The last week has been pretty rough for me following the passing of my grandmother. I was pretty close to her from my earliest years, but over the last few months, we hadn’t spoken as much as we normally had. I was involved with my own children and she had not called as often as she used to, which I didn’t think much about at the time, but now I realize was just another sign of her Alzheimer’s growing slowly worse.

When she passed away, the initial shock was difficult, but it was actually much harder after the funeral, when I tried to get back into my normal routine. To put it simply, I didn’t want to write. I felt down. I kept thinking about Grandma – and also about how my mother was dealing with things. Memories kept popping into my head. The last thing I wanted to do was to write or do research. I mostly just wanted to hide under a blanket somewhere.

Then I realized something. If Grandma saw me sitting around feeling that sorry for myself, she would let into me like no one’s business. She constantly expected great things from me, more than other people, and she told me why once – because she knew that I was capable of it.

So I spent some time putting myself in a better psychological place – and it really helped. Here are some of the things that really worked.

Let it out The quicker you let it all uncork, the better off you’ll be. I spent some time thinking about the happiest memories I had with Grandma and, before long, the tears came, hot and hard. I cried for a bit, then I felt much better about things.

Exercise I went on a three mile walk, then I did a little bit of interval training (basically, I ran as fast as I could for a block, then stopped until I caught my breath, then did it again, repeating several times). Endorphins do wonders for lifting your mood and making you feel better, even if it’s just a nice walk.

The outdoors After my walk, I sat outside in the grass for a bit. It was pretty cold (winter has been trying to fight back against spring here in Iowa over the last few days), but the fresh air, the sunshine on my skin, and the sound of birds in the trees brought me a steady and happy inner peace. I wound up tinkering around in the garden for a bit, enjoying the outdoors and being refreshed by the sweet spring air.

Simple meditation A period of simple meditation can help clear any troubled mind. Here’s a very basic one that works well for me. I get in a comfortable chair with my feet up. I close my eyes, then I focus on nothing but breathing. I breathe in for a four count, then breathe out for a four count. Once that becomes easy and natural, I focus on each part of my body, starting at my toes. I try to focus on making them go completely still. I move up my body, until I’m to my head, and I’m usually pretty close to sleep (but not quite). Then I go in reverse, back down my body, imagining those pieces coming back to life. It takes about twenty minutes and always makes me feel relaxed and more at peace with the world.

YouTube I have a big collection of YouTube bookmarks that simply lift my mood. They usually take me back to moments in my life that really made me happy, and each one usually gives me goose bumps. Here are a few of them.

Conversation I’ve talked to countless friends and family members over the last few days. Each conversation has helped. A simple phone call does the trick … and a good friend always listens and has something helpful to say.

Children I’ve spent a ton of time playing with my children. A child at play subtly convinces you to let go of the concerns in your life and simply revel in what’s happening at the moment. Rolling around on the floor with my daughter, playing Memory with my son, and having a dance party in the basement with them helped cure a lot of what I was feeling.

Love Just now, as I was writing this, my wife came into the office, put her arms around me, and gave me a big hug. Her constant, unyielding love helps with moments like this. She’s a constant source of support and conversation, and when I’m facing a difficult moment like this, she’s there for me in every way.

Since starting The Simple Dollar, friends and family and neighbors have started coming to me regularly to chat about money issues. Most of the time, the questions are pretty simple and the answers come quickly. What intrigues me about these conversations, though, are the little things that people say that reveal bigger truths about their experiences with money.

One refrain that always seems to come up is what I like to call “weekday misery, weekend pleasure.” To put it simply, quite a few people who speak to me hate their job. They absolutely loathe it. Yet, because the job pays substantially better than anything else available to them, they stick with it.

This creates a lot of misery in their lives, and they find various ways to placate that misery. Quite often, this involves “playing hard” on the weekends – going on entertaining day trips, engaging in expensive hobbies, and ending both days with a significant party. It also often means “softening the blow” of the day by doing things like going out for breakfast before work.

I’ll take one person in particular – I’ll call him Ralph. Ralph’s education ended with a high school diploma, so to a degree, Ralph’s opportunities were limited. Ralph had a slightly-more-than-minimum-wage job that he really enjoyed. The work was enjoyable and fulfilling, the workers were friends both on the job and off, there were plenty of overtime opportunities, and the employer was very flexible with time off when it was needed.

Yet Ralph eventually applied for a much higher paying job. He went from earning about $9 an hour to earning about $22 an hour. At the same time, though, Ralph gave up work that he loved and a lot of time spent with friends. He gave up a lot of schedule flexibility. He gave up overtime opportunities, too. Even worse, the new work was terrible – it basically left him feeling depressed and empty most of the time.

The only benefit? More income. Yet it wasn’t as much of a boost as he expected. During a normal week, his paycheck roughly doubled, but at his previous job, he would often spend his evenings working overtime with his friends, meaning his old paychecks were often not that much lower than his new paychecks.

Another problem came up: his new work environment was filled with people who were talking all the time about the stuff they were buying. At his old job, most of the people there were happy just to make the bills and have a $20 in their pocket. At the new job, everyone had expensive cell phones. Many of the workers had ATVs that they rode around on during the weekends. They all had shiny new cars, where at his old job, most of the people had rusty old trucks.

So he felt the need to upgrade so that he could “relate” better. Of course, this added greatly to the monthly bills.

At the same time, the new work made Ralph largely miserable, so he started doing expensive things on the weekends. He took up a handful of expensive hobbies – that’s what his new coworkers were doing – and went out on the town regularly on weekend nights.

In the end, Ralph wound up with a job he was less happy with and less money in his pocket than before.

Where can Ralph go from here? Here are five suggestions for you if you’re in a “weekday misery, weekend pleasure” situation like Ralph.

Get in touch with the work you would really enjoy. Ralph is lucky in that he already knows what he enjoys doing. Many people do not – they just know that their current job makes them unhappy. Invest the time to figure out what you’re passionate about. What do you really enjoy? Seek it out. You might also need to work on how to turn that passion into income.

Communicate with those around you. Tell your spouse about your burgeoning change of heart about your work. If you’re unmarried, talk to your closest friends or your parents. Talk through both sides of the equation with them – making a change or staying where you’re at. Quit often, the people you care the most about – and who care the most about you – will have powerful insights that you didn’t consider.

Identify the places where you could cut spending in your life. One big challenge with making a move like this is figuring out where you could actually reduce your spending. Look for the big things you can cut. Also, look for the spending you’re doing that’s directly tied to your job (like clothes, stopping for food each day, doing things with coworkers, or “keeping up with the Joneses”). Another good place to cut is the “one time” things – things you can do once that cut your required spending over the long haul.

Build up an emergency fund. As the possibility of moving to a more fulfilling career position becomes more real to you, you need to build up an emergency fund to help you through the rough transition. Set up an automatic transfer from your checking account to your savings account every week, as much as you can muster. Doing this serves a secondary purpose, too: it convinces you to start making gentle cuts to your spending now.

Set a “target date.” This is the big one – it made my choice to “downshift” to a more personally meaningful job much easier. Select a date that you’re going to walk away from your painful job and make the big switch. Put that date front and center in your life – put up reminders all over the place. That date becomes a psychological lift – it makes you want to make the big push. Cutting back on things seems much easier than before. Building an emergency fund becomes fun rather than drudgery. Instead of burning your free time, you feel pushed towards using that time to pave the way for the transition, meaning you’re finding ways to save money instead of spending it. A target date can really ignite the kind of change you want to make in your life.

Remember, a little more money isn’t worth a lot more misery.

On behalf of myself and my family, thank you to the hundreds (perhaps thousands) of readers who directly sent us messages of condolence – and a few small memorial gifts as well. It is truly, truly appreciated.

How to Make Money with a Blog Ever wondered how exactly a blog makes money? This is perhaps the best one-page description of how to do it that I’ve yet read. (@ christian pf)

Personal Finance Hour J.D. Roth from Get Rich Slowly and Jim Wang from Blueprint for Financial Prosperity have started a weekly radio show. You can download the older episodes at their website – they’re pretty good.

Clothing Swaps: A Twist on “Girl’s Night Out” Having social support for frugality is key, but many people have a hard time finding that support. This is a brilliant idea for making a very fun, social, frugal evening. (@ seattle times via unclutterer)

How to Survive (and Perhaps Thrive) on a Teacher’s Salary Excellent advice for the millions of teachers out there, particularly those who have suddenly found themselves as the sole breadwinner in a home where their partner is newly unemployed. (@ wisebread)

How to Build Your Social Circle I’ve repeatedly discussed how valuable a social circle can be, but it’s often difficult to build one from scratch, particularly if you live in a new area. This is some great advice on getting started. (@ dumb little man)

Daydreams: Living Off the Grid I often dream of this very thing – getting a little piece of land out in the country, setting up a big garden and some small-scale organic livestock farming, and getting as off the grid as possible with things like a wind turbine for our electrical needs. (@ frugal dad)

Recently, an astute reader pointed me towards a very interesting Yahoo! Finance article entitled Suze Orman and the New Rules of Credit Card Debt. In the article, Suze changes her usual tune of paying down debt above all else – here’s a key quote:

“If you have an unpaid credit card balance [and] not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can.”

Furthermore (with my own emphasis added):

Orman says that all spare dough–after making the minimum payments–should go into an emergency savings fund. Ideally, she says, that fund should contain eight months worth of living expenses.

This is a pretty surprising shift, since Orman was, until very recently, a very strong advocate of focusing on eliminating all high-interest debt. Obviously, this shift has been brought on by the recent economic downturn – but is it really a sensible change in philosophy? I’m not so sure.

Let’s start with the basics. My philosophy on debt repayment is pretty typical: get a small emergency fund built up, then start snowballing all of the high interest debt (anything over about 6% or so) by focusing all of your energies on paying off the debts in order of descending interest (highest interest first). If you’re interested in how to get this philosophy rolling in your own life, I’ve discussed it in detail before.

Suze used to have a very similar philosophy, but now it’s changed in one significant way: instead of a small emergency fund at the start, she encourages people to get an eight month emergency fund before continuing on to repaying debts.

Although I agree with Suze that a change in strategy is appropriate, I disagree with this particular change.

First of all, it’s a long term solution to a short term problem. Many economists expect the economy to rebound in 2010. A typical estimate is that the recession will drag on for a total of eighteen to twenty-four months, with a bit more than half that time already elapsed.

What about jobs? The rate of job loss is slowing down across the country and in some areas is already beginning to rebound.

In short, it’s quite reasonable, based on the information before us, to conclude that we’ve already caught the brunt of the storm and that the future holds an economic rebound.

In this environment, making the decision to jump from debt repayment to emergency fund building is about two years overdue. Of course, two years ago, many fewer people would have listened to such advice.

At the same time, proposing an eight month emergency fund is really poor money advice to most people, particularly in the face of such a short-term concern. Eight month emergency funds are long term goals, taking years of careful planning and consistent saving to build. Proposing such an enormous goal to someone facing a big pile of monthly bills and a typical income isn’t great advice.

I know this from experience. If you had told me a few years ago that I should have eight months’ worth of living expenses in the bank, I would have laughed at you. It simply wasn’t realistic.

I propose a different solution.

First of all, ignore a huge, long-term goal like an eight month emergency fund. It took me years of difficult decisions and hard saving to reach that kind of buffer – and I had a strong income and a stubborn streak behind it. Sure, it’s a great long term goal, but if your focus is on getting through the downturn, your focus should be on the short term.

Instead, if you’re worried about the downturn, focus on three key things through the rest of this year (and thus, likely, through the bottom of the downturn):

One, apply some realistic frugality in your life. I’m not suggesting completely revamping your life and completely altering your behavior – that will simply fail most of the time, just like a crash diet.

Instead, look for truly effective ways to trim your spending, particularly things you can do one time and have them continually save money over the long haul. Work on improving energy efficiency, for example, by air sealing your home, installing a programmable thermostat (and actually programming it), and using more energy-efficient equipment (like light bulbs and appliances). Prepare home-cooked meals in advance and freeze them (so when you’re busy during the workweek, inexpensive homemade meals are very easy). Call and get your credit card interest rates reduced. Cut out services you’re not using – and try to negotiate any package deals you have, like a cable/phone/internet bundle. All of these tactics can be done once in a big energetic flurry, but they trim your monthly expenses thereafter.

Two, acquire no new debt. Instead of replacing things, stretch out their use a little bit longer or find alternate means. Take your credit cards and hide them, so you’re not tempted to use them for things you don’t truly need. Most importantly, take it one day at a time. Focus on just avoiding the credit cards in the here and now – don’t stress out about the long term.

Three, build up your emergency fund a little now, but be prepared to reduce it in 2010. If you’re really concerned about the short term, it’s okay to slow down the debt repayments in the short term. Just pay the minimums and put the extra payments (along with all of that other money you’re saving through the steps above) into your emergency fund. Then, when the economy rebounds and you’re clearly in a more secure state with your employment and other factors, don’t be afraid to put some of that savings towards your debts.

To put it simply, an eight month emergency fund, if you have high interest outstanding debt, is overkill. However, in the current economic environment, there is reason for people to feel much less secure about their employment. So, in the short term, I’d bulk up my emergency fund a little – but only in the short term.

If you take nothing else away from this article, take this away: everyone’s personal sense of risk is different. For many people, the current economic state goes far beyond their comfortable risk threshold – if you feel that way, bulk up your emergency fund in the short term. If you feel confident and comfortable where you’re at, pay down your debt – or, if you don’t have any debt, start saving for retirement. The key, as always, is to spend less than you earn. If you do that – and do it with all your might – the details of whether to pay down debt or to have a bigger emergency fund pale in comparison.

My maternal grandmother passed away very suddenly this past Thursday. It caught me completely by surprise, in fact – I was working on arrangements for a weekend guest at our home when my father called me with the news.

It shocked me, to say the least. Here are some of the things the last few days have taught me.

The grieving process is different for everyone. After I received the call, I cried a bit. I sat in a daze for a while, thinking about my grandmother. I then threw myself into doing something, calling a few distant relatives, then cleaning out the pantry in order to give my mind and body something simple to work on.

That time gave me what I needed to be emotionally strong for the funeral and the family events before and after.

Other family members dealt with things in different ways: tears, humor, solitude, eating, cooking, cleaning, and so on. Some wanted to talk about Grandma. Some wanted to talk about anything else. Some wanted to talk about nothing at all.

The best thing you can do is take a deep breath and realize that everyone around you is dealing with the same painful thing you are, in their own way. Be there when others want to talk, back off when they don’t want to, and feel fine giving yourself the room you need.

Times like this are what emergency funds are for. Obviously, the news meant our weekend was filled with an unplanned trip to spend a lot of time with people who weren’t expecting us to visit. This meant a lot of unexpected expenses – a long road trip, food, flowers, and so on.

If we were back in our paycheck-to-paycheck days, this would have been a big problem for us. Our budget for the next month would have been seriously hampered by the onslaught of little expenses here. More importantly, it would have added more stress into an already stressful time.

Instead, we didn’t worry about this at all – we just handled it. Our focus was on our family and our grieving process, not on whether or not we could afford to buy several bags of groceries or a 400 mile road trip or a contribution to a floral display for the funeral.

Times like this are when a strong social network comes through. The large social network that my parents have (that I’ve mentioned before) came through time and time again during the days between my grandmother’s passing and the funeral. They provided lots of food, lots of companionship, and help with arrangements as well. They ran errands, made phone calls, got deals on flower arrangements, gave advice on estate issues, and many, many other little things during those painful days.

These people didn’t need to be called or asked to help. They didn’t expect anything in return, either. They were simply willing to do it, no questions asked.

Why did these people simply do this? Why did they just step up out of nowhere when they were needed? They did it because my parents had always done it for them, no questions asked. My parents spend so much of their time helping others, providing advice and food and phone calls and technical assistance and many, many other things to the people around them on a daily basis. If they see someone near them in need, they simply help them instead of worrying about their own needs and free time.

That giving nature was returned to them in spades this week when they needed it – and they always have that helping hand when they find themselves in any difficult situation.

Rarely have I seen such a clear example of why it’s incredibly valuable to give freely of yourself.

Letting go of the bad memories is vital. When people pass away, there is a window of opportunity there to let lots of little things be bygones and let petty bad memories take a back seat, at least for a little while.

It can be painful to see some people at such a time, but there is no better time to embrace those people and begin the process of rebuilding a broken relationship.

I was able to watch this very thing happen a few times over the last week – and I truly hope that the end of my grandmother’s life will be able to plant the seeds of a few rebuilt relationships.

Perhaps, in some ways, this is my grandmother’s final gift to all of us.

When I reached my financial bottom, one of my first responses was to look for fat to cut out of my life. I eliminated Netflix. I eliminated magazine and newspaper subscriptions. I whacked away at some of the pricier options on several other bills.

I needed to do this because, quite simply, the monthly bills had grown so large that they had overwhelmed my income. It was becoming difficult just to pay the bills, let alone do anything else or spend anything extra.

I expected that eliminating these services would really hurt. My wife and I used to watch movies by the dozen – how could we possibly live without Netflix? What would I do without Harpers in the mail and the New York Times on my doorstep? What would I do without unlimited text messages?

What I found was that life went on without these services – and it went on quite easily. My wife and I filled our evenings with other things – reading, going outside more, and so on. I found new things to read to replace the cancelled subscriptions. I also found I wasn’t sending nearly as many text messages as I thought – and I didn’t really need them that much, anyway.

To put it frankly, I was much happier seeing my debt go down by $20 a month than to see Netflix discs in the mail. I didn’t expect that at all, to tell the truth – I figured I would loathe leaving Netflix. I couldn’t possibly believe that a monthly $20 reduction in debt was really worth losing something I enjoyed so much.

Without that steady influx of movies, though, I quickly moved onto other things. I began to read more. I went outside more. And before long, I didn’t really miss the discs in the mail at all.

At the same time, I was able to put $20 more per month towards my debt. That’s $20 off the principal, which meant that I was paying progressively less interest, too. It became part of my debt snowball, helping me to wipe out my credit card debt and my remaining auto loans quicker than before.

And that felt good.

It’s easy to trick ourselves. There are so many things in our lives that we gently delude ourselves into thinking of as a requirement. In truth, though, many of those things are far from requirements – they’re just expensive pleasures that leave us writing a check each month. In the end, is it really bringing a net benefit of pleasure, particularly when there are other worthwhile ways to spend our time?

I’m not encouraging anyone to give up things that would actually hurt. If giving up something would actually negatively impact your life, be very careful about actually eliminating it.

Instead, I propose giving it a thirty day trial. See if you can spend thirty days completely without a particular service. If you can, then you don’t need that service – it’s an unnecessary leak on your finances. If you find you cannot, then that service is still there waiting for you, after all.

You might just find – as I did – that you don’t really need all of those services and things that your monthly bills pay for. Then, when you trim those services, you can apply that money to paying off your debt or investing in a Roth IRA – yes, $20 a month can be the beginning of a healthy Roth IRA if you start young.

Good luck.

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. Several readers have asked for suggestions on stock investing. Here are three excellent books on the topic (links go to my reviews):
A Random Walk Down Wall Street by Burton Malkiel
The Bogleheads’ Guide to Investing by Larimore, Lindauer, and LeBoeuf
The Little Book of Common Sense Investing by John Bogle

And now, some great reader questions!

I recently heard an auto expert say that it is no long environmentally responsible or even necessary to change your car’s oil every 3000 miles. He said to cut costs and still maintain your vehicle, 5000 miles between oil changes should be sufficient. What are your thoughts?
- Jessica

In general, newer cars are designed to work best with oil changes every 5,000 miles, not every 3,000 miles. For example, my first car, a Buick Skyhawk of some mid-1980s vintage, required oil changes every 3,000 miles on the dot or else you could easily notice the car not running as well – in fact, I often noticed things going downhill a bit around the 2,500 mile mark.

On the other hand, most automobiles made since 2000 operate quite well with oil changes every 5,000 miles. The engines are simply made differently than they used to be.

My advice? When you get a car, consult the manual and follow the advice given there. If you own a newer car, you’ll note that it likely encourages you to get changes every 5,000 miles instead of the old 3,000 mile standard.

You’ve been doing reader mailbags for more than a year now. Aren’t you running out of questions?
- Michael

Not at all, actually. I have more questions than I can possibly answer.

In a given week, I usually get fifteen or so usable questions from the weekly Reader Mailbag thread and twenty five or so are emailed to me. I filter these pretty carefully, cutting the number down to fifteen or so usable questions. I then use ten of these (pretty much at random) in the reader mailbag and either use the rest for standalone posts or save them for a future date when I need reader mailbag questions. I have literally hundreds in the archive at this point.

So, no, I’m not running out of questions. In fact, I have plenty of material to keep the reader mailbag going for a long time.

I recently sent my financial advisor an email about logging into my account view. (Side note: I have a financial advisor due to my grandmother investing in mutual funds for me since I was born, and they also have set up a Roth IRA for me.) I got a response back that kind of surprised me: “I’m going to ask my assistant, C_____, to help you with the XXXXXX Account View, then let’s talk about making some changes to get more conservative – less stocks! more bonds, cash, currencies, hedges against the downside!”

My gut reaction is that it’s a little too late to hedge against the downside, and if anything, I have 35 years until retirement so it’s way too soon to get conservative. What do you think of her response?
- Hillarie

My guess would be that the advisor made that comment without properly reviewing who you are. Most likely, many of her clients are much closer to retirement age than you are and thus going more conservative might make more sense for some of them. Thus, (s)he just popped out the easy answer without thinking too much about it. Another great sign of this is the fact that the advisor is tossing your case to his/her assistant – she doesn’t want to think about it.

This is part of the problem with hiring financial advisors, particularly ones you don’t interact with face to face. In my opinion, if you’re only interacting online with an advisor, you can do it yourself without their help. You can set up your own Roth IRA. You can do your own basic investments. Investment and financial advisors really only help if they’re fee-only (meaning they’re not trying to sell you something) and they’re helping you resolve a complex situation.

My advice, Hillarie, is to take advantage of the online tools available to you, as well as all of the sources of learning available, and take control of your own financial management.

I just recently got an iTouch as a present. What apps and features do you like and use the most on yours?
- Nicole

It’s probably easiest to simply list what’s found on my home screen. On the bottom row (the home row that appears on every screen), I have RtM, Evernote, Calendar, and Safari. The rest of my home screen is composed of Facebook, Twitterific, TWC (The Weather Channel), Instapaper, Kindle, Grocery IQ, Analytics, Nike + iPod, Bloomberg, USA Today, NYTimes, Wikiamo (a Wikipedia reader), Weightbot, and iReddit.

In other words, I use my iPod Touch basically as a PDA and not as a music/media player. All of the stuff on my home screen is essentially for information gathering or information storage.

The item I use the most is RtM. Whenever I come up with something I need to do, I fire that up (whether I’m near wireless or not) and add the task. The next time I’m in wireless range, I fire it up again and it updates my tasks. Boom – easy as pie. I do much the same thing with Evernote – those two are the MVPs of my iPod Touch.

Trent – You always recommend people to invest only what the will employer match into the 401k and the rest into a Roth IRA. Why is that? It makes more sense and cents to invest the max one can deduct from their taxable income(i.e $5000 for this year) then if you have more to invest then invest in a Roth IRA or Roth 401k.
- Frugal Cubicle

To put it simply, I advise that because for most people, their tax rate in retirement will be substantially higher than their tax rate right now. Thus, it makes sense to pay your taxes on the money now (as is done in a Roth IRA) than it is to pay your taxes later (as with a 401(k)).

The biggest reason I believe that tax rates will be higher later is the state of the federal budget. Over the last decade, we’ve run things at an enormous deficit, one that’s not sustainable over the long term. At some point, we’re going to have to start balancing the budget, and the only way to do that is either to slash spending or to raise taxes – and, most likely, it will be a mix of both.

A Roth IRA has another big advantage, too – you control the investing. You can choose whatever investment house you want for your Roth IRA – you’re not forced to choose whoever your employer has paired up with. You also get much more freedom as to what investments to choose, not just whatever investments your employer has.

Pairing the two together, it makes sense that, unless you’re getting matching from your employer, you should put money into a Roth IRA before you put money in a 401(k).

Do you listen to your local NPR station? If so, do you pledge during their fund drives?
- Lisa

Yes, to both. I listen to 640 AM here in central Iowa quite a bit, particularly for Morning Edition and All Things Considered. My wife’s car has 90.1 FM as the first programmed station.

I’m a huge believer in supporting what you use with your money. We both use Iowa Public Radio a lot, so we support it with our money and our time (my wife has actually volunteered to help out with the phones during pledge drives). That’s why I’m a paid user of both RtM and Evernote – they both provide stellar services that I use on a daily basis, so I’m quite happy to support them with my dollars. I’ve even donated to blogs before – if I read daily over a long period, that site has provided me with a lot of free entertainment, and supporting that entertainer means they’re much more likely to keep doing it.

Support what you value.

I recently made a pretty bad purchasing decision which involved me opening a new line of credit at a store (online) and cost me quite a bit of money. I was tempted because of the no interest/no payments deal they had going, but in retrospect I regret spending so much. The deal expires in July, a year after the purchase, and I’m struggling to make ends meet as it is. I’m sitting on an ‘emergency fund’ that is about half of what I owe, plus I have other credit card debt as well. My job situation is bleak at best; I’m currently making minimum wage and the job market around here is horrible. I’ve tried to apply for many other various positions, but it seems that nobody is hiring. What are your thoughts on the situation? Obviously I’ve learned from my mistake and I’ve been saving diligently as much as I can, but I still can’t make ends meet. Please advise!
- Dave

Your first step should be to negotiate with all of your creditors. Call them up, explain your situation, and look for a different plan for repaying those debts. Perhaps you can get lower interest rates on the credit cards and the line of credit.

You may also want to consider selling some of your stuff, particularly the things you don’t use as much. Go through your collections, for starters, and see if you can strip them down or, even better, sell them in their entirety. You should also look at every monthly bill and see how many services you can cancel, and consider doing other things that will save you money over time, like installing a programmable thermostat. Big changes are very useful – can you go without a car, for example? Perhaps you can downgrade your living situation.

These things will free up a lot of money and should get you much closer to your goal.

For your online business, how do you go about doing all of your taxes? Did you setup an LLC or something similar?
- Richard

I have a single-member LLC. The income I receive from that is simply taxed as personal income. A LLC does not file taxes for itself – instead, the income it generates is passed onto the members, and since I’m the only member, that means me. I do the taxes in TurboTax – easy as pie.

In fact, the whole process was pretty simple. It didn’t take much time at all to set all of this up.

Ok, I just read the MSN “Getting by on…..” series, and I want to puke a little bit.

Anyone else read it and have the same reaction? Or am I just being classist here?
- Sophia

All I have to say is this: it is much harder to cut your spending than it is to increase it. Once you’ve become used to spending at a level equivalent to your income, cutting that spending is very psychologically difficult. Many people (myself included) need some sort of wake-up call in order to make changes, and for some, that wake-up call has to be pretty severe.

It’s very easy to feel outraged about the situation that those people find themselves in, but think about it this way. Imagine if you had two kids in a private school where they had built up a ton of friends and felt very comfortable and happy. Would you want to pull those kids out of that school and put them in a local public school where they didn’t know anyone and the quality of education would likely be lower? I can say that I would find that choice very difficult, indeed.

Cutting your spending is a challenge, whether you’re cutting $400,000 to $380,000 or cutting $20,000 to $19,000. In both cases, you’re giving up something that’s important to you.

Have you ever tried RAGBRAI?
- Monica

No, I haven’t. It’s a pretty serious ride – 80 mile legs or so – and I’m simply not good enough at bicycling to keep up with legs like that. I have several family and friends that have participated, though.

For those unaware, RAGBRAI stands for the Register’s Annual Great Bicycle Ride Across Iowa. It’s an annual leisurely group bicycle ride across the state of Iowa during the summer, with legs beginning and ending in towns of various size in Iowa. For people who are avid bicyclists, RAGBRAI can apparently be an incredibly good time – the stops along the way apparently turn into pretty entertaining parties, often sponsored by the towns themselves. Check out the website if it sounds interesting.

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 really enjoy books like The Millionaire Next Door – books that focus on addressing the more interesting differences between people who achieve financial success and those who do not. What I particularly enjoy is how they often wind up mostly hammering on the reader’s preconception of what “success” means.

The Difference (by Jean Chatzky) basically follows that same pattern. Rather than talking about the how-tos of organizing your money, Chatzky instead does a wide survey of people who have moved from a low financial status to a high financial status. What traits do those people have in common? What behaviors do they share?

On a personal level, the topic really intrigues me, simply because my wife and I are in substantially better financial shape than my parents were at an equivalent age. Does Chatzky’s conclusions on the behaviors that upwardly-mobile individuals share match with my own behaviors? Are there ideas that are way out of whack? Are there good ideas that I can adopt?

Let’s dig in and see what she has to say.

Meet the Neighbors
To provide the backbone for this book, Chatzky worked with Harris Interactive and Merrill Lynch on a poll distributed to more than five thousand people. The poll covered lots of factors: non-financial behaviors, financial attitudes and behaviors, life goals, and personality. Based on the poll’s results, the group was able to identify four distinct groups: the wealthy (3% of respondents), the financially comfortable (27% of respondents and the group I’d probably put myself in), the paycheck-to-paychecks (54%), and the further-in-debtors (15%, and the place where I started on my financial journey). From this group, Chatzky sliced out 620 respondents of interest – those who had gone from the bottom group to one of the top two groups.

Choosing the Difference
What separates that 10% that climbed up from everyone else? More than anything else, the “difference” is ambition – the ability to set goals and to work towards them. Can you set a realistic, clearly defined goal? Can you identify steps to take you from where you are to that goal? More importantly, can you actually make yourself take these steps toward success? I discuss goals a lot, and I can say from experience that setting goals and stepping up to the plate to actually work towards making them happen has made a huge difference in our lives.

Do I Have to Be a Rocket Scientist or a PhD?
No, you don’t. Intelligence actually has little impact on your earning potential. The key difference is education – and the biggest element to getting a good education is hard work. Obviously, people with high intelligence can work less to get that education, but in the end, it’s the education that matters in terms of lifetime earnings, not the intelligence behind it. A formal education is just a part of it, though – learning from life experiences is also vital, as is reading every day and striving to learn something new every day. An active mind is one that succeeds in increasing one’s earnings.

Ding, Dong, Your Passion Is Calling
Guess what? The people defined by the survey as financially comfortable or wealthy are much, much more likely to be happy with and truly enjoy what they do for a living than people living paycheck-to-paycheck or sinking in debt. What gets you there? Either you need to find out what you’re passionate about or get passionate about what you’re doing. Chatzky offers an armload of suggestions for both sides of the coin.

Get Happy (But Not Too Happy)
What does that mean? Here, Chatzky goes the extra mile to distinguish between happiness with your current state and optimism about the future. The best state to be in if you’re striving to improve your state is to be only moderately happy about where you are, but be optimistic about what the future holds. In that state, you’re drawn to work hard, because you see a bright future in front of you, one that’s brighter than the state you’re currently in. Of course, overoptimism is bad, too, because then you believe that you’re constantly headed towards a pot of gold. Your optimism should reside in your own ability to create a great future.

In Praise of the Do-Over
You don’t have to spend your whole life doing what you’re doing now. In fact, people who make the leap described in the first chapter often have at least one “do-over” in their life. Of course, that “do-over” usually begins with failure, and people that succeed are the ones that deal appropriately with that failure. Do they learn something from the failure, pick themselves up, and try again? Or do they wallow in that failure, never trying for the brass ring again? You will fail, so you have to be resilient against that failure.

Taking Risks That Make Sense
Some people play it very safe, taking no risks. They stay quiet at work, choose only conservative investments, and never rock the boat. Other people take huge risks all the time – and their lives are often filled with magnificent flameouts. There’s a balance in the middle there that people find where success resides. They take risks (in life and in money), but those risks are usually backed up with a contingency plan. They make career switches, but not without a big emergency fund. They invest in stocks, but only with a large investment timeframe. Most importantly, they do this often enough that they begin to develop an intuition of sorts that points them in good directions.

The Kevin Bacon Principle
Another key difference is networking. People who are upwardly financially mobile spend significantly more time networking with others and communicating with them routinely (a 1988 study estimated that such people spend 70% more time networking than others). Even more interesting: the wealthy and financially comfortable are more likely to socialize with people at all financial levels, whereas people from lower financial strata tend to avoid people from higher strata, socializing only with people from their own family. What can you do? Seek opportunities to socialize in the wider community. Attend public events. Join social groups. Talk to everyone there, whether they intimidate you or not (fake it ’til you make it, after all). Eventually, the intimidation will wear off and you’ll begin to build some surprising connections – and some very useful ones as well.

Grazie
Pay it forward. Show gratitude to those who help you. Give as much as you can. Does that sound like you? Chatzky’s survey indicates that it’s much more likely to be true for people who are wealthy or financially comfortable than for those who are not. Selfishness tends to actually be linked to lower financial status. What can you do? Be more open with sharing your time and ideas – and, yes, your money. Get involved in projects that benefit the community at large. Help others when you can, and when people help you, show gratitude. There’s no better way to build a positive reputation.

Working Hard and Working Smart
The message here is straightforward – if you want it, work hard for it, but also make sure you’ve got a good game plan to get there. The piece of advice that struck me, though, was the suggestion to compete against yourself first. Can you do better than you’ve already done? Can you top your last achievement? Use yourself as the benchmark, not others around you. You’re the only person that it’s fair to compare against, because your attributes remain the same. Competing against yourself pushes you and makes you better.

The Healing Power of Saving
Save automatically. Save habitually. Save as much as you reasonably can. Spending less than you earn is a constant mantra among those who are financially successful. The interesting piece of the equation, though, is how your life changes when you begin to save and begin to store up some real money in the bank. You become less worried about paying the bills. You begin to see big possibilities in life. You begin to feel like anything is possible. It’s truly life changing – and I speak from experience here.

Make Your Money Work for You
The final chapter of the book seems to have been added later, after the rest of the book was complete, to address the recent downturn in the stock market. Chatzky’s advice is pretty simple, borrowed straight from Warren Buffett: “Be fearful when others are greedy, and be greedy when others are fearful.” In other words, she views the 2008-09 economic downturn as an opportunity to invest, not an opportunity to hide.

Is The Difference Worth Reading?
The overall idea behind this book was nothing new to me. In fact, it would be extremely easy for me to simply say this book was a rewrite of The Millionaire Next Door. However, The Difference stands out in at least two major ways.

First of all, there’s a lot more actionable, tangible advice in The Difference. Chatzky provides a lot of action for engaged people to take. Second, the focus on the upwardly mobile instead of merely on people who are millionaires changes the tone quite a bit. Many of the anecdotes in the book come from younger people than the anecdotes in The Millionaire Next Door.

I felt, in the end, that The Millionaire Next Door provided more food for thought, but The Difference provided more actionable content and more connection to my life right now. I think they’re both well worth reading.