success in saving $5,000 didn’t just come because he was earning a solid wage at the moving company – it came because he made a genuine effort to save money and cut corners where he reasonably could, and he wasn’t tempted to spend the difference, either.

If nothing else, the book is an excellent yarn. I thoroughly enjoyed reading the book and was sad to see it end. Shepard is a strong writer with a good sense of making even the most mundane things seem interesting.

Is Scratch Beginnings Worth Reading?
Scratch Beginnings is a thoroughly entertaining (and somewhat enlightening) book about the realities of living at the low end of the socioeconomic ladder. It’s substantially more appealing and relevant than Barbara Ehrenreich’s similar Nickel and Dimed, which I disliked. It’s also readable and enjoyable enough that I had difficulty putting it down when I began reading it, consuming it almost in one straight shot.

Will you come away from the book with some great insights into frugality and how to save money? Probably not. Will it provide some enjoyable reading along with some food for thought about what it really takes to succeed in America? Undoubtedly, yes. And because of that, I thoroughly recommend this book – it was enjoyable and thought-provoking from beginning to end.

Earlier this week, I stumbled across an October article from Inc. entitled Street Smarts: Secrets of a $110 Million Man. The article carefully outlined ten essential tactics that underlie any successful entrepreneurial endeavor:

1. Numbers run a business. If you don’t know how to read them, you are flying blind.
2. A sale isn’t a sale until you collect.
3. When your short-term liabilities exceed your short-term assets, you are bankrupt.
4. Forget about shortcuts. Run a business as if it’s forever.
5. Cash is hard to get and easy to spend. Make it before you spend it.
6. You have no friends in business, only associates.
7. Don’t focus on the top line. Gross margin is the most important number on the income statement.
8. Identify your true competitors, and treat them with respect.
9. Culture drives a company. In the long run, the boss’s most important job is to define and enforce it.
10. The life plan has to come before the business plan.

Excellent advice for entrepreneurs, all around, but what really stood out for me from these ten points is how most of these tactics really help out in our day to day lives, too. Let’s look at several of them.

If you don’t know how to read numbers, you’re flying blind.
In order to succeed with personal finance, one needs to have at least a minimal ability to work with numbers – to add and subtract in a logical fashion and a basic understanding of how interest rates work. Without that, you truly are flying blind – it’s impossible to know whether or not you can really afford purchases or not. If you’re trying to get your financial life turned around but you’re quite afraid of numbers, ask for help – one should never be ashamed of asking for assistance when trying to improve oneself.

Money isn’t money until you have it.
This is a solid, simple rule to live by – don’t spend money you don’t have yet. The easiest way to do this is to simply avoid credit cards, or to only use them if you have enough cash in your checking account to immediately pay off the full balance. Doing this ensures that you’ll not run up a big debt tab that will be difficult to pay off.

Don’t focus on the top line. Gross margin is the most important number on the income statement.
What’s “gross margin”? It simply means spend less than you earn – it’s the difference between how much you bring in and how much you spend. The bigger the difference between what you spend and what you earn, the better shape you’ll be in over the long term. That means it pays to both be frugal and push yourself to earn more – one or the other alone isn’t enough to achieve strong, lasting financial success and security.

Culture drives a company.
What does this mean for you? Surround yourself with friends and people who all practice a healthy financial lifestyle. Friends who socialize by shopping don’t help. Friends who constantly try to one-up each other with the biggest, best, and latest gadgets don’t help. Friends who encourage each other to improve and do better? They help. Friends who constantly help each other out with tasks? They help.

Forget about shortcuts.
Putting yourself in a healthy long-term solution for financial success is never easy. It’s going to take work and diligence. One month of scrimping isn’t going to make all the debt go away. Instead, you need a long-term plan for turning things around. Take things one step at a time, retain the tactics that work, and ditch the ones that don’t. Be persistent, and don’t give into frivolous temptations.

The tactics for success in business, in the end, aren’t that different than the tactics for success in everyday life. Spend less than you earn, do it consistently, and surround yourself with support for that lifestyle, and you’ll do well.

Seth Godin pointed me towards this video of children opening Nintendo Wiis on Christmas morning (it’s well worth watching at least the first minute or so of the video):

Here’s the original page if you can’t see the embedded video.

While I was watching it, I was caught up with two strongly conflicting feelings.

At first, I felt happy for the children. Overjoyed children, on some level, always make me feel happy. I’m reminded of the unabashed joy of some of my own childhood moments, plus I can’t help but consider the happiness of my own children, too.

Yet, as I kept watching, the video began to unnerve me. These children were expressing an enormous amount of joy due to receiving an expensive consumer electronics item. I couldn’t help but think of Christmas 1987, where I reacted in a very similar way to receiving a Nintendo Entertainment System. It is still the single strongest memory I have of a childhood Christmas – and I remember the near ecstasy I had when my parents brought that item out of the bedroom.

What brought on such huge anticipation and excitement in a consumer product? For me, there were a lot of factors – friends at school were a big part of it, as were television commercials and, to a degree, my parents played along as well. They would encourage me to mark things that I wanted out of toy catalogues, for example, and I can remember drawing many, many circles around the Nintendo that year.

The end result? I spent more than a month in a fever pitch of anticipation about Christmas, hoping I would receive a particular item, and I was in an intensely excited frenzy when Christmas morning finally arrived. It was an emotional crescendo – and, frankly, it was the exact way that Nintendo’s marketing department hoped it would end, with a huge rush of happiness associated with that consumer product. Is it really a coincidence that our home currently has several Nintendo products in it? Likely not.

When I see those children in fits of ecstasy, I see children beginning to assign happiness to consumer goods – and that worries me. For most of my early adulthood, I did that very same thing – I convinced myself that my happiness was directly connected to what material items I had. I’d buy things and barely use them because of the rush of owning that product, and I’d quickly buy into marketing plans of all kinds. In some ways, I still do.

So this leaves the question: how can I tie together these scenes of Christmas delight with my own conflicting desires as a parent? Obviously, I want to create happy childhood memories for my kids and I also want them to actually have at least some of the things that they desire, but I also don’t want to create the type of emotional association with things that these kids are developing – and that I once developed. Here are my thoughts.

First, I won’t encourage my children to ask for anything for gifts. This discourages obsessing over Christmas lists and the like. Instead, I’ll just focus on paying attention to them – what are their interests? What are they passionate about? This requires more footwork, but it also stymies a focus on consumerism.

Next, I’ll work diligently to create positive memories with my child that aren’t associated with consumer products. Instead of leaving my children to their own ends – or spending time with them focused on consumerism – I’ll try hard to create happy memories that don’t revolve around things. I’m already actively doing this with my children – in just the last few days with my son, for example, he’s helped me make supper, we’ve played catch, we’ve wrestled in the living room until he’s laughing his head off, and we’ve also read a pile of library books together.

Finally, I want to reinforce in my children the power of giving over receiving. My childhood was often centered around the stuff I could get – there was very little focus on giving to others. We did not write thank you notes for gifts, nor was I ever really encouraged to think about giving to others, either in terms of charities or to loved ones for gift-giving occasions. I feel that this attitude contributed greatly to my financial problems in early adulthood, and I fully intend to work to implant different values in my own children.

I want my children to have a thoroughly happy and fulfilling childhood, but every time I watch that video, I feel that long term happiness is somehow being traded for the short term. That’s not a trade I want to make with my own children – there is a different way, and I intend to find it.