Spend less than you earn doesn’t just mean cut back on your spending. It also means striving to earn more income when you can, because the real goal is to maximize the gap between your income and your spending and then use that for a greater purpose (saving for your goals).

When the economy is good, there are a lot of ways to increase your income: hunting for a new job, asking for a raise, switching careers, starting a side business, and so on. Unfortunately, when the economy is down, many of those options are much more dangerous than before – people are afraid to rock the boat at work because of fears of layoffs and the job market is pretty tight as well.

In a down economy, I believe the best way to set yourself up for more income over the long haul is to start a strong side business. A side business started today will be ready to really thrive as the economy begins to rebound and people begin to spend their money more freely. Better yet, many good side businesses don’t have a tremendous amount of startup cost, so you don’t have to put yourself at personal finance risk right now.

You can do this. Many, many people believe that they don’t have what it takes to make such a thing succeed, especially now in terrible economic times. That’s simply not true. There are many, many ways to make extra money no matter what your skills are.

First off, at first, it’s useful to think of a side business as a hobby with benefits. Don’t worry too much about choosing the activity that will earn you a lot of money.

Instead, start off by thinking about the things you enjoy doing. For example, my mother truly loves young children – babies and toddlers. Few things make her happier than rocking an infant to sleep. Thus, for a while, she’s considered opening up a very small in-home daycare, simply because she personally enjoys the experience so much.

The Simple Dollar started off as a side business in a sense. I never anticipated it would earn very much money, but I knew that I enjoyed writing and felt I was at least moderately skilled at it. It was a great way to funnel my energies into something that could help others and might potentially earn a few dollars.

What do you truly enjoy doing? Don’t answer this immediately – it’s much more effective to start a list and keep it over a period of time. Write your ideas down now, then leave the list out somewhere where you’ll routinely bump into it.

Also, it doesn’t have to be something that others consider fun. It’s about what you enjoy doing. What things do you do that leave you feeling good after you do them?

After a week or so, take a look at all of the things you’ve written down. Somewhere on that list is the perfect side business for you. The trick is finding it.

Try brainstorming a few different ways to earn money for each of the items on the list. Let’s say, for example, that you wrote down “prep sports” as an interest. Perhaps you could become a referee. Perhaps you could start a blog discussing prep sports in your state. Make a list of all of these ideas – two or three or four for each thing you enjoy.

What you’ll find is that some of the ideas sound unappealing and others sound merely okay. What you’re looking for, though, is the one or two items on the list that fill you with excitement. You’re getting close.

If you have a small handful of ideas, whittle them down by eliminating ones that would require a large initial investment and also eliminate the ones that seem like they might wear on you with a large investment of your time and energy.

What you’re left with is something with potential. It’s something that can fill your spare time with something you enjoy. It’s something that can earn you some extra money on a regular basis.

So now what? You have your idea. Now get started. Let the idea fill up your spare time – devote at least an hour or two to it each evening. Don’t necessarily seek income right off the bat – instead, figure out what you’re actually doing by learning from others who are doing similar things (the internet is a fantastic resource for this).

More importantly, try, try, and try again. Don’t just sit there attempting to formulate the perfect idea. Instead, give your pretty good idea a shot. If you fail, great – learn from it and try again. Try as often as you can.

I’m reminded of a great story I read a while back, originally told by Alison Woods:

The ceramics teacher announced on opening day that he was dividing the class into two groups. All those on the left side of the studio, he said, would be graded solely on the quantity of work they produced, all those on the right solely on its quality.

His procedure was simple: on the final day of class he would bring in his bathroom scales and weigh the work of the “quantity” group: fifty pound of pots rated an “A”, forty pounds a “B”, and so on. Those being graded on “quality”, however, needed to produce only one pot – albeit a perfect one – to get an “A”.

Well, came grading time and a curious fact emerged: the works of highest quality were all produced by the group being graded for quantity. It seems that while the “quantity” group was busily churning out piles of work – and learning from their mistakes – the “quality” group had sat theorizing about perfection, and in the end had little more to show for their efforts than grandiose theories and a pile of dead clay.

Go out there and try something. You’ll probably fail, but learn something from it. Get back up and try again.

Don’t spend hours and hours sweating over making a blog post perfect. Write something, edit it a bit so that the big ideas are clear, then share it.

Don’t worry about being the perfect referee. Learn the rules and procedures of the game, then go out there and try it.

Don’t worry about knowing how to handle every computer repair task. Master the basics and be able to back it up with good documentation, then get started.

Most important, don’t worry about maximizing your profit. Instead, focus on enjoying what you’re doing and building a positive reputation as you learn and improve. Eventually, you’ll reach a point where you’re in demand because you’re both skilled and you have a positive reputation – and then you’ll be able to earn quite a lot.

Good luck.

Carl writes in:

I am 21 years old and am still in college earning my degree. As of lately I have begun thinking about my future and what I will do with my money. I understand saving is a crucial part of living a successful financial life, but I am confused on how to attack such an issue. I have decided that I will definitely get a Roth IRA, but outside of that I don’t know what else to do with my money. I want to invest in the stock market in the long term most likely a index fund or a portfolio of low risk companies, would that be a form a saving?

I don’t if i should even bother with an online savings account and just focus on IRA and stocks, or should I have all three?

Carl’s certainly headed in the right direction. He’s clearly aware of the value of spending less than you earn and is interested in figuring out the best way to invest the difference.

However, there’s one big piece of the puzzle that’s missing here: what is Carl saving for? Without having clear goals in mind, it’s incredibly easy to make very poor choices when it comes to saving for the future.

Take the Roth IRA, for example. It’s a great vehicle for saving for retirement because, when you reach retirement age, you can take withdrawals from it without any taxes at all. However, it’s an extremely poor vehicle for saving for goals prior to retirement, since you can only withdraw your contributions.

On the other hand, savings accounts can be a great place to put cash if you intend to spend it in the near future. You don’t have the risk of losing value as you do with the stock market and you’ll earn at least a small return on your money.

Carl needs to spend some time thinking about what his goals are. Is he interested in saving for retirement (based on the Roth IRA mention, I’m guessing he is)? Is he saving for something in the short term – for example, is he considering a home purchase in the next year or two? Does he just want an emergency fund so that he can survive in the event of an inability to find a job after graduation? Or is he interested in long term investing (more than ten years or so) that he can use in his thirties or forties for a major purchase (like, say, a home to raise a family in)?

These different goals are wonderfully matched to different investment vehicles. If you want an emergency fund, you should be putting your cash in a savings account. If you want short term savings for goals in the next few years, you should look at short-term treasury notes, bonds, and certificates of deposit – stable investments that aren’t restricted and won’t lose money. If you’re shooting for long term savings (but not retirement savings), look at stock investments, preferably in index funds. If you’re saving for retirement, a Roth IRA is a great vehicle.

It’s likely that Carl is eyeing multiple goals. It’s also likely that, given his youth, that these goals are more long term in nature, but it is always useful to have an emergency fund on hand for any emergencies. I can say this much: if I were in Carl’s situation, just coming out of college with a strong desire to spend less than I earn, I would fully fund a Roth IRA, build up a few months’ worth of emergency fund, then start investing in index funds for longer-term things, like buying a home in my thirties. However, Carl’s priorities may be different.

The real challenge isn’t the actual investing. The challenge is figuring out your goals and knowing where you’re going with your life.

Meet Clara. She’s a 93 year old great grandmother. She’s also the host of one of the most compelling things I’ve ever seen on the internet.

Clara was a young woman during the years of the Great Depression. During those years, she learned a lot of survival skills – among them was the ability to create a tasty meal for the absolute minimum cost.

Today, Clara’s a spry ninety three year old who is still able to get around in her kitchen and is also a good storyteller, so she’s sharing her stories and her Depression-era recipes on YouTube.

Part of the reason that I liked these videos so much is that in some ways, Clara reminded me a lot of my own great grandmother, who passed away in 1999 at the age of 89. I miss her every day, still – she was an amazing woman with a nice touch in the kitchen and a good story always on her lips.

Not only are Clare’s recipes well worth trying, Clara’s stories and her humble mannerisms make this series come together into something special. There are currently ten videos in her YouTube channel – below, I chose four of them to highlight. I strongly encourage you to watch them all if you find the ones below even half as interesting as I did.

Clara’s pasta with peas is a very clear example of the simplicity of these Depression-era meals. It simply consists of a simple stew (just water and milk as the liquid backbone) of potatoes, onions, peas, and a bit of tomato sauce (with some salt and pepper) cooked together with pasta, providing you plenty of nutrients – and it’s incredibly cheap. Her tip about saving energy (and money) by simply turning off the heat and letting the pasta finish cooking from its own heat is excellent, too. The highlight, though, was Clara’s tale about Depression-era bootleggers hiding illegal liquor in the garage of her neighbors.

Clara’s depression breakfast is actually more of a snack, as it consists of very simple sugar cookies (flour, eggs, and sugar) which you can dip in coffee, which she demonstrates how to make in a Depression-era coffee pot. She also goes through a bunch of old photographs and tells a number of wonderful stories about her family and friends, providing visual glimpses into the Depression and pre-Depression eras.

Clara’s peppers and eggs is actually an incredible breakfast, one that I’ve come to enjoy. It’s about as simple as it sounds – she’d just take bell peppers (saving the seeds for next year, of course) and slice them, then cook them along with scrambled eggs with some toast on the side. She also tells tales of how people swapped food (especially in schools) and the prevalence of home canning and basic farming (chickens, for one) during the Depression. This video actually has a second part, where Clara makes a very simple homemade bread from flour, water, and yeast.

Clara’s poorman’s feast consists of lentils, rice or pasta, salad, and inexpensive cuts of meat – steaks that were cut very thin to make them stretch. She tenderizes the meat by soaking it in lemon juice and olive oil and fries it and simply boils the lentils and rice together to make a healthy backbone. For the salad, she recommends fresh endive and drenches it with olive oil, salt, pepper, oregano, and lemon juice.

Thank you so much, Clara, for sharing these videos with the world on YouTube. If you liked these videos, be sure to check out Clara’s other videos including Sicilian fig cookies and egg drop soup among other foods – they’re timeless and have provided me with hours of entertainment (and cooking).

This past week, I received my first automobile ticket in years.

No, it wasn’t for a traffic violation. It was for a complete mental lapse on my own part. I had failed to renew the tag for my truck, so it was sporting an outdated sticker. Boom – immediate fine that was substantially higher than the cost of just renewing it.

Lesson learned. I added the renewal to my calendar so that, even if I don’t happen to receive a renewal notice in the mail for some reason, I know to contact them and make sure it’s renewed. After all, another $85 ticket isn’t really something I need when it can easily be avoided.

Magazines (and Websites) About Homesteading and Self-Sufficiency Growing up, Mother Earth News was a mainstay around our house. I remember leafing through it quite a bit when I was a kid and being often astounded at the kinds of projects that were described in there. (@ get rich slowly)

Turning Spenders Into Savers: Understanding Sales Pitches I usually find sales pitches thoroughly amusing from a purely entertainment perspective, mostly because I don’t understand why people would buy into it. For example, there was a way over the top “Sham-Wow” salesman at the Iowa State Fair last year – it came off like a scam, yet people were buying them by the armload. (@ queercents)

Recession-Proof Your Debt Snowball Some interesting thoughts about how a debt snowball might work a bit different during an economic downturn. (@ frugal dad)

10 Essential Money Skills for a Bad Economy I tend to think that these are essential skills in a good economy as well. (@ zen habits)

Lifestyle Diseases and Personal Finance Obesity, alcoholism, smoking, drug abuse, depression, anxiety, high blood pressure, heart disease, diabetes – all of these are preventable, all of these are expensive, and all of these are often interrelated. Get healthy! (@ personal finance advice)

Over the last year or two, I’ve had to do a lot of thinking about where I wanted The Simple Dollar to go in the future. The site had become quite popular, but I didn’t know what that meant. I had started The Simple Dollar mostly as an outlet for my desire to write a lot of words every day and also to thoroughly explore my experiences and growing interest in personal finance (and other areas related to it, like time management).

To be honest, I didn’t ever expect you to be here. Sure, I had big dreams – who doesn’t have passing fancies about having their articles read by several hundred thousand unique readers a month? – but I was also realistic about things. My original goal was to attract a couple hundred semi-regular readers who might send some articles along to their friends and that maybe I’d help a handful of people with their personal finance problems. Instead of what I thought would happen with The Simple Dollar, I got what I dreamed about.

Right around the time I made the decision to write full time, I read an article that changed my perspective on everything. The article was called 1,000 True Fans, written by Kevin Kelly. The article makes an argument that a person who wants to make a living with a creative endeavor (which The Simple Dollar is) needs to cultivate a thousand true fans that are willing to support a writer/musician/etc.

Let me put that in a bit of a different perspective. Let’s say I was a skilled musician, but I wasn’t signed to a big record contract. All I had was a lot of concert dates around the country in small clubs and a contract with a small record company that really couldn’t afford to promote me at all. The 1,000 True Fans argument is that all I would have to do is strongly connect with just 1,000 truly loyal fans – those who will come to my shows no matter what, buy my albums, buy my t-shirts – and I’d be able to survive.

(Don’t worry, I am going somewhere useful with this. Just be patient.)

This led me to a big realization about The Simple Dollar: people might visit for the first time for personal finance advice, but that’s not why they’re sticking around. There are thousands of sources for personal finance advice out there – books, other blogs, professional magazines. There’s something inherently different about The Simple Dollar (and the same applies to Get Rich Slowly and Zen Habits and other blogs) that causes people to come back to this site specifically instead of other sources.

In effect, those people that keep coming back and keep reading the emails are my “thousand true fans.”

You guys don’t support me through financial contributions (though many have bought my book and have even picked up a few of the downloadables), but you find other ways to support The Simple Dollar. You comment. You send me emails. You send articles to your friends. You “friend” me on Facebook and follow me on Twitter. And, I do believe that if I did need some sort of financial contribution, quite a lot of you would drop a few dollars my way.

So where’s the useful lesson in all of this?

I write articles for The Simple Dollar. I put them up here and share them as freely as I can. I communicate by email and IM with a lot of readers each day. Where this gets interesting is that many of those people return the favor in some way even though they’re not obligated to. They do the things I mentioned above – they send articles along to their friends, they talk about what they read here, they leave comments, and, yes, sometimes they buy my book and look at the ads.

All I did is start the ball rolling by writing – and giving my sincere effort in that writing, every single time. All of the value exchanges from there add up to enough to support me and my family. The interesting key, though, is that I started writing The Simple Dollar without thinking I would get a single thing in return for it.

There’s an exchange going on here, of course, but it’s an exchange that you can have in your own life as well. It’s easy to start: give what you know to others without expecting a thing in return. Do it regularly, consistently, and without reservation.

It’s easy to do. Help people. Share what skills and talents and ideas and gifts you have at every opportunity. Be generous with your time and your love. Help your friends, your neighbors, and even strangers. Most importantly, though, expect nothing in return.

After some time, you’ll come to realize that there is a bedrock of people in your life that are willing to help you out whenever you need it. These people might be your close friends or your family, or they might be people you see only a few times a year at community events. It might be the guy down the block that you’ve helped a few times when his car didn’t start. It might be the mailman. It might be the single mother that lives next door with two young girls.

These are the “thousand true fans” in your own life. You give of yourself to them as much as you can – and when you need it, they reciprocate in kind. What’s most amazing of all is that this builds up over time with hundreds of little exchanges – and before you know it, you’re receiving far more back than you’ve ever given.

Thank you.

A few days ago, I was being interviewed by a local newspaper when the interviewer, after asking a ton of questions about frugality and my ideas on personal finance, simply asked me the titular question.

Do you want to be rich?

I thought about it for a moment and realized the question – and the answer – isn’t as easy as it sounds.

I don’t want to be rich in the Bill Gates sense of the term, because many of the things I enjoy doing in life would simply become impossible. Bill Gates can’t go to the grocery store with his family, not without shutting the place down – he has employees do it instead. Bill Gates can’t simply go on a stroll through a neighborhood – it’s too much of a security risk. He’s also constantly targeted with people who want something from him and feel as though they deserve it simply because he has more wealth than they can imagine.

I do not want that kind of wealth in any way, shape, or form. I don’t want anything even close to it. If I found myself in his shoes, I’d do much the same thing that he’s doing – I’d be giving it away to worthy causes just as fast as I could while being sure the money was being spent in a worthwhile fashion.

Yet, although being able to help people in such a way would bring me some joy, I would still feel as though I was missing a lot of things in life.

I don’t even want to be what I call “locally rich” – the local businessman who is the richest person in the neighborhood with the nicest house and so on.

Recently, the home of West Des Moines developer Dave Walters had his house foreclosed with an estimated price tag of $4.2 million – meaning it was the most expensive house in the Des Moines area. The local newspaper featured a visual tour of it – and I realized that, as I looked at the pictures, I wouldn’t want to live in that house. The upkeep costs would be tremendous, requiring me to have to work at a very high level just to maintain the place. In fact, to maintain it, you would have to have hired help – it goes far beyond what a single person would ever want to do (or even could do).

What I really want in life is financial independence. I dream of simply being able to live my life as I live it now without having to worry about future income. I don’t even desire to spend much more than we spend right now – the only thing I might add is the ability to travel a bit with my family as my children get older. I’d also like to be able to devote myself more and more to volunteerism and other causes.

That, in fact, is my long term goal. I’d like to reach that point in the future, but I’m in no rush to get there (trust me, if I were in a rush to get there, The Simple Dollar would have a lot more advertisements on it).

But here’s the kicker: from the perspective of many people, financial independence is rich. For me to have what I would call full financial independence, I’d need to have a net worth above two million dollars. The average American right now will not earn that much from their employment in their lifetime. At the same time, however, for a decent slice of this decade, the average American had a negative savings rate.

On the other hand, I view being rich as a state where you have so much money that you’re either continually accumulating more money, spending it in wasteful ways, or giving it away through philanthropy, but in exchange for that you lose some of the ability to enjoy simple things in life. That’s an equation that I want no part in.

Much of this flashed through my mind before I answered the reporter quite simply: “I don’t want to be rich. I just want to be financially independent – to be able to live my life without financial worries.”

And, with the personal finance practices I’ve learned in the past few years, I’m heading down a path to do just that.

Some questions for you to think about and comment on: what does being rich mean to you? Do you strive to be rich, or do you have other goals?

Lauren writes to me, lamenting her difficulties with an emergency fund:

I want to have an emergency fund, but every time I think about the amount of money I would have to save, I talk myself out of starting. Instead, I find something else to spend the money on and then something happens and I regret not having that fund.

Over the last couple months, I’ve bought a big pile of DVDs to cure the winter blues. I’ve easily dropped hundreds of dollars on them. A few days ago, my car broke down and the bill was… hundreds of dollars.

Can you help me get started with an emergency fund? I feel like I’m missing something.

At almost the same time, I spied an interesting comment over at Lifehacker:

My goal is the 8 month saving expense plan that Suzie Orman always talks about. To have enough saved up to FULLY pay all expenses for 8 months…it’s really difficult to do, but as long as you keep the focus on it, once it’s accomplished, it’ll be such a good emergency buffer.

Yes, Suze does preach about an eight month emergency fund. It’s a great goal, but it’s a pretty lofty and intimidating one for many people.

It seems that, in this economy, a lot of people are thinking seriously about their emergency funds. Frankly, I think that’s a very good thing – emergency funds are a key part of a healthy personal finance situation. The biggest problem, though, is that it’s intimidating – eight months? That’s a lot of savings.

Trust me, it’s not as hard as it sounds. Three years ago, my wife and I were nearly bankrupt. Today, we have an emergency fund that’s actually larger than Orman’s recommendation – we’d be fine easily through the end of the year if things fell apart. You can do this. Here’s how.

Why An Emergency Fund?
The first step along the way is to understand what an emergency fund actually is. An emergency fund is cash that you’ve saved up for the sole purpose of helping you maintain your normal life through the emergencies that life hands you. Most of the time, you shouldn’t touch the emergency fund at all – it just sits there earning a bit of interest and waiting until you actually need it. When you lose your job. When an appliance breaks down. When your car needs a repair.

Quite often, people who don’t have an emergency fund see the idea of having to save up money as some form of punishment – after all, money put in a savings account and locked away is money that can’t be used to live, right?

Actually, it’s quite the opposite – having an emergency fund means that you do have room to breathe. You don’t have to completely panic if your car breaks down or if you lose your job or if you suddenly need to replace a hot water heater. Instead of having to find some way to squeeze those expenses onto a credit card or beg a friend for some money to help, you can just pay the bill – no worries.

Another problem that I often hear about when it comes to emergency funds is the temptation that people have to spend the money on things that aren’t emergencies. They see that they’ve built up several hundred dollars in savings and they start thinking about buying a flat panel television or going on a trip – and that’s just what they do.

If you want to have a savings account for big splurges, that’s great – start a “splurge fund,” too, if it makes sense for you. It’s important, though, to just leave the emergency fund completely alone until you need it. Deposit money in there and don’t even look at the balance until an actual emergency occurs.

Set Your Initial Target Low
So, what’s the first step? Many people bite off a gigantic goal for their emergency fund right off the bat and then find that it’s very hard to get there. Eight months of living expenses is an enormous goal, one that will take years to reach – and along the way, you’re bound to get disheartened.

Instead, one great way to start is to set a goal that’s more reasonable. Make it your initial goal to have an emergency fund of just $250 or $500. That’s a goal that you can reach in just a few months (or even less if you’re in a good income situation) and yet it’s an amount that can make a huge difference when you have an emergency.

Then, break that goal down into smaller pieces. Perhaps you can save $25 a week. If that’s the case, you can have a $250 emergency fund in just ten weeks, so you can set that as your overall goal. Maybe you can put away $40 a week, which would bring you to the $500 goal in three months.

My advice is to not set your savings plan too high at first, either in terms of the amount you can save each week or the overall amount. It should challenge you just a bit, but not be a number that’s simply unreachable.

Find Your Breathing Room
“That’s great,” you’re thinking, “but where am I going to come up with $25 a week? I barely make ends meet now.”

That’s a pretty typical sentiment from people who are just beginning to turn their financial situation around. There are a lot of ways to come up with extra money throughout the month. Here are ten big things you can do to get the ball rolling.

Request a rate reduction on your credit cards If you’re carrying a credit card balance, getting your interest rate reduced will directly save you money each month. Just flip over your credit card, call the number on the back, ask to speak to a supervisor, and simply request that the rate be reduced. Suggest that you’re considering transferring your balance off of the card.

Shop around for better auto insurance and homeowners insurance. Try Progressive, Geico, American Family, State Farm, and AIG, for starters. Just visit their websites, get some quotes, and make a switch.

Install a programmable thermostat – and program it. Pretty simple, actually – it just takes thirty minutes or so and will cut your cooling and heating bill by 20 or 30 percent. Set it so that the air conditioner and/or furnace don’t run while you’re sleeping or at work so that the energy isn’t wasted when no one is around or awake to enjoy it.

Use a list for grocery shopping. Ten minutes of planning before you go will save you at least ten minutes in the store, plus it will help you stay focused on the stuff you actually need, reducing your grocery bill because you’re putting less unnecessary stuff in the cart.

Transform one splurge a month. Instead of going out for an expensive dinner once a month, turn that dinner into a meal prepared at home. You’ll save quite a bit even if you prepare something very fancy in your own kitchen.

Set up a carpool. Find someone that lives fairly close to you that works where you do and start carpooling together. Even if you can only do it a few days a week, you’ll still drastically cut down on your commute costs, plus it will be a lot harder to stop for those impulse splurges.

Use public transportation. Even better, get in the habit of using public transportation for your commuting needs. Most metropolitan areas have surprisingly good public transportation options – and they’re far cheaper (and not all that much more time consuming) than driving yourself.

Get on the bike. Want to start getting in better shape? Only live a mile or two from your work? That’s a perfect situation to get a bike and start using it for the commute instead of wasting your dollars on gas and car maintenance.

Trim unnecessary monthly bills. Are you subscribing to Netflix but rarely using it? Cut it! Are you paying for premium cable channels that you never watch? Trim them!

Snowflake. Quite often, when people come into a bit of unexpected money, they tend to spend it without thinking about it. They decide not to stop for coffee, but then choose to spend it later on take out, for example. Instead of spending that “found money,” take some or all of it and immediately put it into your emergency fund. If you have online banking, that’s pretty easy – just transfer it out of your checking account.

The key thing here is to actually save this savings. Instead of just spending the money on something else, put that money away towards your emergency fund. If you find that you’re actually saving more than $50 a week with these tactics, then put more into the emergency fund or increase the amount you’re putting into your retirement savings.

Make It Automatic
So, you’ve trimmed $50 a week from your spending, but now you have this cash sitting there and it’s tempting to spend it on something more exciting than an emergency fund. You’re tempted…

… but you don’t have to be tempted. Instead, you can set up an automatic savings plan to sweep that money straight out of your checking account and into your savings account that you’re using for an emergency fund.

If you haven’t already, I recommend setting up an online savings account at a bank separate than the one you normally do business with for your emergency fund. Doing this not only lets you shop around for a bank with good service and good savings account rates, but it also causes you to put the money in a place that’s not quite so easy to access. You can’t just run to the ATM or stop by the teller window and withdraw cash from it – you have to go to your computer, order a transfer, and wait for a day or two to access the cash, which is more than enough time for you to think carefully about what you’re doing and not get sucked in by impulse.

So, sign up for an online savings account with good service and a solid interest rate, set up an automatic plan at that bank to sweep $50 (or whatever you can save) a week into that savings account, and then forget about it. Since you’ve already freed up that money through tightening your belt just a bit, this should be quite easy to do.

Set Reasonable Milestones Along the Way
In a few months, you’ll hit that first milestone – and it’ll feel good. That account will have enough money in it that it’ll start earning a bit of interest on its own and you’ll start to feel in control of the situation.

Now’s the time to keep going. Set another goal – an emergency fund of $1,000. Keep that automatic savings plan in place.

Once you reach that goal, aim for a single month’s worth of living expenses. Then two months. Then three. And just keep watching that emergency fund grow.

Obviously, when you do have an emergency, tap that fund. Don’t put your car repair bill on the credit card. Don’t start living on plastic while you’re between jobs. Instead, keep living a financially stable life thanks to your planning ahead.

You might just find that this is a lot of fun – so you might start seeking out more ways to save. Just keep setting goals for yourself and keep pushing yourself just a little to make it there.

Before you know it, your life won’t be disrupted by these kinds of emergencies – and you’ll sleep a lot better at night knowing that.

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.
I’m 20 Years Old and Have No Debt: When Can I Retire and Live off My Investments?
Seven Ways To Save Money While Cooperating With Your Neighbors – And How To Get Started
Is Not Spending Money Bad For The Economy?

And now for some great reader questions!

Why is growth so important? Every company is always talking about ways to grow their business, looking for new investors so they can grow into new markets, etc. Why do they need to grow? If they’re in the black, why can’t they just keep doing what they’re doing?
- imelda

It’s pretty simple, actually. Publicly-traded companies – those that have issued stocks to the public – are beholden to their stockholders. The stockholders have purchased those stocks with the intent to earn a profit, after all.

There are two ways to provide value to stockholders: paying out dividends or driving up the price of the stock so that it can be sold as a profit. Typically, very stable companies pay out dividends, but, quite frankly, a stable quiet company that pays stable quiet dividends are fairly boring. They don’t get the headlines. They don’t get the attention.

The other route – the one that gets the press – is the growth strategy. If you make the company grow rapidly, the stock value will grow rapidly as well. That’s because a share of stock has a direct relationship to the overall value of the company – if the value of the company goes up, the share usually follows. Thus, many companies shout loudly about their growth strategies in order to drive up that stock value, making the shareholders happy and giving the talking heads on CNBC something to chirp about.

We’ve all absorbed your advice on how to spread the word about our respective blogs when getting started. As a more “established” blog, do you have any other methods you employ to market your blog?
- the weakonomist

To be honest, I’ve never really actively marketed The Simple Dollar aside from occasionally submitting articles to social bookmarking sites.

Instead, I focus hard on writing content and little else. Every time I post an article, I’ve not only thought carefully about what the point of the article is (what sort of useful idea is this conveying), but also who might read it. Is this article one that regular readers will really enjoy? Or is this one that will appeal more to people on social bookmarking sites? Maybe it’s one that will just show up well in Google search results, bringing in readers that way.

It’s all about good content that people want to read. A good product is the best marketing you can have.

Back in my high school classes I learned that the energy needed to start up something is more than what is required to keep it running. Following this logic, is it cheaper to turn lights on and off as I enter and leave the room or to leave them on?
- Jessica

The amount of energy needed to fire up a light bulb is negligible. In simplest form, the light you see is a reaction to the presence of electricity, not a process that starts because you flip the light switch.

It is always worthwhile to flip off the lights when you leave the room for more than a minute or so. The only reason why it’s not useful to flip the switch every time is that each on and off degrades the bulb a bit, leading eventually to the bulb “blowing” and requiring a replacement.

How do you find the books you review?
- Lily

I do a lot of things. I look at the Amazon pages for books I’ve liked and look carefully at the books that are described as “similar.” I use the bibliographies of books I like. I listen to suggestions from readers. I also accept books that publishers send me spontaneously, though I often don’t review them (mostly because they tend to be repetitive).

What I really look for is a book that offers an angle that I really haven’t addressed before. I’m intrigued by books that teach me something new or give me some ideas I haven’t considered before. If I read a book that really does nothing for me, I usually don’t bother to review it.

What should I look for in a condo or townhouse that will make a significant difference in deadening neighbor noise? Or are condos basically the same as apartments, in which case I’m out of luck until I can afford a house? I’d really like to hear others’ experiences and advice before I take on a 15- to 30-year debt!
- Dru

For the most part, you’re out of luck. If the noise is excessive and a public nuisance, you can obviously follow up with law enforcement, but most apartment noise is completely reasonable, even if it is annoying.

Your best bet is to look for thick-walled condos. Test the noise level that comes through the walls, if you can. Take a friend with you, have them tour one condo while you tour another, and have them shout loudly. See if it bothers you – or if you can even hear it. If you’re annoyed by a single person shouting, then the walls are too thin and you’re going to be annoyed by pretty much any neighbor.

I am planning on buying a Nintendo DS soon and was wondering if you think the DSi is worth the wait or higher price? I’ve heard the web browser will be improved dramatically.
- Sarah

For those unaware, the DSi is the upcoming replacement for the Nintendo DS Lite that has been on the market for a few years. The DSi costs $40 more and loses the ability to play old Game Boy Advance games, but it offers quite a few new features: a built in web browser, a digital camera, a larger screen, a built in mp3 player, and the ability to download games wirelessly, none of which were included in the original DS.

To put it simply, if those features are worth $40 to you, then wait. If they’re not, get the DS Lite.

I will say that I’ve played with my DS Lite for hundreds of hours and it’s quite beat up. It also has pretty poor battery life at this point (an hour, maybe less), so I may upgrade to a DSi in the future simply because of battery issues and a very scratched-up touchscreen. Having said that, I will wait until the DSi has been out for a while before upgrading so I can see if there is any compelling DSi-only software.

If you are participating in 401(k) with your employer, and if you are not maxing it out at $15500, can you open an IRA or a Roth IRA by yourself. My employer doesnt offer Roth options and I am more interested in that.
- Saagar

You can participate in a Roth IRA regardless of what you’re doing with a 401(k). You can max out the 401(k) and, if you’re eligible for a Roth IRA, max that out as well.

My suggestion is to only invest in the 401(k) up to the point where you’re getting all of your employer’s match, then fund a Roth IRA. If you still want to save more for retirement, you can put more in the 401(k), but in most situations, a 10% contribution to a 401(k) plus a fully funded Roth IRA should be more than adequate for retirement.

What software do you use for computer backups? I am currently doing automated backups nightly using EMC Retrospect (it came free with my external drive) but would rather use an open source program if a good one is available. I’ve looked through your excellent lists of open source software but didn’t see anything for backups.
- Cynthia Grant

I use a Mac, so I use Time Machine for all my backups. It’s included as a part of Mac OS X. Basically, all you have to do is plug in an external hard drive and it works like a charm.

A friend of mine who uses PCs exclusively swears by Carbonite. I have never used the service – or any PC backup service – so I can’t comment either way on it other than to pass along my friend’s recommendation.

When I used a PC exclusively (a few years ago), I used to just back up my Documents directory to a memory stick at the end of every work session. It was clumsy and manual, but it did the trick.

I am in Canada and Capital One credit card just informed me of a new service that they offer. For $15 a month, they can keep track of our credit card as well as our financial situation with the help of Equifax and Trans Canada ( i think ) bureaus. As well as identity theft. We had it for 3 month but I hated paying $30 a month for this service. Would you recommend it? Or is there something else better that I have not seen? I have it for free with my CIBC bank account, but I would have to look into the identity theft part. Is this a ploy for more money to the cc people?
- Lynn

I generally do not think that credit monitoring services offer enough benefit for the fee that you’re paying, but if you’re strongly worried about identity theft, they can be a worthwhile investment solely to put your mind at ease.

In the United States, at least, I usually encourage people to visit the FTC’s credit reporting service, where you can request a copy of your credit report from each bureau each year. If you do these on a four month cycle – one from Experian in January, one from TransUnion in May, and one from Equifax in September, say – you can keep strong tabs on your credit status.

I think a good way to learn skills around the house is to volunteer with Habitat for Humanity. There are projects around the country and you can help out throughout the building process. Not only do you develop the skills, but you help a great cause as well!
- Seth Rowland

This wasn’t really a question, but instead a brilliant comment that I felt was well worth repeating.

Habitat for Humanity is an incredible charity. Not only does it directly benefit people in your local community that actually need housing help, it doesn’t involve just throwing money at the problem. You’re actually building something tangible that can actually be used for the purpose intended.

Not only that, volunteering for Habitat for Humanity can teach you a ton of carpentry, plumbing, and home repair skills. You can easily learn how to install a toilet, how to hang a door, and countless other little useful skills that you can take home with you and apply in your own life, saving you the cost of having to hire a repairman for those tasks.

It’s a great way to volunteer your time – and you learn something valuable in the process. That’s a great way to spend a Saturday, in my opinion.

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