A very long time ago, I wrote an extremely brief article covering the difference between charge cards and credit cards. That article really didn’t answer the question, though, because I still have conversations and receive emails where people use the phrases “charge card” and “credit card” interchangeably.

Along those same lines, Tim writes in recently:

Am I better off using a charge card or a credit card for buying stuff?

At first, I just assumed that Tim had replaced “credit card” with “charge card” in his vocabulary and I began to answer that question, but then I realized that it’s worthwhile to distinguish between all three types of cards and their advantages and disadvantages. So let’s go through them one by one.

Credit Cards
A credit card is borrowed money. When a company issues you a credit card, you’re given a specific credit limit – the maximum amount you can borrow from the company. Each time you use the card, you borrow some amount from that company, and each month, you’re required to pay back a portion of that amount to the company. Mastercard, Visa, and Discover are the major types of credit cards.

Advantages The biggest advantage of a credit card is the flexibility. You can make purchases without actually having the cash on hand at the moment. You also have an indefinite amount of time to pay back that money, though you do have to make a minimum payment each month on what you owe. Many credit cards also have rewards programs, which return to you 2-3% of your purchase price in some form or another – often in the form of gift certificates or rewards programs. Also, good credit card use helps you to build a good credit report, which can save you money on insurance and help you with loans. Consumer protection with credit cards is usually pretty strong, too – they’ll often help you deal with fraudulent purchases and don’t leave you out to dry if you lose the card.

Disadvantages The big disadvantage is that all the flexibility is a double-edged sword. The ease of use of credit cards and the lack of pressure to pay off what you owe makes it very easy to make poor purchasing decisions. Then, when you can’t pay off the card, you usually pay a hefty amount of interest on that unpaid amount – and over a long period, that interest can be incredibly costly.

Debit Cards
A debit card, on the other hand, is linked to your checking or savings account. Each time you use the card, money is automatically taken from your checking or savings account to cover the purchase. Many debit cards have the same purchasing flexibility as credit cards, as many are accepted where Visa and Mastercard are.

Advantages You can’t get into debt trouble with a debit card. It does not allow you to buy things that you don’t have the money for. For people struggling with debt, this is a huge advantage because it keeps you out of trouble. Plus, they’re flexible and convenient for day-to-day purchases. You also don’t have to have good credit to get a debit card – you often get one with your checking account.

Disadvantages The biggest disadvantage is that you have to keep a very close eye on your account balances, because you can overdraft your account if you’re not careful. Another disadvantage is that very few debit cards have rewards programs of any kind. Debit cards often don’t have the same consumer protections that credit cards and charge cards have – if your card is stolen, your protection against unauthorized purchases can be weak.

Charge Cards
Charge cards are often confused with credit cards, but they actually function in a fairly different fashion. Like credit cards, charge cards extend credit to you from the issuer, but you’re required to pay the full balance at the end of the month. Some charge cards also have an annual membership fee. Charge cards are typically associated with American Express; many store chains often issue their own charge cards as well which can only be used at that store.

Advantages You don’t have to have the money on hand for a purchase with a charge card, nor do you run the risk of carrying a balance that will charge you interest. Many charge cards have tremendous bonus programs that go from things like 5% cash back to free companion flights on airlines – their bonus programs are typically better than bonus programs for credit cards. Charge cards often come with additional services and benefits, like free roadside assistance, free food at airports, and free hotel room upgrades. They also help your credit much as a credit card does. Most charge cards offer strong consumer protection as well, similar to that of credit cards.

Disadvantages Some charge cards have an annual fee which eats away at the benefits from using it. Also, since you are operating on credit, there is some risk that you might build up a large balance on the card that will be difficult to pay off. Many charge cards are usually pretty strict in terms of who they’re issued to – you need to have good credit before even getting one.

Which One Is Right For Me?
Many people wish to avoid credit at all costs because of the risk of debt – in that case, a debit card is obviously the right choice. If you’re seeing a great debit card (preferably one that has some semblance of a rewards program), you should investigate all of the checking options available at your local bank and also perhaps do some shopping for a new bank, particularly if you’re unhappy with your current bank for some reason.

I tend to believe that it’s worthwhile for everyone to apply for at least a single credit card and use it irregularly. It provides a very easy way to build a positive credit report and gives you some flexibility in purchasing. If you have a good rewards card (for example, I use my Citi Driver’s Edge card for all gas purchases), you can also earn multiple percentage points back in rewards.

If you have excellent credit, have a strong policy of paying your balances back in full each month on your credit card, and travel a bit, it’s worth examining some of the charge card offers available to you, particularly if you’re running a small business. Typically, one can get a big net benefit from a good charge card, but you have to be aware of the benefits alloted to you by that card. Plus, you can’t get into revolving debt trouble with a charge card since you have to pay the balance in full each month. I know at least one small business owner who makes a killing with his charge card, getting tons of free flights, free airport foods, discounts on rental cars, roadside assistance, free hotel rooms, business advice, and so on, but those are rewards that others may have difficulty maximizing.

My suggestion, if you’ve never owned a card, is to get a good checking account (I use ING’s Electric Orange as my primary checking and I’m happy with them) and use their debit card for most purchases. At the same time, get a credit card, use it for only a few purchases, and leave the card at home so you’re not tempted to use it. This allows you to start building healthy credit without the debt risks of a credit card.

Please, readers, fill in additional details you see as important – many more people than just Tim will find use with this information.

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 have asked for books to read on debt recovery. Here are my three picks (links go to my reviews):
The Total Money Makeover by Dave Ramsey
Pay It Down by Jean Chatzky
You’re Broke Because You Want to Be by Larry Winget

And now, some great reader questions!

I haven’t quite figured out why some experts recommend a 6 month EF (emergency fund), but a 9 month EF if you have kids. Why do you need the extra three months, just because you have dependents? Since you have kids your expenses would presumably be higher. Your EF would automatically account for that because it’s being guided by month’s worth of expenses and not a dollar amount.
- Seth

First of all, statements like “build up a six month emergency fund, but make it nine months if you have a kid” are useful rules of thumb for goal setting, but they’re never the absolute perfect solution for everyone’s situation. Some people are simply more prone to emergencies in their life than others. Things that make you more prone to needing an emergency fund include poor health, an unstable job, driving an old car, and so on.

It’s commonly held that children are another factor that increases your likelihood for emergencies, and I’d have to agree with that. Here’s my feeling: the more dependents you have, the more likely you are to have huge emergencies in tandem, and thus the larger your emergency fund should be.

If you’re the sole person you’re keeping an emergency fund for, you’re the only person who can suffer an emergency. On the other hand, if you have a spouse and two kids, you have four people who can have an emergency. You lose your job, then your kid gets hit by a car. Double whammy, one that can’t happen without kids.

That’s why it’s useful to have a longer-term emergency fund if you have kids. Six month versus nine month? Numbers that specific are somewhat a matter of opinion.

My question is regarding the size of home I should buy. My wife and I are newly married and do not plan to have children for probably 2 years. Should we buy a home that’s just big enough for what we need now and move up later, or should we take advantage of the especially low prices to get a house that is big enough to meet our future needs (without breaking the bank)?
- jonathan

As a rule of thumb, you’re better off just buying the house you need right now. Excess space is expensive, not only on the upfront sticker price, but also in terms of maintenance and a tendency to fill that space with stuff (which also has a cost).

However, you have at least three big factors pointing you to buy a little bigger right now. First, interest rates are incredibly low at the moment. You’ll likely not get a loan this low in two years once the economy has begun to recover. Second, the housing market is still reeling. Prices aren’t falling sharply like they were a year or so ago, but they’re certainly not rising at the moment. When the economy recovers, it’s hard to say what will happen to that number, but the prices are certainly better right now than they were two years ago. Also, you know that children are coming and you’re planning on settling in the area, which means you know you will actually need more space.

Given those factors, I would encourage you to go against the rule of thumb and buy that larger house. Don’t get anything unnecessarily large, but pick a home that’s appropriate for you and your family post-birth.

I’m currently looking to leave the nest of home. I have a good, stable job in a stable industry. What’s some things to have in advance. I am personally hoping to have a 6-9 Month emergency fund pre-established before I leave but how about other tips? Thanks!
- Battra92

First of all, you have incredibly supportive parents if they’re allowing you to continue to live at home while you have a good, stable job. Most parents would have shooed you out the door long before now.

That being said, you’re going to have a very hard time judging your real expenses until you’re out there on your own, and thus a “6-9 month emergency fund” is a hard number to judge (unless you’re trying to match salary).

With such supportive parents, I would move out sooner rather than later. If something goes wrong, they will apparently be there to support you. Moving out now gets you on your own two feet much sooner.

I recently got into a surprising argument with a friend who insisted that my partner and I should be buying a house as we are both securely employed and are making decent incomes. She argued that we would actually be saving more by taking out a home loan. My partner and I both live in a very inexpensive rented apartment in a very nice part of our city and have not wanted to take on the responsibility of a home especially because we both are somewhat nomadic. Owning a house is not something that either my partner or I aspire to in the near future but do you think we are missing an opportunity here?
- pv

That person’s idea is based on the sense that a mortgage payment builds equity. In part, that’s true, but most of a mortgage payment goes away in interest, particularly early on. There’s also some advantage to buying a home right now because the housing market is down and interest rates are very low (as I mentioned above).

That being said, if you’re not interested in being a homeowner, don’t be a homeowner. There are many other places you can put your money to build value – stocks, direct real estate investments, bonds, CDs.

The key is that you’re actually doing it. Many people who are in a situation where they don’t need to make payments don’t use that extra money effectively. If you use it effectively, you can build a lifetime of wealth and security.

I have seen a number of times the “rule” that people should pay themselves (savings) first, before their creditors and before their regular expenses, but this is something that I don’t understand. Partly because I thought it was obvious that if you have savings, you use them to pay debt where you have got it because it seems counterproductive to keep savings but also keep debt as well. If you used your savings, your debt would be gone quicker – the same goes, as far as I can tell, for putting money in savings on a monthly basis. Or does it depend on what you’re saving for and your income level (barely make the bills or got a little to trim down) and other things?
- princes_peas

The reason for having money in savings when you’re also paying down debt is to prevent emergencies from undoing all of your progress. From a psychological standpoint, that’s an incredibly powerful element.

Think of each of the two scenarios for a moment. For several months, you throw all your extra money into paying off debt, then an emergency hits and your balance goes right back to where you started with a life that’s seemingly reliant on debt. Or, you make minimum payments and put your extra money into an emergency fund without racking up any new credit, then when the emergency hits, you can actually deal with it without the credit.

In one scenario, you’re relying on high-interest debt to live your life. In the other one, you’re standing on your own two feet and merely paying off the mistakes of the past. There is a lot of psychological value in standing on your own.

My husband and I have been pondering the prices at Sam’s Club to determine what’s worth it. I read your earlier posts, and see that you buy diapers and a few other things. What have you found there to be less expensive than locations that do not require a membership. Could you estimate the price difference?
- Rebecca Hammer

For the most part, if you’re willing to buy a large quantity of a particular item, Sam’s Club will beat your local grocery stores in price. Although it’s not the case on every item, it’s a strong enough rule of thumb that we’re almost always willing to default to Sam’s on price.

The catch here is quantity. In a home with just two people, if you buy much at Sam’s Club, you’re going to be putting a lot of the extras into storage. Do you have a big freezer and an adequate amount of dry storage space? If you don’t, you’ll either end up restricting your purchases enough that the membership won’t be worth it, or you’ll end up wasting portions of your purchase.

One effective way of dealing with this problem is to buy bulk items with friends and then split them into reasonable portions. For example, you might go there and buy an eight pack of spaghetti sauce at a price per jar that’s much cheaper than the store, but you simply don’t have room for all the sauce, so you actually split the cost of the eight pack with a friend and each of you take four jars. You might even want to consider splitting the membership with a good friend.

How do I go about finding a local credit union?
- princes_peas

The easiest way to find a credit union in your area is to use the Credit Union Locator at the Credit Union National Association website.

Having said that, you should also hit your social network for advice. Ask people you know that live in the area if they use a credit union or have any good/bad anecdotes to share. I tend to trust what my friends have to say on topics like this, because the experiences of a “random” customer often reflects how you will be treated if you use the service.

I have an artist that I stumbled upon and I would like to own one of his paintings (even if only a print). What is your opinion on purchasing artwork? (Especially if they are over 200 dollars)
- Chris

First of all, never buy art as an investment. Investment-grade art is expensive and incredibly prone to huge market fluctuations that are hard to predict. If you buy art, buy it for your own enjoyment.

As for whether or not an expensive print or original art is an appropriate purchase, it depends on what you’re looking for. I tend to believe that it’s worth investing in one quality item that truly expresses what you want than it is to buy five low-quality items that merely fill a room. Your decorations should reflect who you are and a great piece of art can last a lifetime and be handed down as well.

Having said that, you need to be sure that a piece of art that you’re going to invest a lot of money in is something you’re going to want around for the long haul. Don’t buy it rashly – this is definitely a “six month rule” kind of purchase – wait at least six months and make sure you’re still passionate about it. See if that item really sticks in your mind. Put images of the item up in your home and see if they fit. Save appropriately so that you’re not putting such a person on credit.

If you go through that and come out on the other side still wanting the art, go for it – it can be a wonderful long-term addition to your home decor that brings significant personal value into your life.

My boyfriend’s father has been telling me recently how “dumb” it is to be putting away money for retirement at my age (24). He thinks I should be putting more money away in my savings, buying a house with a 15 or 7 year mortgage, then start saving for retirement around age 40 when my house is paid off. Now, I know this is taking a lot of things for granted: that when I’m 40 I’ll have a job with a decent retirement plan, that I won’t have kids in college, etc., and it’s not really a risk I’m willing to take. But I’m considering maybe a slight decrease in the percentage I am putting away. Right now I contribute 8% of my income to a 403(b). Once I have been with my current employer for one year (September 2009), they will begin contributing 11% of my annual salary. With the market the way it is, I know I am buying low and should continue to contribute, but is it worth maybe reducing my contribution to, say 6% and putting that money right into my savings? I have considered that my 403(b) contributions are pre-tax, so it’s not exactly an even trade. Sorry for the long-winded question! Thanks!
- Marcy

Not only is it dangerous to take for granted what you’ll be doing when you’re forty, it also ignores the concept of compound interest.

Let’s say you can put money away for retirement and it will always return 8% a year (we’re not going to worry about the vagaries of the stock market here). If you put in $5,000 a year (the Roth IRA maximum contribution right now) from age 24 to age 30 – just seven years – you’ll have $659,633 at age 65. On the other hand, if you wait until you’re 40 and put in $5,000 a year, you’ll have to put in $5,000 a year EVERY YEAR from age 40 to age 65 – and you’ll still only have $399,722 at age 65.

Assuming that 8% return, every $1,000 you put in right now at age 24 is worth $3,430 at age 40. Waiting until you’re 40 only means that retirement savings will be much harder than they ever would be if you started now.

Do you still do computer work on the side? How is that going?
- Nate

I still do computer work for people who ask me directly, but I am no longer seeking new customers. To put it simply, I have far, far too many things going on in other avenues of earning to keep up with computer work.

I didn’t particularly get tired of it. What happened is that my life filled up with commitments and income opportunities and I had to make some difficult choices. That meant, simply, that computer consulting, for now, has gone the way of the dodo.

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

Over the next several months, I’m giving several presentations and speeches on my story and what I learned about personal finance along the way. Some of these engagements will be paid ones, thus this may be the beginning of a new revenue stream in my life.

As with anything new in my life, I’m filling some of my spare hours learning more about public speaking, particularly since this may begin to become a source of income. My first step was to simply ask some of my friends for suggestions, focusing on the small handful that I know have at least some positive public speaking experience.

I received two book suggestions in return – this book and the already-reviewed Presentation Zen.

You’ve Got to Be Believed to Be Heard by Bert Decker is a thorough guide to public speaking, focusing somewhat on extemporaneous speaking (when you don’t have time to prepare much in advance, like off-the-cuff speeches and question-and-answer questions). It addresses most of the major issues that people have with public speaking: overcoming stage fright, organizing your ideas, making your energy and passion come across in your voice, mastering your mannerisms, using eye contact, using humor, and so on, including plenty of exercises to improve these specific aspects of your speaking.

Is this material actually compelling and useful to prospective public speakers? Or could you just get the same thing from a Toastmasters meeting or two? Let’s dig in.

The Emotional Connection
First of all, we are all public speakers. Every time we speak to someone else, we’re practicing public speaking on some level. Some people are good at this – they come across as interesting and energetic and you want to get to know them more. Some people aren’t.

Decker’s key argument throughout the book is that successful speakers make an emotional connection with their audience. A great example of this comes from comparing Bill Walsh to John Madden. Both were very successful football coaches who tried their hand at broadcasting and speaking. Obviously, Walsh failed and Madden succeeded, but why? Although Walsh was more accomplished and more photogenic, he wasn’t able to connect with audiences that well – he rarely smiled and rarely put any enthusiasm or life into what he was saying, things that Madden was able to succeed with. You don’t need to be photogenic to succeed – look at Madden or Dick Vitale! They succeed because they’re clearly passionate and make an emotional connection with the people in the room. More Dick Vitale and less Dan Rather, in other words. More Steve Jobs and less Mark McGwire. More talking and less reading prepared statements.

It’s pretty obvious from watching good speakers and bad speakers that there’s a pretty wide gulf there, but why? Decker argues that the difference is that people buy into ideas based on emotion, then seek facts to back them up. I see it in myself all the time. Thus, people who bring positive emotion to the table when speaking are the ones that succeed – things like happiness, excitement, energy, temptation, and so forth. The ones who bring negative emotion fail – nervousness, contempt, and so on.

Decker proposes three fundamental truths about making a personal impact:

The spoken word is almost the polar opposite of the written word. Your text is only one small slice of what you communicate when speaking. You also include posture, facial expression, energy level, eye communication, vocal inflection, vocal intonation, volume, gestures, and so on. Your actual words are only one piece of the puzzle.

In the spoken medium, what you say must be believed to have impact. In order for it to be believed, you must be believable – and the easiest way to do that is to believe in what you’re saying with all your heart.

Believability is overwhelmingly determined at a preconscious level. People choose to believe you or not based on a very quick analysis that’s often not based at all on what you’re saying. This is even true in writing (believe me, I’ve had people question everything I say, even when the question is irrational, while others blindly accept everything I say), but it’s very true in speaking with all of those other cues.

Using All of Your Mind
When you first approach a person, they immediately make a snap decision about you: are you a friend or are you a foe? Quite often, this impulse isn’t based on the information you’re hoping to communicate. Instead, it’s a pure first impression – how do you come off at first glance?

The process of that first impression is embedded deep in people. Their sense of who to trust and who not to trust is often set in early childhood and it’s based on very early experiences. People tend to gravitate towards those that show warmth – they smile, they’re willing to embrace, they have humor, and they share.

Decker’s general suggestion is to be natural, energetic, and enthusiastic from the moment you walk into the room. Move towards people, grip their hand with enthusiasm, and engage positively directly with them. Many successful speakers “work the room” a bit before they begin by doing just this – shaking hands and chatting with people for a while before their presentation is even set to begin. This puts at least some of the audience on your side – they identify you as “friend.”

Another key component of building a positive relationship is trust. Do they trust what you’re presenting? The key part of this is for you to trust what you’re presenting. When you trust it, put it out there with pride – you know what you’re saying is right, after all.

Two Key Principles
Decker is sneaky here – there are actually six key principles that he divides into two groups. Decker offers a TON of great tips here – I’m just picking out some that I’ve tried out myself.

Eye Communication Look people in the eye, but don’t stare – do it for a five count. Similarly, try to avoid very short eye contacts (eye darting) or blinking for more than an instant. You can practice by putting Post-It notes of smiley faces up on a wall, then practice speaking to those faces, moving your eyes from face to face with five counts and not blinking heavily, until it becomes natural. When you’re actually speaking, you become less nervous, because your speech transforms into a collection of one-on-one conversations.

Posture and Movement Work on keeping your stomach pulled in, your back straight, and keep your weight slightly toward your audience. Also, move around while talking, but don’t pace – move from one spot to another, stop, then move again.

Dress and Appearance Dress appropriately – conservative is usually better unless you know your audience. If you’re wearing a jacket, you should usually button it (unless it’s a woman’s suit that’s tailored to be open). Ask others for honest feedback, too.

Gestures and the Smile We all have nervous gestures. See if you can find yours – then focus on stopping them (if you can’t figure yours out, ask someone to tell you after watching you speak). Don’t be afraid to exaggerate gestures you’re using for emphasis, like hand sweeps. Also, don’t be afraid to smile – smile as often as you feel is appropriate. Don’t remain stern-faced – it doesn’t help at all.

Voice and Vocal Variety A lower voice is usually better, so work on lowering your voice for speaking occasions. My favorite? Try the King Kong exercise – say “King Kong, Ding Dong, Bing Bong” several times in your natural voice, except lower the final “bong” as much as you can. It actually does work at lowering your voice – I’m working on lowering mine a bit not only for speeches, but for my podcasts.

Words and Nonwords (the Pause) Build your vocabulary by reading challenging things (but learn how to pronounce those words), then use those words in conversation until they’re natural. At the same time, avoid jargon like the plague – technical terms are only appropriate for a highly technical audience. Also, record yourself speaking and work on cutting out all pauses, so that you can choose where to put pauses for emphasis.

The biggest (and best) tip: record yourself as you practice speaking, then watch the recording. It’s very easy for people to identify their own speaking flaws.

Mastering Your First Brain
Many people are simply afraid to speak in public. They’re afraid of vulnerability. They’re afraid of failure. They’re afraid of alienation. All of these fears tie together to build a deep fear of public speaking in people until they avoid it like the plague.

The best way to go from avoiding it to actually doing it is to take baby steps. When you’re in conversation with others, you tell stories, right? Start by simply telling one of those stories to more than one person. Then do it when you’re standing. Then do it to people you don’t know as well. At that point, you’re already doing it – that’s public speaking. The more you do it, the less scary it seems.

What about stage fright? Decker strongly suggests visualization (as it says in Proverbs 27:19, “As a man thinks in his heart, so he is.”). Spend time imagining yourself giving the speech you wish you had the courage to give. Imagine it over and over, with as much detail as you can muster. The more you imagine it, the more comfortable your mind becomes with the idea.

From Information to Influence
Many people view a presentation or speech as an opportunity to relate data. Doing that, though, is a recipe for failure. What you want to actually communicate is an experience – data simply backs up your story and shouldn’t be the focus.

Center any speech or presentation you give around a story. Don’t drown that story in data – instead, just show slices that back up your points (if further data is needed, you can distribute it in another form).

Decker provides a pretty detailed system for creating such a speech or presentation, but I found one idea that stood out above the rest for me: keywords. A speech or presentation should be based on a handful of words, short phrases, or images that you can simply wax at length on – a minute to five minutes. This matches greatly with the Presentation Zen philosophy – your slides can merely be these keywords.

Another key part of a successful speech is attention getting and memory hooking. What can you do to make sure your message stays in their mind? Decker recommends loading your speech up with stories, examples, humor (without overdoing it), analogies, quotations, references to culture, pictures, and visual aids. The more you add of these elements (within reason), the more likely you are to hook into their memories with your message.

Is You’ve Got to Be Believed to Be Heard Worth Reading?
Aside from the wonderful Presentation Zen, this is the single best book on speaking before an audience that I’ve yet read. While the latter book helps you simplify your message, You’ve Got to Be Believed to Be Heard is brilliant at helping you to become a better speaker mechanically by breaking down speaking into lots of little, practicable pieces.

If you’re involved with public speaking – or would like to be – You’ve Got to Be Believed to Be Heard is a very worthwhile read.

A big, big tip: read this book near a computer. Whenever Decker mentions a speaker or a speaking event, look that event up on YouTube and watch it yourself. Doing this made the book really come alive for me and took it from being an interesting book to being an essential book on public speaking.

On Wednesday, I took my son to get his hair cut. We’ve been trying several local barbers/hairstylists to find someone who can cut his hair well at a reasonable price. What I’ve found during this experience is that when you go to get your hair cut, you usually choose at most two out of three factors: a good haircut, a cheap price, and the ability to actually get an appointment.

So far, virtually every place we’ve taken our child has been able to achieve two out of three of these factors – but none have been able to hit all three.

Take the most recent haircut, for example. The haircut was quite good and we were easily able to get an appointment, but the price was unbelievably high. Before that, with my daughter, we got a great price and were easily able to get in, but the haircut was poor enough that I might as well have done it myself. Before that, we got a good haircut at a good price, but it took three weeks to get in.

So, what can I conclude from this?

First, I’m considering learning how to cut hair myself. I’ve been able to do this a bit on my own head, but I’m not good at it at all and it usually leaves me looking terrible and, eventually, heading towards someone that cuts hair professionally.

My children are young, and thus perfect appearance isn’t vital for them. I have a few years to learn how to cut their hair while the mistakes of learning won’t cause them much social consternation at all. If I do too bad, I can have someone else fix the mistakes in order to make them acceptable for pictures.

Second, the business models for haircutting drive me to this conclusion of cutting hair at home. Of the various places we’ve been, people seem to be content either not having enough business (via high prices or bad haircuts) or turning away business (via inadequate staffing).

Quality haircutting is a service I’m willing to pay others for at a reasonable rate. However, if I can’t easily get that service, I’m going to look for other options.

Third, cutting the hair myself will save money. I have two young children. Let’s say, hypothetically, that I would get their hair cut every two months (each) at $15 a pop. Doing it myself saves $180 a year.

Of course, the counter-argument is that the $180 spent would save me time, but would it, really? In order to get my child’s hair cut, I have to call and make the appointment, take the child to the appointment, wait before and during the appointment, and then take the child home again afterwards. If I do it at home, I simply cut the hair, no questions asked.

In the end, frugality is about finding maximum value, and I’ve finally realized that I’m simply not finding maximum value for my children’s haircuts at the barbershops and salons available to me. Thus, it’s time to take matters into my own hands.

Are there any services in your own life that you’re dissatisfied with? Could you take those services into your own hands for a greater value?

In the past, I’ve discussed how it’s a good idea to spend your spare time dabbling in entrepreneurship: it fills your time with something that you choose (and thus you enjoy) and sets up a potential long-term revenue stream. I also discussed how I got a side business going myself.

Since then, lots of readers have written to me, asking for ideas on how to start a simple side business. What follows is a list of 50 of those ideas that I’ve collected over the last year or so. Each of these ideas is very simple to start, and most can be done as a sole proprietorship at first (meaning you don’t have to file any legal documents to get started, though you will want to do that if it starts to take off). Most of these can be done at home in your spare time in your spare space, too.

Ready? See if there are any ideas below that fit you well. If you find an idea, seek out a guide on how to get started in that area.

Antique refurbishment This is a perfect side business for people who love antiquing. Take worn-out antiques home with you, invest the time and care needed to transform those old items into something amazing, then resell them at a profit.

Auto detailing Have a meticulous eye for detail and love to get things gleaming clean? Auto detailing is probably a perfect side business for you. In essence, your job is to make cars sparkle inside and out – and many people are quite happy to pay well for this service.

Babysitting Got lots of evenings free? Like kids? Babysitting may be a great side business for you. Keep an eye on multiple children on Friday and Saturday nights and you can earn some solid income.

Bed and breakfast Have some extra space in your home? Turn that extra bedroom into a “bed and breakfast” room. This works particularly well if you have a somewhat older home or live near an area that attracts regular travelers and tourists.

Blogging If you enjoy writing, find a topic you’re passionate about and start a blog on the topic. All you need is a computer, some time, and some energy to consistently write.

Cake decorating Enjoy baking and have a bit of an artistic touch? Learn how to decorate cakes and make them for special events. One of my mother’s old friends does this and makes quite a bit of money on the side.

Candle making Candle making is a great little craft to learn. You can often easily sell the candles at local shops and also through websites like Etsy.com.

Candy making Homemade candies are easier to make than you think and quite popular. Package them in nice little boxes and sell them through a local gift shop.

Card making This is another artistic “crafty” angle you can follow. Make greeting/birthday cards from scratch using your own photographs, some blank cards, and a healthy dose of artistic flair. Again, you san sell items like these through a local gift shop or at sites like etsy.com.

Catering If you love to cook, take the “Blondie” route and start a home catering business. Catering is a business that’s perfectly designed to reward those who plan well and can often fit perfectly into weekends, lining up wonderfully opposite a normal workweek.

Childcare service Many states allow people to start up in-home daycares with minimal licensing and paperwork. If you love children and have plenty of time and space at home, this is a perfect business to get into.

Cleaning services for businesses Many businesses and civic institutions have a need for individuals who will provide cleaning services at a low cost outside of business hours. This is a great side business for those who can put in a few hours late at night or on weekends.

Collectible trading If there’s a particular type of collectible that you know a great deal about, you can often make good money as a collectible trader, utilizing tools like eBay and opportunities to find those collectibles in the community. I had some success with this myself with both trading cards and video games in the past.

Computer troubleshooting I had some success with this in the past, though I’ve largely moved away from it now. If you have a knack for fixing computers, this is a good place to start.

Consignment buyer Consignment shops and consignment auctions are often loaded with good deals if you know how to identify them – quite often, you can turn these good deals around and make a nice profit elsewhere. Get started by visiting some consignment shops and critically evaluating the prices on the items there.

Cookie making Much like candy making, homemade cookies can be a great seller. Bake the cookies, package them well, and resell them through a local gift shop. Often, you can find people in your social network who will buy batches from you for special occasions.

Dinner preparer I recently met a woman who earned quite a bit of money as a very part-time chef. Once a week, she would go to someone’s house and prepare a homemade meal for their family, then do all the dishes and cleanup work. This gives the family plenty of together time, while earning the lady some cash in the pocket. If you love to cook, this can be a great opportunity, but you may have to put a lot of work into searching for clients.

Event coordinator Events like family reunions and large parties are often full of busywork that many people simply don’t want to tackle. That can be the perfect place for you to step in and take charge of the planning and coordination.

Event DJing Are you an audiophile? If you have a great sound system and a large selection of music, you’ve already got what you need to hire yourself out as a DJ for various events and receptions. This is a great way to fill an afternoon and evening while also earning some cash in the process.

Exercise teacher Many gymnasiums will trade membership and often a bit more for a person willing and able to teach an exercise class. If you’re in good shape, this is a great opportunity to earn some extra money, plus it can often lead to additional income with one-on-one teaching opportunities.

Furniture making If you’re adept at woodworking and have just a bit of basic equipment, it’s easy to get into business making deck furniture. It only requires a few items – a saw, a drill, a sander – and some creativity and passion for working with wood.

Garage sale management One person I know holds a garage sale at their house almost every weekend during the summer. As a result, that person has a lot of regular customers who stop by almost every weekend to see what’s on sale. That person then goes to neighbors and friends and offers to sell their stuff at that yard sale for them, splitting the proceeds. People are usually happy to do this, since they don’t have to go to all of the work of running a yard sale, but still get rid of unwanted items and earn a bit of money, too.

Gardening services I’ve actually had requests from others for people willing to do this, so the demand is out there. To put it simply, some people are willing to pay others to get a vegetable or flower garden started for them in their yard so they can have access to ultra-fresh produce without all the legwork.

Handy man services Skilled at basic home repair? Let people know that they can call you for little repair jobs, like basic plumbing and other things. You’d be amazed at the simple things people are willing to pay others to help them with.

Housecleaning Many people simply don’t enjoy cleaning their homes and are willing to pay a reasonable price to have someone do the work for them. This is a great way to earn extra money in a flexible way, particularly if you have time off during the workweek.

Interior decorating Fascinated by interior design? Have a huge collection of interior design materials around? Many people are quite happy to hire individuals to help them decorate their home – I know, for one, that I have no eye for this type of thing.

Jewelry making If you have a good eye for detail work and a lot of patience, homemade jewelry can be quite profitable. As with other items on this list, there are many opportunities to sell such items through local gift shops or at sites like etsy.

Knitting / crocheting / quilting Skilled at creating blankets and sweaters? There’s a huge market for these types of items – even better, you can usually make them in your spare time whenever you have it. As always, local shops and places like etsy are great places to go to sell such items.

Landscaping services Willing to mow lawns and trim bushes and trees? Many people are quite happy to pay for such services. Not only is this a great side business for a fit adult, it’s also a great way for a teenager to get a small business started.

Meal-to-go preparations Remember my earlier post about breakfast burritos? Making meals in advance is a great way to save money for yourself – but you can often prepare these for others as well and sell them for a markup. Prepare eight casseroles, for example, then sell six of them to cover your costs, and you’ve got two free dinners for your family (and maybe a bit more). You can grow this by taking orders from others and finding out what they like.

Online media consultant Like participating on messageboards, Facebook, Twitter, and so on? Become an online media consultant and help people promote things. Start small – help local businesses get a presence on Facebook and set them up with Twitter. From there, you can grow to whatever works for you.

Personal shopping Many very busy people and elderly people are willing to pay a fee for people to do their shopping for them. Simply retrieve a shopping list from them, return with the receipt, and accept payment for the purchased items (plus a little fee). You can often do this in conjunction with your own shopping trip if you’re well-organized (take two carts!).

Pet grooming Many people loathe bathing their pets and trimming their hair – I know I do. Pet groomers perform these tasks for a small fee – a perfect job for a person who loves dogs and cats.

Pet sitting When people go on trips, they’re often concerned as to what will happen with their pets. That’s where you step in – offer yourself as a safe place to leave their pets, or be willing to go to their home to take care of their pets.

Pet walking Many busy people leave their pets home all day, but realize that those pets really could use a vigorous walk (and an opportunity to relieve themselves) during the day. Pet walking is a great opportunity for exercise, fresh air, and some pocket money if you have free time during each day.

Pet yard waste cleanup For many people in suburban areas, cleaning up pet yard waste is a real hassle – it’s disgusting, for one. Instead of cleaning it up themselves, they might hire someone to do it regularly, two to three times a week. There are several such services in our area, actually.

Produce selling Like to grow vegetables? Focus in on one vegetable and sell the excess to grocery stores and at farmers’ markets. My father does this with tomatoes and earns some solid extra money during the summer months. You can do really well, though, if you can grow things inside during the winter – February fresh tomatoes can sell quite well.

Proofreading Have strong English skills and exceptional grammar? You may have opportunities to work as a proofreader from home. Advertising for this can be difficult – seek out those who might actually be able to use your services and advertise directly to them.

Public speaking If you’re the type of person who can get the attention of a room easily, public speaking might be for you. Take advantage of every public speaking opportunity you can and you’ll be surprised at the opportunities that make themselves available for you.

Scrapbook making Many people dream of having beautiful scrapbooks. They collect all the materials they want in the scrapbooks but never follow through on the actual creation. You can step in here – take their ideas and materials and assemble a scrapbook for them.

Senior citizen assistance Many elderly people need assistance with a wide variety of simple household tasks – cleaning, laundry, and so forth. Many children of elderly people are quite willing to hire someone to help out their parents.

Sewing and alterations My wife is quite handy with a sewing machine and often hems and modifies our children’s clothes. She could easily take this a step further and offer her services to others, doing basic garment repair and modification for a small price on lazy evenings.

Soap making Making amazing homemade soaps isn’t as hard as you might think – it just takes time and patience. Again, items like these can easily be sold via local gift shops and through websites like etsy.

Teaching music If you know how to play an instrument (particularly the piano or the guitar) and have patience, you’ve got what you need to teach others how to play. Offer lessons in that instrument to others – this can also be an excellent thing to barter with, too.

Toy making From simple things like sock monkeys to more elaborate things like handcrafted chess sets, many people are willing to pay good money for handcrafted toys that you can easily make at home in your spare time. Again, gift shops are the place to go with items like these.

Tutoring Did you major in a particular topic in college? Do you have patience with children? You likely have what you need to tutor kids in particular subjects. Seek out parents and let them know that you tutor in a particular subject and provide materials for them to share and phone calls will often trickle in.

Video preparation services Many people like to have videos made for special events, such as weddings, or for gifts. This may mean actually taking the video yourself at a special event, or it may mean simply assembling materials and creating a video from those items. Either way, with a well-equipped PC, some taste, and some patience, you can make quite sophisticated video productions at home.

Virtual assistant Many ultra-busy professionals appreciate having someone who can check and answer their email, organize task lists for them, update their calendars, and so on, with minimal interaction. The best part is that you can provide this service from home with a good internet connection.

Web site design Many small businesses in your community could use a very basic web presence to tell others about their business. Quite often, these businesses don’t have a large budget for such things. That’s where you come in – get a bunch of clients from the local community by beating the pavement, create sites for them, and maintain them for a small fee. Get enough businesses and you have a nice side business of your own that doesn’t require a ton of maintenance time.

Wedding planner If you’re one of those people who can’t help but flip through bridal magazines and think about various wedding arrangements in your daydreams, wedding planning might be the perfect thing for you. A great way to get started is to develop a website on the topic, get to know people online, and offer your services throughout the community.

I’m betting the readers have many, many more ideas along these same lines.

Ada writes in:

Like you, I think the stock market is near the bottom right now and will go up greatly in the next three to five years. I have some extra cash (about $10K) but I don’t know exactly what to do with it to get on board. How would you do it?

In fact, I’m already doing it. My wife and I made the decision to start investing much of our long-term savings for a home into stocks because we both feel that the market is at the bottom right now and is poised for a big rebound in the next five to ten years.

So, what are we doing?

What Are We Investing In?
Most of our investment is going into index funds. For those unaware, index funds are a way to invest in a lot of stocks at once at a cheap price. A given index fund is usually governed by a simple rule – all stocks in the S&P 500, for example. Index funds have long been lauded as a great way to easily diversify at a very cheap cost.

We’re investing all of our money equally into two funds – the Vanguard Total Stock Market Index (which basically covers all domestic stocks) and the Vanguard Total International Stock Index (which broadly covers all international markets). In other words, the money is as diverse as we can make it.

At the same time, there are a number of individual companies that my wife and I particularly believe in for one reason or another (Apple being one, for example). While we both recognize that individual stock investing is a risky proposition, we also know that our investment choices reflect the things we believe in.

So, we’re allocating a small portion of our overall investment into a diversity of individual stocks – 20, to be exact. Each month, we’re automatically investing a small amount into each of these twenty stocks. Our investment amount in individual stocks is about 25% of the amount we’re putting into index funds.

Who Are We Investing With?
Our index fund investments are handled by Vanguard. We’ve trusted them for years – they’re known for their low-cost index funds and their reliability, which is exactly what we want. They’re also managing my Roth IRA, which they’ve done quite well.

Our individual stocks are being managed by Sharebuilder, which we decided on after a fair amount of hand-wringing. Their automatic investment plans were simple and reasonably priced (without any of the factors that made us nervous about the few brokers that undercut Sharebuilder in price), plus we weren’t restricted in our investment choices (as many of the companies we wanted to invest in didn’t have direct plans for investing). Since we’re planning on just doing automatic investing until the time comes that we actually need the money and then we’ll sell all of it (no market timing here), the actual management of the money for tax purposes will be pretty straightforward, too.

Isn’t This Risky?
Undoubtedly it is. That’s why we’re not putting any of our emergency fund, any of our retirement, or any of our short-term saving goals at risk. The money we’re investing here is money that we will only tap in the long term (ten or fifteen years or so) for the place in the country we’ve always dreamed of. Ideally, the stock market will help take us there a bit quicker than we might be able to otherwise, but if it doesn’t work, we’ve not really risked anything that affects our day-to-day lives, then or now.

Also, this plan merely reflects what we’re doing. You might want to be more conservative with your own savings for long term goals like this, and you certainly wouldn’t want to do anything like this with money you will need to rely on in the future.

We’re only able to start doing things like this because we’ve cut our spending drastically over time and we live by a mantra of spending less than we earn. Because of that, we can now make choices like this, paving the way to our dreams.

One of the most constant criticisms leveled against me (and against anyone who talks about frugality regularly) is that, in order to save a few cents, one must abandon the simple pleasures in life. “YOU’LL PRY THIS MOCHA LATTE FROM MY COLD, DEAD HANDS!” people will write to me in a fit of vengeance.

Here’s the truth: if that mocha latte actually brings significant happiness into your life, the last thing you should ever do is give it up. Giving up something you love in order to save a few cents isn’t frugal, it’s cheap.

Instead, a frugal person would look at it from several different perspectives.

Is it the item itself that is bringing happiness? Quite often, we tie good feelings and memories into a material object that actually aren’t related to the object at all. I talked about this a while back – I realized that my daily visits to the coffee shop weren’t about my joy from drinking coffee. Instead, that twinge of pleasure I got came from memories of trips to the coffee shop when I was in college. The happiness I got was free and not really tied to that day’s coffee order at all.

Is there a equal-quality substitute that can save you some cash? Many people criticized my post about homemade laundry detergent – it only saved me eighteen cents per load, right? What a cheapskate!

Well, I could make 52 batches of that homemade laundry detergent in about fifteen minutes. This saves me $9.36. I’m not reducing the quality of the detergent, either – my homebrew gets my clothes just as clean as the detergent I normally used.

Any time you can find a roughly equal-quality substitute for something you use regularly, you save money. There’s no reason to not check out generics or homemade versions of staple items – if they’re not up to your personal standards, go back to the name brand you were using before. If it does the job in a way satisfactory to you, stick with the less-expensive version.

So, what about that daily latte at the coffee shop? Why not try a smaller size one morning? Why not try a different, less-expensive coffee shop once? Perhaps you can just go to work and drink the coffee there – take a bottle of good creamer with you to add that flavor. There’s no reason at all not to at least try the lower-cost alternatives available to you – and if you find one that clicks, adopt that alternative as your new standard and watch yourself save money each time.

Is this actually a worthwhile use of my time? If I can’t save money at an hourly rate of $20 per hour invested in the frugal task, it’s not worth it to me (unless I’m doing it for other reasons as well, like brewing homemade beer).

Take the laundry detergent, for example. That single batch takes e about fifteen minutes and saves me $9.36. That earns me an after-tax hourly wage on the project of $37.44 – definitely worth fifteen minutes, particularly when I can somewhat multitask with that time (my full concentration doesn’t need to be on the bucket when I’m stirring it).

My time (and your time) is too valuable to waste on nickel-and-dime frugality.

So, how does this apply to the latte in question? Maybe you’ve found a coffee shop that has a good price on lattes – and you just can’t match the quality elsewhere without matching the cost and matching the time invested. If that’s the case, then by all means enjoy your latte at the coffee shop.

Here’s the real story. A cheapskate always chases the bottom line, regardless of quality of the experience. A spendthrift just takes the first offer that comes along and insists that this is the best way of doing things.

On the other hand, a frugal person doesn’t just accept the first offer that comes along. They try to find ways to get that same experience and quality and value for a lower price – or find the best bang for the buck in their lives.

Don’t give up your daily latte. Instead, just look for the best value you can get on that latte, because if you drink one every day, every penny you save on that daily latte really begins to add up. And that same truth applies to almost everything in your life that you do with any repetition, from flipping on a light switch to brushing your teeth.

Mike writes in:

If I had to evaluate myself, I’d say one of my largest challenges is my ability to maintain self-discipline. There are always innumerable personal projects I’d like to dive into. Unfortunately, it seems to be the case that almost all of them slip away from me. I’m an undergraduate in computer science, and I feel like the same problem extends to my academic pursuits. Creating a regular study routine in college has proven quite a daunting task for me.

I don’t think the problem is my ambition. I’m quite passionate about both my studies and my hobbies. I’ve come to the conclusion that habit and routine are the essential factors that are missing from my life. Perhaps this is a personality trait I lack; but I have a hunch that this is something many individuals wrestle with. Do you have any techniques or thoughts on how I might be able to ensure the cultivation of habit and routine in my life? I feel as though this stability will be something I could leverage for the rest of my life.

For much of my college career, I had the same problem. I’ve always been able to focus in on one thing, but establishing patterns and routines was always a challenge. I would be aware that I should be doing one thing, but there was always something else going on that would intrigue me more in the moment, and then I’d find myself pushing up against deadlines.

By the time my penultimate year rolled around, I realized I had to do something different. My GPA wasn’t where it needed to be and, although I had actually completed several nice projects over my college career (including writing my first novel, which will never be published), I still had a very hard time establishing daily routines.

Here’s exactly how I tackled the problem.

Start Small
Many people who aren’t naturally routine-oriented start off by attempting to establish a ton of routines at once – and then they fail miserably. I know this from personal experience, as I tried many times to establish routines of my own and watched others fail at it as well.

The trick is to start very small. Focus on establishing just one simple routine in your life, and give yourself a month to do it.

Instead of establishing an elaborate daily study routine, instead just pick a very small block of time to devote each day to reading. Instead of building up a morning routine with lots of activities, focus on just one activity after you wake up, like brushing your teeth.

Spend some time thinking about the single, simple routine you want to establish. A good “starting” routine is one that is simple, one that involves something you would have to do anyway (like homework or hygiene), and one that you’ll repeat quite often – a daily routine is a good one. Later on, as you get used to establishing routines, you can move on to more complex routines.

Make Effective Reminders
The most common problem that many people have with establishing new routines is simply remembering to do them at the appropriate time. If you normally wake up and start on your day, it can be hard to always remember to start off by, say, brushing your teeth. Why? Quite often, it’s because you already are entrenched in a set of routines – and breaking those routines is quite hard.

In truth, the challenge with establishing new routines is that you usually have to break old ones to establish new ones. You might not think that your mornings have a routine in place, for example, but, quite often, there is a subtle but powerful routine already there, one that incorporates a small handful of variations that, together, make your mornings seem rather random and chaotic. Thus, even though your morning seems very un-routine and it seems as though you can’t add a new routine because things are so irregular, quite often the opposite is the truth – you have a routine and breaking that routine is difficult.

So, how can you break through that resistance? The best way to do it is to think about your change in routine consciously at the very moment you need that thought, and the best way to do that is through a reminder.

It’s often difficult to know exactly when or where you’ll need that reminder, though, so I suggest trying a bunch of reminders when you’re starting a new routine. Let’s say, for example, you want to get in the habit of brushing your teeth as soon as you wake up. You can start by putting your toothbrush in the place where you always go first thing in the morning, then putting notes in various places that you might otherwise go. Stick that brush on your bedside table, then put notes in your pants pockets or right in the middle of the mirror in your bedroom. You’ll soon find that one of those reminders is the one that always works, so you can quickly reduce the effort to focusing on that one key reminder.

Repeat Until It’s Natural
Replacing one routine with another usually takes one to two months. Until then, you continually run a risk of falling back into your old routine without the new habit ingrained in it.

For me, I often found that the reminder I would set up carefully for myself would become part of my routine. I began to expect to find my toothbrush on the table when I woke up, for example, and that led naturally into brushing my teeth. I began to expect to carry only the materials I needed for studying in my backpack, so that when I went to the library between classes, all I would have on hand is the required study materials. When this type of expectation happens, it’s a very good sign. It means that, at least in part, you’ve adapted to the new routine.

The final threshold to ensure that your new routine is natural is that you can easily remove any inconvenient reminders and still succeed in accomplishing the routine. Take down your reminder notes, for example, and see if you still go through the routine as normal.

Add One New Piece at a Time
Once you’ve managed to establish one new routine, add another one. Go through the same procedure – find one you actually want to add, set up a bevy of reminders so that you think about it when you need to, and keep those reminders in place until you just simply do whatever it is that you’re trying to establish.

For me, I found that once I had added three or four routines to my life, it suddenly became very easy for me to establish further routines. I no longer had to really think about it after the first few days of a new routine. That’s not to say I lost all spontaneity or anything, but that when I needed to take care of things on a regular basis, it became much, much easier to get used to those routine tasks.

The end result? My GPA went up significantly each of my final three semesters in college while, at the same time, I was working harder than ever at a side job. Quite simply, learning how to add routines to my life made me much more productive than before.