The survey results are starting to appear from the survey many of you took a few weeks ago (thanks again for doing this). I found three things really interesting.

70% of the readership is between 18 and 39. Which basically means… most of you are my age or close to it. Sometimes, I’m concerned that I focus too much on relating experiences that are highly tied to my age (early-to-middle career growth, marriage, having children, very comfortable with technology), but the demographics seem to match this very well.

73% of the readership earns $50K a year or more. I found this to be very interesting. If you’re earning $50K per year, your value per hour of work is at a minimum $25 per hour. Yet I often get the impression that many of my readers (meaning quite a few people earning that much) really like the hardcore frugality stuff – stuff that actually earns less than $10 per hour, for example. That’s a really interesting mix. What does it mean? I’m not sure yet.

My audience is almost 60% female. Three out of five readers are women. Again, I’m left to think about exactly why this is. One of my friends thinks it is because of my writing “tone.”

Anyway, interesting stuff. Some of the data isn’t loaded into the survey results (as of this writing), but there’s still plenty of interesting stuff to look at.

The Three Most Influential Lessons My Parents Taught Me Excellent, excellent stuff. It’s very interesting to look at how people are influenced by their parents in ways that are often hard to imagine when you’re younger. (@ frugal dad)

I Cashed Out My SIMPLE IRA An unexpected personal finance decision. Faith. Emergencies. It all ties together here. Did he make the right move? I honestly don’t know. (@ gather little by little)

Should I Take a Job That Pays Less Than Unemployment? Lots of interesting points on both sides of the question. My feeling? If the job has clear career benefits, take it – otherwise, wait. (@ wisebread)

Ratings of Big Retailers From my perspective, Costco and Sam’s Club are pretty similar to each other as a shopping experience. Saying that, I prefer to shop at warehouse clubs – there’s more space to move around and fewer people in your way. (@ free money finance)

One of the interesting features of our Prius is that it keeps a running tab on your current gas mileage. You can see both the mileage at any given moment or the average over your trip. Having such easy access to this information while you’re driving subtly teaches you how to drive more efficiently. Here are a few things we’ve learned.

Coasting makes a huge difference on your gas mileage. One thing this data has taught me is the huge value of coasting, particularly through a series of stoplights. Stopping and starting eats a lot of gas – our gas mileage during acceleration goes down to as low as 10 miles per gallon. Coasting, on the other hand, uses virtually no gas at all.

Before adjusting my driving, I had a strong tendency to leave a stoplight, accelerate to the speed limit in town, then often find myself hitting the brake and stopping again as I approached the next stoplight. That meant I was doing a ton of acceleration, then losing most of that speed by braking again just a block later.

Instead of doing that, I’ve found it’s just as quick (and way more energy efficient) to coast as much as possible through long strings of stoplights. I accelerate up to roughly the speed limit, then I coast for a while, particularly if the light ahead of me is red. Almost without fail, I catch up to the car ahead of me just as they’re accelerating away from the stop – and I already have some momentum going forward, which means I don’t have to accelerate nearly as hard to get back up to the speed limit. It doesn’t take any longer and it saves money.

I tested this out driving through the town where I live and the difference was tremendous – doing this added about 25 miles per gallon to my mileage through town.

Driving 75 on the interstate is substantially less fuel efficient than driving 55 on a two-lane highway. One regular trip for us is driving south to the West Des Moines area, about a 35 mile trip or so. We have two routes to get there that are roughly equal in length, but the interstate is a bit faster. On the interstate, of course, we drive around 75 miles per hour to keep up with the traffic. On the other hand, we can take the highway and go around 55 miles per hour. The highway usually takes us about six minutes longer to get to our destination, so before getting our Prius, we’d simply always use the highway.

But here’s the kicker. If we take the interstate, we would get around 38 miles per gallon. If we take the highway, we get about 52 miles per gallon. So, if we take the interstate, we use 0.92 gallons, but on the highway, we use 0.67 gallons. That’s a savings of about $0.48 on the trip, even in our relatively fuel efficient car.

This changes the equation just a little bit. The two lane highway is far more scenic than the interstate as well – there are many more interesting things to see and talk about along the highway route (meaning it’s easier to engage the kids). When you also toss in the fact that it’s cheaper – and it would be a much bigger difference in a less fuel-efficient car or if the price of a gallon of gas were higher than $1.94 – the balance starts to shift towards the slower route. Does the balance actually shift? Not entirely – for us, it still depends on a number of factors (the time of day, the presence of kids, and so on) – but the balance of values has changed.

Wind resistance makes a tremendous difference in your drive. Simply put, driving on a windy day (unless the wind is consistent and at your back) is incredibly inefficient.

On a recent windy day, my family and I embarked on a lengthy road trip where the wind was mostly in our face. This forced us to accelerate quite a bit more to maintain speed – and it pushed the gas mileage down about 35% (29 versus 44). As a test, I drove with the wind on another windy day and found that it improved our mileage by only about 10% (48.5 versus 44).

Thus, unless the wind is very, very consistent and at your back, a windy day will hurt your gas mileage. If you have an optional trip to make and there’s a heavy wind outside, you’re better off delaying the trip. That’s what I’ve already done twice since seeing the impact that a heavy wind can have on gas mileage.

Turn off your cruise control in hilly areas. In virtually every car I’ve used, cruise control has been a great tool on flat roads. It helps me control my slight lead-foot tendencies and seems to do a good job with gas mileage. The data from our Prius backs this up – on flat roads, that is.

If you enter a hilly area, though, cruise control is very inefficient. Instead of maximizing your speed going down hills and using that momentum, cruise control instead tries to keep the car within a few miles per hour of your set speed.

Since it can’t read the road ahead, it doesn’t know what’s coming up. You do. Take advantage of that and turn off the cruise control in hilly areas. I turn it off any time I go downhill or uphill, since it seems to be more efficient to build up speed going down the hill (getting well above your cruise speed) then coasting at the bottom until you get back to your cruise speed, and doing the opposite on hills (allowing yourself to get well below your cruise speed instead of accelerating into a hill).

In the end, our best value from the Prius might be the ability to actually see how our little driving choices affect our gas mileage – and how we can make better choices to vastly improve that mileage. As time goes on, these better choices become ingrained in our driving habits, making the more efficient choices our natural choices – ones that we’ll carry on to other cars. Fuel efficient driving doesn’t cost you time – it just saves you money.

Personally, I’d like to see all cars have a fuel mileage indicator. It’s been an invaluable tool for directly teaching someone how to drive more efficiently – and it’s easy to see the benefit when you go to the gas pump.

My wife and I have been members at Sam’s Club for years. We use it to buy tons of items in bulk – but over time, we’ve realized that some items simply aren’t cheaper there. While visiting, I’ve noticed the same trend with Costco as well – it’s got spectacular prices on some staples, but poor prices on other things.

Is it worth it for you? I can’t answer that question – it’s clearly worth it for us, as we save literally hundreds a year shopping at Sam’s Club versus shopping at other grocery stores and department chains.

However, I can suggest a pretty easy way for you to figure out for yourself if you would save money at a warehouse store.

Make a “Bulk Buying” List
Your first step is to make a big list of all of the things you might be willing to buy in bulk for your home. The items to really focus on are nonperishable items that you use consistently and perishables that you use only on a very consistent basis. Some of these might include dishwashing detergent, laundry detergent, laundry softener, garbage bags, flour, rice, bread, milk, eggs, fruit juice, cleaning supplies, water filters, breakfast cereal, oatmeal, and so on.

One great way to do this is to save grocery and department store receipts for a few weeks (or a few months) and use those as a starting point. Go through those receipts, pick out the items that are regularly repeated (or are nonperishable and you have room to store), and make a new list of just those items.

On that same list, write down the prices and the units. So, for example, if you buy a bundle of 36 rolls of toilet paper, write down the number of rolls and the price of the package. Number of rolls, number of bags, number of packets, number of servings, and so on are all key numbers to write down here.

After that, you’ll want to calculate the price per unit of each of these items. It’s easy – just divide the price of the package by the number of units. If you bought a 36 pack of toilet paper for $7.99, you’d just divide $7.99 by 36 to get $0.22 per roll. This is an important number to have when you’re evaluating bulk prices.

Get a Day Pass
Once you have your list of things you’d regularly buy in bulk, get a day pass to your local warehouse store. Call the local branches and ask whether or not you can get a day pass at the front desk. Most such stores will offer one once – often, any purchases you make with that pass would cost you 10% extra (but don’t worry about that).

Go to the store, pick up your pass, and go around the store with your list and your calculator. Ideally, you’ll want to find as many of the items as you can – and you’ll put only the ones that are actually a bargain into your cart.

Know How to Calculate Per-Unit Prices
Figuring out which ones are a bargain is pretty easy. Just find the item you’re looking for, find the price and the number of items in the package, then use your calculator to divide the price by the number of items to get the price per item. If it’s better than the one on your list, add the item to your cart and jot down the better price per item on your list, along with the number of units. Don’t worry about the 10% difference on your one day pass at all yet.

Easy enough – most of you probably yawned your way through that tip. But here’s the kicker. At the end of the trip, you’re going to need to decide if the full membership is worth your money. Here’s how you do that.

Figure Up Your Total Deal
Go through your list and figure out the difference between the two prices per unit. For example, if you’ve got $0.16 per roll toilet paper in your cart and your previous best deal was $0.22, the difference is $0.06. Multiply that difference by the size of the package in the cart. So, if you’ve got a 36-pack of toilet paper rolls, multiply the $0.06 savings by 36 rolls, giving you $2.16.

Do this for every item in your cart, then add up the results. This total should be significant enough that it’s very clear you’ll save money over the course of a year. You might find that the stuff in your cart pays for the membership right now, or that it’s close. If that’s the case, go straight to the customer service desk, sign up for an annual membership, and check out. If that’s not the case, pull out any items that are cheaper at your other shopping locations and check out whatever is left in your cart (since, even with the 10% charge, they should be cheaper than you’d pay elsewhere).

On our staples – dishwashing detergent, water filters, bread, wine (Sam’s actually has a very good wine selection), olive oil, and so on – we regularly save enough to pay for the annual membership in a single trip.

The Real Trick
The real trick with warehouse clubs is to know how to focus on the stuff you’ll actually use in good time and avoid the stuff you don’t actually use in large quantity. When we shop there, we basically only buy things we know we will consume in their entirety in the near future (i.e., a bottle of wine) or we use so consistently that we’ll get through it pretty quickly (i.e., dishwashing detergent).

If you don’t stick to a similar policy, you’ll end up with a cupboard full of unusable stuff – and that’s a huge waste of money. Focus on the staples, though, and warehouse clubs can likely save you quite a few dollars.

Good luck!

A few days ago, I wrote about the dilemma of whether it’s worth spending twenty minutes arguing to earn $10, a post that I hoped would generate some good discussion (and it certainly did). For me, I wouldn’t engage in the argument – it’s not worth it to me to spend twenty minutes engaged in confrontation for $10.

Some astute readers made the point that I’m quite willing to engage in frugal projects for a much smaller return than that – and that’s true. I’ll work on frugal projects all the time that earn significantly less than that $30 an hour rate that I would have earned from the argument.

What’s the difference? Why would I work on a frugal project for less than $30 an hour, but not engage in waiting at a store for the same amount?

There are a lot of reasons, actually.

I get more from most of my frugal projects than just some savings. I enjoy making my own laundry detergent. I enjoy brewing my own beer. I enjoy finding ways to improve the energy efficiency of my home. I enjoy finding free activities in the community.

For me, things like this are a lot of fun. I view it as a very enjoyable challenge to find interesting projects that save money.

I don’t enjoy engaging in activities that interfere with the lives of others. I don’t enjoy arguing or public confrontation. I don’t enjoy dragging other people into my personal desire to save money. I especially don’t enjoy making my kids sit in a checkout line – or leave them sitting at home waiting for me.

It takes a lot of money to put me in a situation where I’m thoroughly uncomfortable. Public confrontation is one of those situations. I don’t like witnessing such confrontations, either. So, unless there’s a lot of money at stake, I simply won’t engage in it. If it’s a confrontation with a business, I will very directly take my business elsewhere.

I prefer doing things that I can involve my family in. When I make a meal, the kids can often help with it. When I make homemade laundry detergent, I’ll let my son stir the mixture. When I replace light bulbs or do other home tasks, I’ll have my kids tag along and help in some way (like holding a bulb or a small sack).

This turns frugality into family moments. They learn something from this – not only is it normal to find ways to save money in your life, but it’s also normal to try new things. They also learn that it’s fun to do things for yourself and make things for yourself. For me, the value of such moments and lessons is quite high.

My free time has more value than my work time. Let’s say, hypothetically, that I earn $10 an hour for each hour I work. Even given that, I won’t take $30 an hour to interfere with my personal time.

Each and every day, I set aside a number of hours for me and for my family. That time is what I work for – it’s what I put up with frustrations for. That time – which generally falls between 4 PM and about 9 PM each weekday – is sacred to me, and I won’t interrupt it unless I have to. Those times are such because of the schedule of my wife (who gets off work at about 3:30 PM each day) and my children (who go to bed around 8 PM each day).

If I were single (since many people think that I “dog” on single people), that equation would change somewhat. My personal time would be more flexible because I wouldn’t be working around the 5 PM soccer match and the 8 PM bed time of my children. I might be anxious to get home to play World of Warcraft or something, but that could wait while I was engaged in an opportunity to put $10 in my pocket. I might have plenty of things to do, but many of those things have more flexibility because they don’t affect the schedules and needs of others as much.

The value of my time is more than just dollars and cents. What I’m doing at the moment affects that value greatly. If I’m being made to do something unenjoyable, there needs to be a much larger pot of gold at the end of the rainbow than if I’m doing something fun.

For me, at least, $30 an hour isn’t enough to convince me to argue in public, but $5 an hour is more than enough to engage in a fun frugality project with my kids and wife in tow. If it’s hard work by myself, $20 an hour might do it. All time is not created equal, after all.

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. A few readers really enjoyed the recent posts on marriage and wanted more insights. Here are three great books on that topic (links go to my reviews):
Financial Infidelity by Bonnie Eaker Weil
Smart Couples Finish Rich by David Bach
It Pays to Talk by Carrie Schwab-Pomerantz and Charles Schwab

And now, some great reader questions!

I came to this country 12 yrs ago, worked really hard and made some good money. I was very conservative in spending due – the fact that I was living on visa made me cautious. But few months ago, I became permanent resident. I never even bought a new car when I was making over 6-digit salary. Now, that I have my green-card, I am thinking on settling down – basically thinking about buying home. But at the same time I do hear Jim Cramer’s and some of top CNBC analyst’s comments as well – where they suggest not to buy anything big for next few years until market settles down. So, the question is: Should I invest in international market like Indian real-estate (I know it’s booming by the month) OR should I make my (our) dream come true of buying house here? Pls advise.
- PR

First of all, take the advice from Jim Cramer on CNBC with a grain of salt. There’s a reason his segments are prefaced with a big disclaimer similar to the one found on the Mad Money website:

All opinions expressed by Jim Cramer on this website and on the show are solely Cramer’s opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL or their parent company or affiliates, and may have been previously disseminated by Cramer on television, radio, internet or another medium. You should not treat any opinion expressed by Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Cramer’s opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Cramer, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Cramer’s statements and opinions are subject to change without notice. No part of Cramer’s compensation from CNBC is related to the specific opinions he expresses.

Past performance is not indicative of future results. Neither Cramer nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

In other words, Cramer is an entertainer, first and foremost, and you should rely on an investment advisor before making any real money decisions.

Now, for your bigger question: should you buy a home right now? You seem to be mixing personal needs and desires (that of homeownership) with investment desires (Indian real estate). The real question should be whether you’re happy living where you are right now or whether you would be happier living in a home, and that depends on you and the factors in your personal life. If you’re simply looking to maximize an investment, don’t invest in your primary living quarters. Instead, invest in something that you can treat with a purely analytical perspective that you can make moves on without worrying about the personal consequences.

Have you ever tried adding any additional ingredients (ie: Oxy Clean) to your laundry detergent recipe?

I was wondering if you had any similar results?
- Charlette

Yes, I have. If you want to add additional cleansing agents, do it separately, just like you would if you added Oxy-Clean to a load of laundry. You wouldn’t merely dump Oxy-Clean into your detergent bottle, would you?

Whenever you drastically alter a chemical reaction (and that’s what’s going on with the laundry detergent recipe), the product (in this case, the detergent) is going to be very different. Even a change as simple as choosing a different type of soap – or even the quantities used – will radically change the detergent you get in the end.

I have been out of the work force for 20 plus years (stay at home mom) and now would like to get back in. I know I lack many skills that employers are looking for today and would like to know a couple of things, 1. how and where do I go for general training for (office) skills? and 2. would you recommend going to a temp agency for part time employment? I am a bit overwhelmed starting this process,so any suggestions you could provide would be greatly appreciated.
- Mary

Some entry-level secretarial and administrative assistant positions require a high school education and some basic office skills (word processing, writing, and good communication skills, for starters). Many positions look for a person who has completed some sort of additional training, usually offered through a business school or a secretarial school.

One great place to start when digging into this is the Department of Labor’s Occupational Outlook Handbook, particularly the section on such positions. In fact, the entire handbook can be useful for people who are trying to figure out the basics of a particular job in terms of what they need to do to get their foot in the door, what the job entails, and what kind of earnings might be expected. Good luck!

I discovered your blog a few months ago and quickly subscribed to it via Google Reader. I find many of your ideas very helpful. I have noticed that every so often you write about an email you receive of someone who has criticized your ideas and/or style of writing pretty harshly. Do these emails make you feel bad? How do you resist being offended or resist taking these criticisms personally?
- Gwen

I see dozens of negative comments and emails each day – it’s just a fact of life for anyone who writes anything with a large audience.

At first, these comments bothered me quite a bit – I kept thinking I had actually said something wrong or offended someone. Now, I realize that the vast majority of such criticizers are simply people with giant chips on their shoulders. They’re out there looking for something to complain about, and I’m a fairly open target.

So, for the most part, I ignore it.

The only problem with that approach is that you can lose valid criticisms in the flood, but if I spent all my time wallowing in the negativity to find a handful of truly accurate criticisms, I’d spend all my time looking at negativity, and the only result of that would be to make me a negative person.

I just wanted to add that although I no longer use my Discover Card, I don’t ever remember receiving calls from them ever.
- leslie

Discover uses a fairly tricky method to contact people. Instead of directly calling cardholders, they call with an ominous-sounding voice recording, urgently telling people to call a certain 1-800 number. That number connects you with Discover’s accounts office.

Once upon a time, we used to receive these fairly often – and we ignored them. One day, curiosity got the better of me and I called the number, not knowing for sure what to expect. To find that the number originated from Discover was a surprise, to say the least.

Any word on how your adoring public can get an autographed copy of your book?
- Mol

Is there interest in this? I have no idea what kind of mechanism would be needed to do this type of thing. I hadn’t actually even considered that there would be significant interest in selling signed copies of the book.

If you are seriously interested in buying a signed copy of my book, leave a comment to this post. I’ll show them to my publisher and see whether or not we can come up with a good arrangement that makes everyone happy.

hi first id like to say thank you as you have inspired me to walk thru my fears and start selling and writing along with persuing my lifetime dream of becoming a multimedia artist. so my question to you is, are there any places to start your own website that are very user frendly and reasonably priced as im working on a budget.
- denise warner

It depends on what you’re looking for.

WordPress.com is probably the easiest option for someone who just wants to get a website going. However, WordPress.com doesn’t allow you to include advertisements – you have to stick with the templates they provide.

Blogger is another free option that offers more control over the design, but their interface for actually posting can be difficult at times.

If you just want to put up a small handful of static pages, Google Pages might be the right place for you.

Each of those options make it pretty easy to start your own website to talk about whatever you wish. In truth, it’s all about the writer/creator – if they’re doing something interesting, people will come.

I got a Canon Powershot camera two Christmases ago, and just a little over a year later, the display went black and it won’t take pictures. I sent it back to Canon for repair and since it’s just past the one-year warranty, Canon is giving an estimate of $100 with no guarantee that the problem will be fixed. The person who bought it for me paid $200 on Amazon and it’s currently priced at $277. What is the frugal thing to do here – buy a new camera or take our chances with the repair? Is there a point when a repair isn’t worth it?
- Sandy

If there’s no guarantee the camera will be fixed for that $100, you’re better off buying a new camera. Your best case scenario here is that you wind up spending $100 to get back a used camera with one new part in it, and there are a multitude of much worse scenarios.

Spend some time researching the purchase, though, and make sure that you’re actually getting the camera that best matches your real-world use. You may find that the camera you really want isn’t the one you had before.

I inherited several one ounce gold bullion coins. I have no idea what to do with them. Any suggestions?
- Eddie

Your best bet is to identify any gold dealers in your area and get some quotes from them. Don’t just sell to the first dealer that makes you an offer – call around and get quotes from several dealers in your area. Here’s a handy tool for finding such dealers.

You should also do some research online before you call so that you know exactly what you have. Type any identifying marks into Google and see what you can learn about the coins you hold, so that you can accurately describe the coins to the dealers.

What price should you expect? You should get offers per coin that approximate the current value of an ounce of gold, within a few percent. If these are U.S. minted coins prior to 1934, you should get an additional small premium.

How are you doing with regards to your goal of working on a skill every day for one hour, have you been following it? I believe yours was to be able to solve the Rubik’s cube, which only takes a few weeks to learn if you look up how to do it and memorize the moves, but would take years of studying mathematics in order to be able to learn to solve it on your own with no assistance whatsoever. What path did you take?
- C.I.

I’m still learning, actually. There are two difficulties with the Rubik’s Cube for me. First, my hands are enormous, making it difficult to match some of the grips I see in YouTube videos (meaning I often end up solving things completely incorrectly).

The second problem is that I started off trying to learn the Petrus solution, which is pretty difficult. I should have mastered one of the easier solutions, then moved onto this one.

My goal of being able to solve the cube in a minute or so is still in place and I still think it’s realistic.

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.

I’ve reviewed quite a few David Bach books over the years: The Automatic Millionaire, Smart Couples Finish Rich, Start Late, Finish Rich, Smart Women Finish Rich, and Go Green, Live Rich.

Bach writes in a very approachable tone, but many of his earlier books seemed to be repetitions of the same material – The Automatic Millionaire, Smart Couples Finish Rich, Start Late, Finish Rich, and Smart Women Finish Rich might as well have been the same book with an extra chapter for each specific demographic. Thankfully, though, he seems to be addressing a new topic with his more recent writing – Go Green, Live Rich looks at the overlap of personal finance and environmentalism, for example.

This leads us to another attempt at a new direction by Bach. Fight for Your Money focuses specifically on cutting your spending by dealing head-on with companies that slip extra fees into your bills. Much of the book centers on advice for negotiating away those fees, getting better rates on your bills, and so on.

This is a very action-oriented book, not a philosophical one. Specific action points take the lead here – ones that have the potential to directly save you money. Let’s dig in.

A Walk Through Fight for Your Money
Fight for Your Money is split up into a ton of short chapters that focus tightly on specific areas of spending – for example, the first ten are Buying a New Car, Buying a Used Car, Car Leasing, Car Rentals, Car Repairs, Bank Accounts, Debit Cards, Credit Cards, Credit Scores, and Payday Loans – and there are thirty one more short chapters on similar, very specific topics.

Instead of doing a chapter-by-chapter review of such a dense book, I pulled out eight specific tactics that were of specific interest to me.

Don’t (?) Trade In Your Old Car
On page 12, Bach says

To put it bluntly, they will lowball your trade-in to make up for the great price they gave you on your purchase.

This is not always the case. Some dealerships have actually adopted the direct opposite of this tactic – they’ll offer a great trade-in to soften you up for later negotiations. I agree with Bach that dealers use the trade-in to play tricky games with buyers, but it’s not always that straightforward.

Take our recent car purchase. The blue book value on our trade-in was $400, and we had two different direct estimates from people we trusted that we should not expect to get more than $500 out of the car, whether selling it directly or trading it. The car had 175,000 miles on it, shocks and struts that needed immediate replacement, some ominous engine noises, wear on the interior, and a transmission that would sometimes fail to shift gears – in other words, it needed major work to stay on the road.

Instead of giving us a great deal up front on the car, the dealership played a much different game. They gave us $1,500 in trade on the car, but we were only able to negotiate the price down to about $21,100 (not including the trade-in) – roughly factory invoice, when we were intending to negotiate further.

In other words, the dealership used the trade-in as a bargaining chip, not using it to “make up” losses on the “great deal” they gave us.

Still, Bach’s point is well taken. Dealerships are there to make a profit, and you need to look at the total package you’re being offered including the trade-in.

Be Careful with Debit Cards
On page 80, Bach says:

According to calculations by Consumer Reports, a typical overdraft fee on a debit card purchase translates to an annual interest rate in excess of 1000%!

Bach’s point is simple: if you don’t keep a very careful bead on your balance, it can be easy to overdraft using a debit card – and the fees from such a use can eat you alive.

Another point: there is usually very little fraud protection on a debit card if it’s used with a PIN instead of used as a credit card with a swipe and a signature. Even if your bank seems to have a “zero-liability” policy, that policy usually only applies to uses of the card as a credit card, not as a PIN-based debit card.

Thus, his advice for debit card use is to use it only for small purchases that you’re sure you can easily afford, and use other methods for paying for larger purchases. This keeps you safe from liability concerns and also keeps you safe from overdrafts.

Ask to Have Your Credit Card Account Closed
Bach advocates a pretty hardball strategy for negotiating with your credit card company. On page 93, he advocates requesting to have the account closed if the issuer won’t lower your interest rates upon request:

If they won’t work with you, tell them you want to close your account. Often this will lead the person who took your call to transfer you to a new department – one whose job is to talk customers like you out of canceling their cards.

I believe playing hardball like this is usually good advice, but in a very shaky economy, it might not be the best advice, because they may simply say, “All right, cancelled.” Keep that in mind as a potential risk when you use this tactic.

Clean Out Your Mailbox
Identity theft is a pretty big concern, and one big route to identity theft is unsolicited mailings from creditors. Bach has a solution to such insecure junk mail on page 121:

Equifax, Experian, and TransUnion (which provide your credit history to the card issuers) have created a service called OptOutPrescreen that allows you to opt out of receiving offers of credit or insurance that you didn’t ask for. [...] For details, call them toll free at 888-5-OPTOUT (888-567-8688) or visit them online at www.optoutprescreen.com.

Excellent advice, and an excellent service. We signed up for this and our preapproved credit card offers basically disappeared overnight. Not only does this mean we have less junk to deal with in the mail, it also reduces our risk of identity theft.

Get Term Life Insurance
On page 141, Bach takes a swing at the life insurance industry:

According to the most recent statistics, about 60% of the [life insurance] policies sold in the United States are permanent policies, while about 40% are term. The greater popularity of permanent policies is not surprising, even though consumer advocates agree that term policies make more sense for most people. Permanent policies generally cost five to 10 times more than term policies – meaning insurance agents make a lot more commissions selling them, which is why your “friend in the insurance business” will gladly come to your home at night to discuss it.

In other words, consumer advocates generally point towards term life insurance policies as a better deal, yet there is still a lot of belief out there that permanent policies (like universal or whole life) are better.

Why? The salesmen make more money on the permanent policies. Any good salesman will try to sell the item that will make them the most return, so they’ll attempt to make the case for universal policies or whole life policies, while pooh-poohing the term policies (because those won’t put as much money in their pocket).

If you’re insuring yourself for your family’s benefit, focus on a term policy.

Avoid Most Work-At-Home Opportunities
On page 235, Bach encourages people to avoid most work-at-home opportunities:

Typically, work-at-home rip-offs involve phony opportunities to make big bucks doing simple tasks like stuffing envelopes, assembling small products or crafts, or processing medical insurance claims. What the ads don’t tell you is that before you can start “raking in the dough,” you’ve first go to take a training course (which costs you money) and order software or supplies (which costs you even more money). And then all a lot of them do is merely send you a list of potential clients – most of whom have absolutely no interest in hiring home workers to do anything.

There are ways to earn income from home, but these kinds of prepackaged deals (the type you often see advertised on late night television) aren’t the way to go unless you’d rather spend money than make it.

If you want to make money from home, find your own path. Figure out what you enjoy doing, then find ways to earn an income from it. Don’t shell out money for some prepackaged “solution.”

Save An Hour a Day of Your Income for Retirement
I thought this was a brilliant way to look at retirement contributions. From page 245:

The trick is not to think about percentages. Instead, when it comes to funding your retirement plan, think in terms of how many hours you work each week. If you work a 40 hour wee, I believe you DESERVE to at least keep one hour a day of your income. That’s five hours of income a week – or 12.5% of your gross income.

That’s an interesting perspective on retirement savings, one that focuses on the time you invest instead of the money you earn.

One could take that same philosophy and apply it to any savings goal. Are you saving for a house? Isn’t that worth twenty minutes of your workday? Start saving 4% of your gross income, then, and then use that as motivation to find the ways you’re wasting money elsewhere.

Don’t Get Extended Warranties
On page 297, Bach says:

As a rule, if a product is so unreliable that you need to supplement the manufacturer’s warranty with additional protection, you probably shouldn’t be buying it in the first place.

I took this as a major call to research your purchase. If you go into a store to make a major purchase and don’t know exactly what you want, you’re probably not going to walk out of the store with the best option for you.

If you do the research, not just into specific models but into how reliable the brands and product lines are, you’re much more likely to find the reliable item that’s perfect for your needs. Doing that allows you to shop for that specific item, do price comparisons, and then when you’re ready to buy, the extended warranty is just an extra expense you don’t really need.

Is Fight for Your Money Worth Reading?
Fight for Your Money is a great compendium of consumer information that offers real, tangible ways to make yourself more secure, reduce the amount you pay on lots of different things, and learn some useful negotiating tactics. If you’re willing to spend some time reading through this book and taking action along the way, you will save some money.

This is the perfect book to pick up if you’re going to have a “money saving weekend.” Many of the tasks suggested in the book can be done over the weekend, with only a big handful that would have to wait until the workweek to execute.

Does it have long-term usefulness? Fight for Your Money is incredibly worthwhile right now, but in two or three years, some of the information in the book will be dated. Specific information will change and large companies will change their tactics. Fight for Your Money works great in the here and now.

My suggestion? Pick up Fight for Your Money in 2009 if you’re interested (and there’s plenty of worthwhile material in here if you are). After that, wait for a revision or a later edition on this one. In other words, I highly recommend the book – in 2009.

A reader recently pointed me towards an interesting article at MSN MoneyCentral on the topic of restricting the access that teenagers have to credit cards. Much of the article discusses the proposed Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (S. 414, sponsored by Chris Dodd, and often called the Credit CARD Act of 2009), which Weston summarizes as such:

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 would forbid card issuers from opening accounts for people under 21 unless one of these criteria is met:
+ A parent, guardian or other responsible individual agrees to co-sign for the debt.
+ The applicant provides proof he or she can independently repay the debt.
+ Proof is provided that the applicant has completed a certified financial literacy course.

I understand where this bill is coming from and I agree with it in large part, but I would be opposed to it overall. Let’s look at both sides of the coin.

What I Like About the Bill
When I was a new college freshman, I signed up for a credit card in exchange for a t-shirt, then I began to use it for all kinds of stuff – video games and so on. In short, I acted like a fool with that credit card – a card I would have never had if this act had been in place.

A bill like this would unquestionably have kept me from getting into this early credit card debt. My parents would not have signed off on such a card and thus I would have been forced to learn how to manage the money from my part-time job more carefully, teaching me some valuable budgeting lessons.

I also strongly agree with the idea of basic financial literacy being a requirement for credit card use, though I’m not convinced at all that this is the way to do it.

What I Don’t Like About the Bill
What I don’t like about the bill is that it takes away personal responsibility in two different ways.

On one side of the coin is the fact that many people under the age of 21 are fully independent and have their head on their shoulders. One individual I know had a very successful business he was running himself at age nineteen. I know several others who have been through trade school and are embarking on plumbing and electrical careers at that age. Why should these independent and self-motivated individuals be required to find someone to co-sign with them for a credit card?

On the other side of the coin is the lessons learned from credit card ownership, which might actually be easier before age twenty one for many. I didn’t figure out how to use credit cards sensibly until age twenty seven, but I’ll be the first to admit that I didn’t receive a great education on how to use them and what their role should be in your life. If I had, I might have been able to make sense of my earliest credit card troubles (when I was in college) when the amount of debt wasn’t that much at all. For many people, college is a time to learn and make mistakes and grow – this bill just offers more hand-holding.

For me, the negatives of this bill outweigh the positives.

Is There A Better Solution?
The solution needed here is pretty simple – there is a desperate need for better consumer education. Consumer education should be a part of the school system from the earliest stages. Reading, writing, and arithmetic are fundamental, but so is managing your money – not knowing how to do that in the modern world can derail your life.

Instead of sponsoring bills that restrict the freedoms of adults, why not invest a bit more in education and a bit less in other areas?

What do you think? Is the Credit CARD Act of 2009 a good thing or a bad thing on the whole?

Several people have asked me how I started The Simple Dollar and how I found the initiative to keep writing even in the early days when there was little success to be found.

Let’s take a walk down memory lane to September 30, 2006.

I was sitting at my computer playing a game of some kind – probably World of Warcraft, since I was dabbling in that a bit at the time. My son was taking a nap and my mind wad drifting towards thoughts of my future. What was I going to be doing five years from then?

At the time, my family had just begun our financial turnaround. I had been reading a lot of personal finance books and we had paid off the debt on most of our credit cards. The three of us (my wife, my son, and I) lived in a tiny apartment together, and I had a very steady job in a research lab. Things were, for the most part, quite good.

There was something missing, though. I felt a big, empty hole when I looked to the future. Since I was in high school, I had dreamed of becoming a writer, and all I could see in my future was that dream slipping away. I knew that, if I wanted my dreams of writing to come true, I had to make a change – a commitment to it.

And in that moment, everything changed.

I logged off World of Warcraft and decided that today was going to be the first day of the rest of my life. I didn’t know what the future held for it, but I knew that if I didn’t give writing a try, it would remain just a dream, nothing more, nothing less.

I had made many, many attempts at writing before, but never with any sustained seriousness. I also knew that I wouldn’t become a better writer if I didn’t commit to writing something and sharing it every day (I already wrote virtually every day in my journal, but I didn’t share these writings – and still don’t).

So I took that first step. I went to Blogger, signed up, and began to write. It took just a few minutes.

At first, it was aimless, of course. I didn’t really know what to write about, so I tried some writing exercises. One writing exercise suggested that I turn a journal entry into a piece of shared writing – and the result really shook me. It was this article, which became the start of The Simple Dollar.

In order to make myself write every day, I set my web browser so that my default page was a page to enter a new blog post. I couldn’t start my web browser without being totally confronted with that tall order – and the mixture of feelings that went with it.

Soon, though, the habit of writing for public consumption started to become more natural. I started TheSimpleDollar.com at the end of the month and, somehow, it all took off.

In truth, though, everything that has happened with The Simple Dollar found its genesis in those first few minutes. In that time, I did four key things.

I realized that if I was ever going to reach my dream, I needed to start now. Every year that passes is a year of lost opportunities. No matter what, you’ll never get those opportunities back. You’ll grow older, have less energy and initiative than before, and those dreams will grow grayer and grayer. There is no someday that’s better than today.

I did something tangible right off the bat. My tangible act was starting a blog that would quickly become The Simple Dollar. I signed up for it right then and there, on the spot, so that I wouldn’t have time to get lost in the details of planning and hemming and hawing and hedging my bets. That immediate, tangible action took my dream from complete unreality to something at least a bit tangible.

I shared what I had done with others. As soon as I started the blog and posted something, I sent the URL to several friends to share what I was doing. Not only that, I asked them to check it regularly and to please comment on what I was doing, even if the comment was negative. Having several sets of eyes on me provided quite a bit of motivation right off the bat. This works with any goal – just make a public yardstick of your progress and tell lots of people about it.

I put the next steps in the process so front and center that I couldn’t avoid them. Even after those little pieces were in place, it would have been easy to let the train die on the tracks. I had to rub my face in my plans for success, so I set a huge, flashing reminder for myself – that blog update page became my browser’s default page. I saw it multiple times every day. I couldn’t avoid that consistent reminder to write, write, write.

Those four keys can be the keys to any success. They can be applied to anything from weight loss to a musical career. The best part? You can be sitting there at your desk, twiddling your thumbs, and start to take those actions to get the ball rolling.

What’s your dream?

Why haven’t you started yet?