For those of you who might be visiting The Simple Dollar via the … suboptimal web browser on their Amazon Kindle (or otherwise own one), The Simple Dollar is now available in periodical form on the Kindle, meaning you can download it and read it like any other book or magazine on the device.

The Simple Dollar Kindle Edition is available through the Kindle Bookstore – just search “simple dollar.” It costs $0.99 a month for automatic delivery, but you can try it out first with a 14 day free trial to see if it’s worth the $0.99 to you as compared to just using the Kindle’s built-in browser or reading The Simple Dollar elsewhere.

This is just another step in making The Simple Dollar as widely available and convenient for people to read as possible. In the near future, I hope to get a true mobile version of The Simple Dollar available for people who browse on their mobile phones and devices.

What Next? The Third Stage of Personal Finance J.D. sees his recent financial success as the beginning of a transition into a new phase in his life. I tend to think of life as a series of goals – now that J.D. has accomplished one of his, it’s time for him to find a new goal. Maybe a big one – a mission in life. (@ get rich slowly)

Is Frugality the Anti-Stimulus Plan? The entire stimulus plan is predicated on spending. Frugality revolves around cutting spending. How do these two things intersect? (@ frugal dad)

Frugal Family Time at the National Park A national parks pass is a great gift for a frugal family that you know. Once you’re inside the park, you can have a wonderful vacation for just peanuts. (@ gather little by little)

20 Questions that Financially Unprepared People Fear If you read these questions and ever get a queasy feeling, it’s time to make a change. (@ i will teach you to be rich)

Did Powerball Tickets Beat the S&P 500 Last Year? A friend of mine argued to me recently that he would have been better off putting his 2008 retirement savings into lottery tickets than into the stock market. Obviously, this isn’t true, but the numbers are interesting. (@ mighty bargain hunter)

Recently, I made a purchase that’s right on the fine line between my desire to investigate frugality and my enjoyment of new technology. I purchased three very expensive 60 watt light bulbs, not much different than any other light bulb. The catch? These bulbs were LED bulbs, among the first LED bulbs designed to replace incandescent bulbs available on the market.

About LED light bulbs To put it simply, LED light bulbs will eventually be what we use to replace incandescent bulbs – CFLs are merely a stopgap measure. LED bulbs are made out of clusters of light emitting diodes – you’ve seen them in use in countless places, but perhaps most commonly as the small indicator lights on electronic devices. LEDs use very little energy for the amount of light they produce.

The problem with using LEDs for normal light bulbs are many fold. For one, the light they produce is directional, meaning that they work great for things like flashlights where you want to point the light in one direction, but they don’t work nearly as well for general room lighting. For another, individual LEDs generally aren’t all that bright – individual ones don’t produce a great deal of light, certainly not enough to light up a room. Another problem is that the process for making truly white LEDs pushes the very limits of technology.

In short, LED light bulbs are just barely at the edge of being commercially viable. The first manufacturer that I’m aware of that’s producing direct replacement bulbs that replace normal 60 watt light bulbs is C. Crane, which is making what they call GeoBulbs. These bulbs cost an astounding $119.95 a pop, but they last for 30,000 hours and use only 7.5 watts of energy (less than the 13 watts or so an equivalent CFL would use, and far less than the 60 watts a comparable incandescent would use). Even better, they light up immediately like an incandescent and don’t have disposal hazards like CFLs do.

Still, $119.95 for a light bulb? Can that possibly be worth it? And if it’s not, at what price point would such an LED light bulb be the most cost-effective method of home lighting? And how’s the quality, anyway? Do they really compare well to incandescent bulbs?

I decided to thoroughly compare them by comparing three different 60 watt cool white light bulbs – one CFL, one LED, and one incandescent. Let’s see how they work out.

Incandescents, CFLs, and LEDs in Action
I decided to test three roughly equivalent bulbs – a 7.5 watt LED bulb, a 13 watt CFL bulb, and a 60 watt incandescent bulb. The CFL and LED were common generic bulbs as purchased at a typical department store, whereas the LED bulb was the GeoBulb produced by C. Crane. Take a peek at this puppy.

Interesting, isn’t it?

Here they are, all laid out, like daisies in a row.

The big question that most people ask is about brightness, so I installed all three bulbs in a single ceiling fan, flipped on the light, and here were the results.

In this picture, the incandescent is on the left, the LED bulb is in the middle, and the CFL is on the right. This shows clearly that the LED bulb is quite bright. It’s also a rather different color than the other bulbs, but that’s primarily due to the difference between “cool” and “warm” lighting – you can choose the particular type of lighting you like.

The LED does have a minor drawback, though, which you can see here:

Quite a bit of the GeoBulb’s light is directional. It’s very bright directly underneath it, but if you move far off to the side, it’s not producing nearly as much incidental light as the incandescent bulb. For many situations, this isn’t a problem at all – recessed lights and lamps won’t skip a beat. However, for other uses (such as a single bulb that lights a small room), you may want to wait for next generation LEDs.

On startup time As soon as I flipped the light switch, the LED and incandescent bulb lit up immediately. The CFL also came on as well, but it had a brief five second (or so) warm-up time before it reached full brightness.

On heat This was the one area where the LED really blew me away. After five minutes or so of taking pictures and examining the light for myself, I turned off the lights and removed each bulb, intending to see how warm they got in the process. Both the CFL and incandescent bulbs were too hot for me to immediately touch. However, the LED GeoBulb was still cool to the touch. It had produced almost no noticeable heat.

This is a very important but difficult to quantify factor. The heat produced by these bulbs escapes into your house, contributing subtly to the heat level in your home. Over a long period, light bulbs can actually make a noticeable difference in the amount of energy required to heat your home (lessening it a bit) or cool your home (increasing it a bit). The LED bulbs would factor into that equation much less than CFL bulbs or incandescent bulbs.

In short, the LED bulbs flip on as quickly as incandescent bulbs (and faster than CFLs) and produce roughly the same amount of useful light, but much of that light is focused in one direction. This makes the GeoBulbs just fine for most uses, but perhaps not appropriate in some cases.

Comparing Costs
The best way to compare the three types of bulbs is to calculate their costs over 30,000 hours of usage – the lifespan of a single LED bulb.

Standard incandescent bulbs The CFL used here has a lifetime of 1,300 hours, so we would need 23 bulbs over the period of this study. I was able to purchase a single incandescent of this type for $0.34, so our total cost for bulbs over 30,000 hours would be $7.82.

As it uses 60 watts, over a period of 30,000 hours, an incandescent bulb would use 1,800,000 watt hours, or 1,800 kilowatt hours. At the current approximate price of $0.10 per kilowatt hour, you would have to pay $180.00 to run an incandescent bulb over this period.

Thus, the total cost of a 60 watt incandescent bulb over a 30,000 hour lifespan is $187.82.

CFL bulbs The CFL used here has a lifetime of 8,000 hours, so we would need 3.75 bulbs over the period of this study. I was able to purchase a single CFL for $1.24, so our total cost for bulbs over 30,000 hours would be $4.65.

As it uses 13 watts, over a period of 30,000 hours, a CFL bulb would use 390,000 watt hours, or 390 kilowatt hours. At the current approximate price of $0.10 per kilowatt hour, you would have to pay $39.00 to run a CFL bulb over this period.

Thus, the total cost of a CFL bulb over a 30,000 hour lifespan is $43.65.

LED bulbs The LED bulb used here has a lifetime of 30,000 hours, so we would need only one bulb over the period of this study. Unfortunately, that single bulb has a cost of $119.99.

As it uses 7.5 watts, over a period of 30,000 hours, an LED bulb would use 245,000 watt hours, or 245 kilowatt hours. At the current approximate price of $0.10 per kilowatt hour, you would have to pay $24.50 to run an LED bulb over this period.

Thus, the total cost of an LED bulb over a 30,000 hour lifespan is $144.49.

What’s the Best Deal Right Now?
Clearly, given the current market conditions, CFLs are the best bargain at the moment for our home lighting needs. However, they have drawbacks – they have special disposal requirements and do not provide immediate illumination as incandescent bulbs and LED bulbs provide.

However, if you’re avoiding CFLs and are directly switching to LEDs from incandescent bulbs, replacement LED bulbs are already there in terms of cost. You’ll have to judge for yourself if the light quality matches your needs.

My current plan is to use the CFL bulbs for general lighting purposes, incandescent bulbs for focused reading (where immediate light is important), and the LED bulbs will be used in a few very hard-to-reach sockets, since they have a very, very long life span. As the price on the LED bulbs goes down (as they inevitably will over the next few years), I’ll replace the incandescent bulbs first, then the CFLs.

When Will LED Bulbs Be Ready for Prime Time?
My advice is to keep a close tab on the prices of LED bulbs. Ignoring light quality entirely, LED bulbs are already cheaper than incandescent bulbs over a long period, but as they are manufactured by more and more companies, the prices on such bulbs will drop over time – and I believe a rapid drop will occur over the next one to two years.

If you’re switching directly from incandescent bulbs, I would wait for one to two years for the market on these bulbs to mature just a bit – let the technology mature and let other manufacturers get into the game, driving prices down. Wait until the prices on LED bulbs drop to half of their current price – say, $60 a bulb – then begin replacing incandescent lights.

Why not just replace all incandescent bulbs with these bulbs now, since they’re cheaper over the bulb’s lifetime? I believe that in the short term, the prices on LED bulbs like these will actually drop faster than the energy cost savings in buying them now, so I would hold off for a year or so before replacing all of my incandescent bulbs.

If you’re just looking for the cheapest lighting possible, your magic number for LED bulbs is in the $15 per bulb ballpark When those prices are reached, LEDs will then be the cheapest solution for light bulbs in the home – and they won’t have the challenges that CFLs provide, either. I would estimate this price point will be reached in three to five years.

Over the last few months, I’ve made the conscious decision to investigate long term disability insurance and long term care insurance for myself to help my family survive if I were to become incapacitated for some reason. I’ve been quietly collecting quotes on these insurance types and reading up on them so that I really understand what I’m buying and what the loopholes are.

I had a conversation with a friend that I trust quite a bit about this process, and he seemed completely shocked that I was doing this. “You’re listening to too many insurance salesmen,” he told me. “Why would you even consider such a thing?”

He went on to talk about the various scenarios that might occur that would require such long term insurance, and for each case he had a reasonable explanation as to how the bills would get paid. He argued that there might possibly be a case for long term care insurance but he believed it was the equivalent for buying house insurance against a volcano eruption while living in Iowa – it could happen, but if it did, there would be bigger fish to fry.

Having known multiple people whose lives were torn apart because of a lack of a method to pay for long term care or to help out with income under a long term disability, I can clearly see the cases for such insurance.

Yet I’m left wondering if I really need it – or if I’ve been convinced that I need it by reading a number of very conservative personal finance writers (and, I suppose, potential insurance salespeople).

In the end, though, my friend was right: personal finance books were the source for my interest in such insurance. But they were also the source of a lot of other great ideas I’ve applied positively in my life: spending less than I earn, managing my money better, cutting my spending, planning for the future effectively, and so on.

How can I know what advice really applies well in my own life? Here are some tactics I’m applying as I dig further into this insurance question.

Always do your own research before making a move. I might read that long term care insurance is a good idea in a book or two, but that shouldn’t be enough to just blindly go ahead and get that insurance. Instead, it’s merely a starting point for further investigation. Dig into the details of any such advice you might follow. In my case, I’ll want to know what that insurance actually covers, when it takes effect, and what sorts of loopholes exist.

Never absolutely trust any single source of information. Just because a personal finance book or two or a columnist or two claims something is a good idea for me doesn’t mean that it is. Again, I need to look at the specific situation of my own life and figure out if I actually need such things – or if my money might not be better spent shoring up our financial situation in other ways.

Know that there are risks and costs associated with anything – nothing is a sure thing – and know your tolerance for risk. There are no guarantees in life, period. The best we can do is consider our situations and make realistic assumptions about what’s likely to happen and what’s not likely to happen and then use that as the basis for future choices. Is there a likely need for long term care for me? No. Is there a possible need for long term care for me? Yes. The question is how much of a risk it is – and what the consequences are on both sides of that bet.

The interesting part about this is that two people in the exact same situation might come to different conclusions here simply because they have different risk tolerances. I know, for example, that my risk tolerance is relatively low, so I might find that such insurance is right for me, while someone else might have a higher risk tolerance and might find it’s not right for them.

Never be afraid to ask for help. By this, I don’t just mean turning to personal finance professionals – although they can be useful. I’m talking about turning to family members and friends for advice. I’m talking about sitting down with your partner and talking through these tough decisions.

We don’t have to go it alone when we’re making choices like these. If you’re unsure after doing your own legwork, don’t be afraid to talk it out.

You might find that, in the end, you’re being too cautious. Or you might find you’re not being cautious enough. Either way, you’ve done the work to find the right answer for you, and that’s a success no matter how it turns out.

The one absolute requirement of a money manager is emotional maturity. If you don’t know who you are, the stock market is an expensive place to find out.
- Adam Smith

I ran across that amazing quote from Adam Smith (an 18th century economist that’s often seen as the father of modern economics) the other day at the library and it’s stuck with me.

If you want to manage money effectively, you have to be emotionally mature. You have to know who you are – not who other people tell you you are or who you think you are. You have to know what you actually need and be able to distinguish between what you need and what you want.

This isn’t just a question of stock investing, either. It applies to everything – the ability to make good consistent spending decisions, the ability to plan ahead for the bigger things in life, and the ability to set goals and priorities and then work towards them.

To put it simply, those hallmarks of emotional maturity simply aren’t held by everyone. I should know – I don’t believe I was emotionally mature at all until I was able to emotionally digest the birth of my first child.

I was able to set goals – but I was rarely able to follow through with them unless my hand was held along the way, either with advising or with other carrots.

I was able to handle all of the basics of personal finance, like paying bills and such – but I wasn’t able to put it in a bigger context, that my choices would affect the rest of my life.

I was able to bargain hunt quite well – but I wasn’t able to really ask bigger questions, like whether or not I needed this item at all.

Worst of all, I was able to see that things weren’t adding up – but I wasn’t able to make the changes necessary to get my financial house in order.

To put it simply, I didn’t know who I was or what I was striving for in life. It took a lot of soul-searching for me to figure it out – a lot of late nights spent holding my infant son, thinking about my life, and talking to my wife.

Once things began to click into place, though, most of the basics of personal finance began to make complete sense to me. My checkbook and credit cards went from being dangerous weapons to being useful tools.

Emotional maturity doesn’t come to each person in the same way or at the same time – nor does it always come all at once. I know people in their fifties and sixties who still have no idea what they want in life (and unsurprisingly, they’re deeply in debt). I know teenagers who already have things figured out and know what they want from life. I know people who are extremely good at saving every dime they make – but they don’t know what their future holds and haven’t even considered starting a retirement plan. I know another person who has a great life plan in place, but often comes dangerously close to undermining it because of his bad spending habits.

Instead, I believe emotional maturity is a journey for each person. We’re all at different stages on that journey – some have barely started, others are well centered. I also believe that there is no true destination along this journey and that you often stop along the way.

How can you continue along your own journey of emotional maturity? Here are five suggestions that helped me figure out my place in life.

Figure out what you really love. Not what you’re supposed to love, or what you think others expect you to love. What do you love? What fills you up with so much joy that you can barely stand it? For me, it’s my family and my writing. The answers may not be as simple for you, and if you really think about the question, you may find that the things you think you’re supposed to love aren’t the things that you really do love.

Throw out the magical thinking. Many people get stuck in the trap of envisioning a great conclusion to some process in their life, but they don’t consider how to get there at all. They instead spend all their energy bopping along to the image of that happy conclusion. Emotionally mature people recognize that you’ve got to work and plan to get there. Look at the things you envision for your future and ask yourself what your plan is for you to get there.

Focus on tolerating and controlling your moods and feelings. It’s very easy to simply ride our emotions and let them lead us. We splurge in happiness, isolate ourselves in sadness, act impulsively in anger, and flee in fear. An emotionally mature person is able to recognize these emotions and not let those emotions change our behavior (at least, not in an uncontrolled fashion). You might have enough control to not punch a wall when you’re mad, but do you have the control to not change your investments when you’re afraid of losses?

Obviously, for some people, this can be much more challenging that it can be for others. The real purpose here is to always attempt to improve your control from where it is now, not to suddenly become a person with perfect emotional control.

Address every avenue of your life that brings you guilt (and other negativity). Many people load themselves up with emotional baggage. Instead of dealing with the problems in their life, they attempt to avoid them or postpone difficult situations. Emotional maturity means thinking about these situations, facing these situations, and doing what you can to resolve them with emotional control.

Accept that you will fail – and learn from it. Don’t assume that everything you touch turns to gold and, even more importantly, when you do fail, be willing to examine that failure honestly and figure out what went wrong. For example, if a relationship fails, don’t simply blame the other person – instead, look at yourself and ask yourself what you did wrong.

These are all steps along a journey towards emotional maturity – and, as Adam Smith points out, emotional maturity goes hand in hand with good money management.

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. One reader asked me what I thought of Dave Ramsey’s books, so here are my reviews of most of them.
Review: The Total Money Makeover
Review: More Than Enough
Review: Financial Peace Revisited

And now for some reader questions!

What are your thoughts on using a utility company’s budget plan?
- Anne KD

Most utility companies offer a “budget plan” where you are charged a specific bill amount every month throughout the year, regardless of the actual usage. At the end of the year, you receive an “adjustment” bill that makes up the difference between the amount you’ve actually paid in and the cost of the energy you’ve used over the course of the past year.

For the most part, these plans are just fine, particularly for people who like their bills nice and regular most of the time. The only problem comes with that adjustment period – quite often, it can be a nasty adjustment, causing you to pay in substantially more than your normal bill just to make up the difference.

If you sign up for such a budget plan, either be sure you have plenty in your savings account to cover any unexpected adjustment at the end of the year or ask for a slightly higher monthly bill. That way, you won’t have to worry about a nasty surprise at the end of the year while still getting the regularity of a budget plan.

I have a question – are you worried about the volcano in Yellowstone erupting? It’s been all over the science blogs I visit. If anyone hasn’t read/heard about it, it’s an interesting read.
- sophia

To me, the Yellowstone caldera (read all about it!) is one of those things that’s simply so far out of my control – and the consequences of a bad event so devastating – that it’s not worth my time to worry about it one iota. The same goes for the possibility of a cataclysmic asteroid hitting the earth – it would be incredibly devastating and far beyond any one person’s ability to plan for it (unless you’re Bill Gates and can build a bunker in a mountain or something).

When I was a kid, there were a lot of predictions about a major devastating earthquake along the New Madrid fault line which, if they happened, would have pretty much leveled my hometown. My father basically took the same approach: why worry about it at all? It has a very minute chance of happening, it’s out of our control, and there’s not much we could do to really prepare anyway besides having earthquake insurance (which was just a few dollars in our area).

I think that’s the reasonable (and healthy) way to go.

Do you have any suggestions on how to find a good attorney, and how to save on attorney services?
- Griffin

I would hit my social network before doing anything else. Ask some of your friends, particularly those you trust and those that have good standing in the community. The advice you get from these people will almost always be the best advice you can get in your local area.

In terms of saving money, your best bet is always to be as prepared as you can before you begin using the services. Know exactly what you want, have as much information ready as you can, and have the questions you want to know ready to go before you visit. Attorneys typically charge by the hour and if you don’t have your information together, you’ll eat into that time simply due to your lack of preparation.

My question is what if you have been married for a while, are very much in love with that person and vice versa, but the one thing that has changed about that person is her spending habits? I find myself having to be the bad guy all of the time about vacations and material things.
- T

A change in spending habits is often tied to other life changes – new friends, a new career, changes in health, and so on. Has anything else changed in your partner’s life over the last few years?

The best tactic for digging through difficulties in a relationship is always rational communication. Don’t yell. Never yell. It will get you nowhere. You should also realize that if you begin to question someone’s bad behavior or flaws, they’ll often try hard to reverse it – and if they do that, admit to your flaws and say that these are things you need to work through together.

Your political advice makes me nervous because you aspire to a political office. I don’t want anyone who recommends a political Dummies book above me.
- Michael

I’m assuming you’ve never heard the phrase “don’t judge a book by its cover”?

Most of the books in the “Dummies” series are actually excellent simple introductions to the topics in question and almost always point the reader towards more sophisticated and detailed works in that area. The “Dummies” books on political topics are no exception to this – they lay out the basics of civic government in America and also provide suggestions for continuing on a journey of learning.

I would far rather have someone read a “Dummies” book on a topic that they didn’t know well than read something overly complex – or even worse, read nothing at all. A “Dummies” book is a completely reasonable place to start.

Did you ever finish reading Neal Stephenson’s book Anathem? What did you think of it?
- Adam

I’m nearly finished with it – and I loved it. You have to give it time, though – Stephenson spends most of the first half of the book setting up the characters and situation and much of that can seem complex and tiring because Stephenson is fleshing out a rather complex world.

For those unaware, Anathem is a giant 900 page work of fiction by Neal Stephenson. The book is set in something of an inversion of our world – the theoretical scientists in the world lock themselves into what amounts to monasteries and live very isolated and spartan lives, and outside of these monasteries, both religion and purely secular lives thrive. What happens when the scientists are basically forced to come out of the monastery because of a global situation that affects everyone? It’s a wonderful novel.

How do we get through to a 14 year old about the differences between rich, poor, and all that is in between? It’s not just black and white. And also, how do I encourage her to come up with a plan for being “rich” (I prefer having her come up with a plan for success, not just being “rich”), without coming straight out and saying becoming “rich” doesn’t just happen overnight? Which, I have said, but I need something to translate to her young language.
- heather

Don’t translate it at all. This is a perfect opportunity to use the Socratic method for teaching. You should lead by asking questions to determine what she is actually thinking about the topic.

If she talks about “rich,” ask her what she means by that. The same for “poor.” Ask her why she wants to be “rich” and not “poor” by her definition. Ask her why she thinks people are “poor” – is it by choice?

Let her lead and show you what she knows. Quite often, teenagers have very fresh and coherent views of the world that are largely correct but simply haven’t been aged by experience – much like a wine freshly fermented. You can provide a bit of that aging by making them consider their views a bit more.

What’s the most frustrating part of writing a blog like The Simple Dollar, with such a big audience?
- El

The biggest problem (from my perspective) is the difficulty that I have remaining part of the conversation.

In the earlier days on the site, I could post an article and then engage further with readers in the comments. This works well if you have a limited number of commenters.

However, most discussions on the site now reach into the hundreds of comments with fifty different strong and intelligent voices and, quite often, there are multiple strong perspectives being voiced. I love that. However, if I ever jump into that mix, it is impossible for it to end well. If I attempt to offer an alternate explanation for something I said in the post, I’m seen as being defensive. If I admit to being wrong and offer to change the post, I’m said to be spineless and caving and attempting to cover the tracks of my “flaws.” Even worse, no matter which path things follow, I’ve destroyed the nice ongoing conversation.

Thus, I simply don’t participate in discussions much any more. With so many vibrant voices commenting, most of the angles I can think of are well covered in most of the discussions, so I don’t really have a role to fill other than “disruptor,” which is something I don’t like to do at all.

I miss the interaction, though. I miss it a lot.

My question: While growing up (I am 37), I learned about money, managing expenses, and saving through, for lack of a better term, observations of the “real world” – my parents always explained to me what was going on when they went to the bank, used a credit card, or sat down to pay bills every month. Now that so much of banking and bill paying is done on-line (making money far less tangible), what would be your strategies for teaching children everyday concepts about money?
- Christine

My plan with my own children is to show them how I pay the bills and keep the money balanced no matter how I do it – on paper, on the computer, on my iPod Touch, or anything. The principles behind it still remain the same – I strive to spend less than I earn, keep my bills paid, and build up personal wealth over time.

That’s really what I want to teach them. They’ll be able to figure out the technology of the moment – what’s most important is that they understand why it’s being used.

What do you and your wife plan to do on Valentine’s Day?
- Lily

My parents are coming to visit that weekend and are insisting on watching the kids while we go out somewhere, so that’s what we’re going to do. We’re going to go out for a simple dinner somewhere in Des Moines, then likely out to a movie (Milk looks like our tentative pick).

For many people, this will seem boring and uneventful, but trust me – there are virtually no evenings where we have the opportunity to leave the kids with babysitters we 100% trust (my parents) and simply spend some time out and about alone together.

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.

As of late, I’ve been reading a lot of what one might call “business classics” – books that have stood the test of time at explaining fundamental principles of how modern businesses work. Books like Crossing the Chasm by Geoffrey A. Moore, The Innovator’s Dilemma by Clayton Christensen, and Barbarians at the Gate by Bryan Burrough, among many others.

Along the way, I came to realize that many of the fundamental principles behind these business books applied very well to personal finance as well. Optimizing your spending? Check. Seeking out new ideas? Check. Protecting yourself against the inevitable? Check. I began to quickly see the overlap – and the potential for some interesting writing in that area.

All of this brings us to Kim Snider’s How to Be the Family CFO, which claims to do exactly that. Snider basically encourages you to take charge of your family’s finances and treat them like the financial side of a business – and offers (as the subtitle says) four simple steps for doing it.

Is Snider’s advice worthwhile? Or does it merely retread much of the same material one can find in any old personal finance book? Let’s dig in and see what she has to say.

A Walk Through How to Be the Family CFO

Section One: Be the Family CFO
A family CFO has three roles: planning, managing assets and liabilities, and managing behavior. That may seem like heavy-handed talk, but if you think about it for a bit, it really fits with what most of us are doing (or trying to do) in our own lives.

We plan for the future whenever we think about our children’s college savings or our own retirement. We manage assets and liabilities whenever we earn a paycheck and pay the bills. We manage behavior whenever we strive to make good day-to-day choices with our spending (and our family’s spending).

Those three things, though (planning, managing assets and liabilities, and managing behavior), are the things that CFOs of large companies also do – they just do them in somewhat different contexts. That doesn’t mean that the lessons of a business school trained CFO can’t apply in our own lives.

Section Two: Plan Prudently
Snider’s big advice in terms of prudent personal finance planning is to simply begin making a personal finance statement on a regular basis. Make a list of all of your assets and all of your debts, find the balances for each, and figure out your net worth. Snider suggests doing this on a very set schedule – monthly or quarterly. I personally think this is a fantastic exercise for anyone to do.

As for budgeting, Snider seems to believe that a loose budget is useful, but the more detail you add and the more you tighten, the less useful it becomes. Why? The realities of our modern, hectic lives don’t really match well with firm budgeting. Instead, define your required bills and set some guidelines for other areas of your spending, but don’t budget down to the last nickel – give yourself at least a bit of wiggle room.

Section Three: Save Prodigiously
Snider argues that a six month emergency fund is a necessity for everyone and encourages families with children to have even more than that. For anyone familiar with Dave Ramsey’s work, this may be a surprisingly large number, since he advocates for a $1,000 emergency fund – for virtually everyone, Snider’s suggestion is far, far more money.

Another interesting suggestion from Snider: she encourages people to focus on retirement savings first and not worry about college savings until retirement savings are well taken care of. Why? You can borrow money to go to college, but you can’t borrow money to retire. This simple fact means that you need to make sure your retirement is covered first, then help out your children.

Section Four: Invest Wisely
Snider’s advice on how to actually invest one’s money is solid and straightforward. Figure out your goals before you do anything, but figure them out early so that you can begin investing early. Create passive income where you can (meaning create things that can continue to earn money for you even if you were to walk away from them). Focus on long term results. Know your risk tolerance – if you can’t tolerate a 20% drop in a year, you shouldn’t be heavily invested in stocks. Don’t let tax implications dictate your investments – just use them as a factor. Don’t ignore inflation.

My favorite piece of advice, though, was her detailed discussion of figuring out what you can control and ignoring the rest. There are simply some things in life you can’t control – the stock market is going to have ups and downs regardless of what you do or how much you worry about it. Instead of worrying about these things, focus on what you can control. Knowing that the stock market ups and downs are inevitable, what can you do to protect your money in a way that makes you feel secure?

Section Five: Manage Risk
Snider argues that the greatest risk we face in our day to day lives is our own personal health – and our related ability to continue to earn an income. As long as we can work productively and earn an income, we can ride through most of life’s storms.

Thus, the best way to manage risk in our own lives is to protect against those risks with things like long-term care insurance, long-term disability insurance, and life insurance. These protect our family against the risk of having something happen to our health and thus should be the highest priority in terms of managing risk in our financial lives.

She does go on to cover other areas of risk – liability, identity theft, and other areas – but her focus on our continued health as the biggest risk was serious food for thought, at least for me.

Is How to Be the Family CFO Worth Reading?
First off, most of the material in this book is stuff that you can find in most other general purpose personal finance books. Snider doesn’t really tread new ground here – if you want explicitly new information, you probably won’t find it in this book unless you’ve not read many personal finance books.

Having said that, em>How to Be the Family CFO is an excellent book because of the perspective Snider brings to the table. Snider takes the view that one should analyze the ins and outs of their life as though they’re a business. Cover your risks. Focus on the areas you actually can control. Budget reasonably, but not too tightly. Make clear reports of your finances so you know what’s going on with your money. This is an excellent and well-reasoned approach to personal finance management.

em>How to Be the Family CFO comes highly recommended from me, particularly if you have a sense that you need to take a harder and more realistic edge with your family’s personal finance management. It made me start to carefully consider my choices in terms of managing my family’s money.

Perhaps my favorite online development over the last year or so has been the explosion of Twitter. For those living under a rock who have not yet heard about Twitter, it’s pretty simple: it’s like instant messaging except everyone can read conversations and join in. You sign up for a free account there and can then send messages (and respond to the messages of others) whenever you want, from your computer or even from your cell phone via text message. You can also “follow” other people who have signed up for Twitter, enabling you to see all of their messages at once. So, when you visit Twitter, you’ll see the latest updates of all of the people you’re following (i.e. the people you’re interested in).

If you’d like to take a peek, feel free to check out my own updates. I also make Simple Dollar updates available on Twitter.

Anyway, one of the hottest topics among online marketers and bloggers is how exactly someone can use Twitter effectively to gain a following and perhaps grow one’s business. Twitter is particularly interesting in this regard because it allows one person to carry on something of a conversation with a large crowd of people that want to hear what they’re saying. Take my own account, for example: if I send an update, I’m effectively talking to 2,000 people who have chosen to hear what I have to say.

Surprisingly, out of this creative explosion has come a ton of bargains. Quite a few people have jumped on Twitter as a way to provide coupons for their business in a very inexpensive way. Others have written computer programs that scour the ‘net for bargains and post them automatically to Twitter. Still others are exploring giveaways and contests.

I’ve followed quite a few Twitterers who are trying these things and I’ve found ten well worth sticking with. Even if you don’t find them worth following, you may find this post worth bookmarking so that you can check in on these accounts from time to time.

DellOutlet – Dell already has excellent prices on computer systems, but they’re giving out some incredible deals directly on Twitter via the DellOutlet account. There are at least two items that I’m considering buying from Dell, so I’m just waiting until they pop up with great coupons on here. If you’re considering upgrading your PC, this is one that’s well worth following.

amazondeals – Every day, Amazon throws up a few “lightning deals” on their site, which are simply individual items sold at a pretty stiff discount for just an hour or two. I tend to follow these pretty closely, as there are often deals on there that can be “turned” for a profit or can be given as gifts later on (several of our Christmas gifts came from this feature). Amazon has chosen to share these on Twitter, which has made it very easy for me to keep tabs on these deals.

AmazonSteals – This one’s similar to the above “amazondeals” account, except this one isn’t directly affiliated with Amazon and it also digs deeper into specific Amazon categories to find steeply discounted items. It actually forms a very nice pair with amazondeals for digging up great deals buried within Amazon.

amazonmp3 – A legal mp3 album every day for $2. That’s basically what this account offers. The mix is widely varied, but I find about one album a month that’s well worth it for me (most recently, Urban Hymns by The Verve, which I listened to over and over again about twelve years ago).

dealyzer – This account seems to simply scavenge the web for huge discounts of all kinds. The mix is quite varied, but I find things regularly on here that are worth following up on (for example, I got the Planet Earth documentary set for my son for $34 shipped directly from Discovery because of this account).

shoppersshop – This is a very low traffic version of dealyzer. Outside of the pre-holiday sales, there’s only about one update a week or so, but when they come, they’re almost always well worth it. I actually found several of the other accounts listed on this page by following shopperssshop.

DealUniversity – Here’s another strong deal aggregator, but this one focuses almost exclusively on electronics deals. Their picks really are a mixed bag, but there are enough gems that come through to make it worthwhile if you are good at sniffing out deals on tech items.

cheaptweet – Cheaptweet is basically just an aggregation of the top picks from CheapTweet.com, which itself just scours Twitter for sales and other deals and allows users to vote up the best of the lot. There’s a fair amount of conversation in there, too, but when the deals come through, they’re usually good ones.

booksamillion – Run by the folks behind the Books-A-Million book chain, this account offers up deals on … books. Following this account is like shuffling through a good bargain table at a bookstore – you won’t be interested in most of it, but every once in a while a dirt-cheap new book will float through.

SmartyPig – I felt it appropriate to mention SmartyPig here, since I’ve been following them practically since their inception. SmartyPig is an online savings account with a goal-setting twist. So why mention their Twitter account? Every month, they give away a SmartyPig account with $100 in it on their Twitter feed (and their methods for determining winners is both transparent and entertaining). The traffic on here is pretty low, too – most of their Tweets are related to their monthly giveaway.

Do you know any other Twitterers that offer good deals on Twitter? Let us know in the comments!

A few days ago, I was giving a phone interview about The Simple Dollar and general frugality and personal finance topics when the interviewer threw me a bit of a curveball. After hearing me talk about frugality for a bit, he pauses for a second, then asks if he can be honest with me. He then tells me that from his perspective, the things that I do are cheap. He would view me as a cheapskate and he wouldn’t think of me as a fun person to hang out with.

I was caught off guard by this, because most interviews that I do are with people who are either genuinely interested in frugality and money management in a positive way, or are at least feigning positive interest.

So I followed up with his comment and I dug up quite a few interesting conclusions.

First, people assume that since I write about frugality, I must be a complete cheapskate. Most of you who have read this site for a long time know that I struggle with balancing my desire to minimize my spending with my desire to, well, spend. Quite often, I come down on the side of spending more – we don’t eat as inexpensively as we could, I still hold on to some expensive hobbies (like video games), and I’m also quite willing to invest in expensive equipment in my home – like appliances and the like.

What this really is is a matter of first impressions. Think about it. Imagine you’re at the grocery store, in line behind someone using a huge wad of coupons. You’re going to get a particular impression of that person. Imagine you’re walking across the parking lot and you see a guy driving a rusty old pickup truck. You’re going to draw some conclusions.

For me, that first impression is that I’m a cheapskate. And, as usual, first impressions aren’t quite accurate at all.

This experience (and many others in my life) makes me realize that judging someone based on your first impression is incredibly limiting. The guy driving the truck that’s falling apart? He could be the negative image you make up in your head. He could also be a person who’s trying desperately to save up for a down payment for a bigger house for his family. He could be someone who very rarely needs a vehicle and doesn’t see a need to invest a lot of money in one. He could be Sam Walton.

Another interesting conclusion I came to from this conversation was the immediate assumption that making frugal choices is a negative. The implication seems to be that I must have some sort of social stigma because I actively seek to spend less money. I must not be any fun to be around because I don’t spend money with reckless abandon, right?

If you believe that, you’re being sold an advertising myth. We’ve all grown up in a society in which advertising has constantly told us that spending money and buying products will bring us happiness and beauty and social success and career success.

Here’s the amazing part: if you truly believe this mythology, then you likely believe the reverse: not spending money and buying products will bring you sadness and ugliness and social failure and career failure.

Think about that statement for a moment. To me, it’s a conclusion that seems simultaneously like a reasonable conclusion and the most outrageous thing I’ve ever read. I can see clearly where the logic comes from, yet when you consider what the statement is actually saying, it sickens me to my stomach.

Yet, reflecting on my earlier life, I can honestly say that to some degree, I used to believe it. I had been trained over the years to look upon spending as a positive – and thus upon not spending as a negative. Looking at it so nakedly, though, makes it seem ugly and empty.

Just as ugly and empty as any other broad negative generalization.

Part of the reason I write The Simple Dollar – and I’m so open with big parts of my life on it – is that I want to show to as many people as possible that such negative generalizations are completely false. Frugality is not boring. It’s not cheap. It’s not lonely. It’s not a sign of failure.

It simply means that I’m interested in working a little harder to find better solutions in my life, solutions that cause me to spend a lot less of the money that I earn. It doesn’t mean I spend all of my time living miserly without any fun at all – in fact, I look at it as a way of living that brings me substantially more fun. I don’t worry about bills. I have career freedom. I don’t sweat whether I can afford something I actually need.

In the end, I’ve come to feel that being called a “cheapskate” in a derisive fashion doesn’t really matter at all. It’s just another word people use to feel better about themselves by demeaning someone else. It may be ugly and empty, but in the end, the only person truly hurt by it is the person who is locked into the negative mindset.