Recently, a brilliant little article popped up over at Five Cent Nickel, outlining the idea that one’s take on long-term investment performance is often a matter of perspective.

I go even further: almost every assumption that you base your money decisions – and even your other life decisions – on is a matter of perspective.

Take me. I was born in the country on the banks of the Mississippi River in a quiet region of the Midwest. I graduated in a high school class of 31 people (several of whom now read The Simple Dollar, apparently). I went to a big university (Iowa State U.) where I graduated in a class of several thousand. I’ve worked for businesses. I’ve worked for governments. I’ve worked for myself. I’m married and have children. After living in a city, I now live on the very periphery of a small town and I dream of living in the country once again.

All of these aspects of my life have shaded my perspective time and time again. Let me walk through some examples.

My childhood taught me it was better to be earnest. To put it simply, I tend towards the serious. I often take people at their word, sometimes even when they’re joking.

My childhood also taught me that not having money doesn’t mean you’re stupid or worthless. Many, many people with substantial money seem to act as though people without money are rubes. That’s simply not the case – there are intelligent, well-intentioned, hard-working people at all levels of financial status.

My educational history taught me that there are many different ways to learn. Not everything about an educational experience can be measured, and a school with tons of opportunities can fail a student just as much as a school with few opportunities. It’s up to the student to be successful – a forward-thinking kid can take advantage of any situation.

My educational history also taught me that tests don’t mean much of anything. I was a National Merit Scholar who proceeded to almost flunk out of college at first because I had no idea whatsoever how to study. I spent my childhood just absorbing whatever interested me, which was great for the SAT and high school but terrible for college. I looked great on the SAT, but in a classroom where I didn’t know the material and didn’t care, I floundered big time.

My work career taught me that stability isn’t everything. If you’re in a stable career, you’re often surrounded by complacent people, which makes it difficult to get things done and exciting projects are hard to come by.

My history with investing pushes me towards being conservative. I’ve seen the dot-com bust and the housing bust. Don’t rely on the stock market for anything you’ll need long term. If you need that balance, it shouldn’t be in stocks.

All of the experiences in my life have gelled together to create my perspective on the world. I tend to think that taking someone at their word is usually the right way to go. I tend to overestimate the reliability of jobs – and sometimes overcompensate for that. I tend to underestimate the reliability of the stock market. I tend to not buy into the whole pressurized SAT/ACT/college application experience that high school seems to be. I tend to, if anything, be biased against people who dress in expensive clothes and drive expensive cars.

My life experience has created my perspective on the world. It pushes me subtly towards conservative investing choices. It pushes me towards being a locavore (eating locally grown foods). It pushes me towards being earnest, serious, and forthright with others much of the time. It pushes me towards chasing my dreams instead of seeking the good-paying stable job.

It’s different than your perspective. Your life has taught you different lessons than mine. The things you choose to apply in your life are different than what I choose to apply, and they get different results.

I can’t provide all the answers. No one can. The best I can do is provide my answers and leave the comments open for others to provide theirs. Out of that, perhaps, you can find the direction you need to grow and move onwards.

Quite often, I get emails from people saying “I love The Simple Dollar. I don’t always agree with what you say, but I read it every day and it makes me think.” or something similar. I’d far rather read that than someone saying “Trent, you’re always right.”

Because I’m not even right in my own life much of the time, and I’m certainly not going to be right in your life, either. All I can do is bring my perspective to the table and hope that, when we share ideas, you bring your perspective, too.

Whenever you read something or hear something that you think is wrong, stop and ask yourself this: why is it wrong? The more often you can come up with a real answer for that, the better off you’ll always be in every aspect of your life, financial or otherwise.

Tell me about it. What aspect of your life has given you a perspective different than mine?

The recent Total Money Makeover book club seems to have been a huge success. Two times a week seems to work, and focusing on discussion-oriented points in the book made it quite interesting as well.

As a result, I’m going to follow it with another book club, starting on Wednesday, September 2. This time, I’ll be focusing on Never Eat Alone by Keith Ferrazzi and Tahl Raz, which was actually the most requested book when I asked for suggestions for the next book club. It focuses on how to build value-based relationships with others, mostly in a professional context, but the ideas really work in every avenue of life.

Given that Never Eat Alone is a bit longer book, the book club will likely be a bit longer, too, stretching to seven or eight weeks. As before, there will be entries twice a week, on Wednesdays and Saturdays.

Don’t be afraid to jump into the discussions of this one! I think it’ll be quite fun.

And now, for some interesting and relevant links. Please note that I usually post twenty or thirty interesting links a week to my del.icio.us site and I pick ten or so from that to post here, so if you’d like to see the links as I find them, check out that page.

A Message to Those Confused About Career Direction It’s normal NOT to know what you want. It took me most of a decade to figure it out and there’s still times I believe I don’t have it perfect. The biggest challenge is that we often want conflicting things – things that simply cannot coexist. Figuring this out can be a real challenge. (@ soul shelter)

How to Make a Million Dollars While Eating Lunch The idea is simple: if you take one simple action and repeat it over a very long timeframe, you’ll have huge success. Her example of the “million dollar lunch” involves trimming lunch down by about $6 per workday then socking that into a Roth IRA, netting you $1M over 41 years. (@ millionaire mommy next door)

Why I Stopped Being Paranoid and Started Using Mint I’m still paranoid. I still have not seen the reason to use Mint (and share my personal info) that isn’t met by personal software at home that doesn’t allow any of your info to pass through a third party. It feels like you’re just increasing your likelihood of identity theft (however slightly) without any real net benefit. What does Mint do that Quicken does not? (@ smarterware)

Top 5 Economy Based Board Games that Make You Think The board games are Agricola, Puerto Rico, Power Grid, Caylus, and Le Havre. All of them are excellent games that mirror the nature of economics in various ways. If you’re playing just one that mirrors economics, I’d probably suggest Power Grid. My favorite game for playing of the five is either Puerto Rico or Agricola – I adore them both. (@ wisebread)

The Power of Resourcefulness This is one worth thinking about a little bit. Peeing in the shower seems unsanitary at first glance, then perhaps not really all that useful upon second thought. But if you’re able to do it while doing other things (such as washing your hair), you can actually save significant water – a toilet tank full. Baker expands the idea, carrying it forward into a general discussion about resourcefulness. (@ man vs. debt)

The False Lure of Multi-Level Marketing The biggest problem I have with MLM systems is that it basically encourages people to abuse their friendships by guilting their friends into buying stuff they don’t want. Ever been invited to a Tupperware party or a Pampered Chef party? They’re just painful – a person trying to cajole their friends into buying stuff that their friends don’t want. The friends do it, even though they don’t want to, but they resent it a little – they feel like they’re being used. Never mind the fact that the salesperson rarely makes very much money anyway. Sounds like a big lose to me. (@ free money finance)

The Five-Day Freeze: Batch Cooking for the Rest of Us Batch cooking simply means preparing meals or other foodstuffs in advance and freezing them in quantities such that they can be easily thawed and used. The article mentions eggs (in the form of quiche), cookies, zucchini, hamburger, and peppers, but those options just scratch the surface. If you have a lot of freezer space, techniques like this pay off left and right. (@ wisebread)

“Try Something Eight Times Before You Give Up.” So many people try something once or twice, decide it’s not for them, and give it up. What I’ve often found is that if you try something a good number of times – like eight – the value often only becomes apparent after multiple tries, and then it becomes a very valuable tradition. The two big examples I can think of are cooking at home – you have to try it a lot of times before you start producing something worthwhile – and strategic board games like Agricola and Puerto Rico, which don’t really shine until you’ve played them many times and everyone knows the rules well. Established traditions and skills can be beautiful parts of one’s life. (@ happiness project)

Overweight And In Debt: The Correlation Between Weight Gain And Pocket Drain Clearly, there’s some overlap between overspending and overeating. We need to spend and eat to survive in the world, but without some self-control, one can easily overeat and overspend, both of which are dangerous. I think it’s a stretch to say that all overweight people are in debt, which is what the title might lead you to believe, but I agree there are some similar psychological principles at work here. (@ frugal dad)

For the Self-Employed, It’s an Endless Workweek The “endless workweek” is a real danger for anyone who’s self-employed. Self-employment can really blur the boundaries between work and personal life, and quite often that means that work can dominate everything. I often feel like I’m in this position; my solution is to put up some strong barriers in time/life that work cannot cross, no matter what. (@ wall street journal)

The twelfth episode focuses on budgeting. I found that traditional budgets didn’t work for me, so I explore the methods that did. Total length: 7:20

Listen In!

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Though I hope you do subscribe using one of the above methods, don’t worry – each episode will be featured in its own post, much like this one, on Tuesday afternoons. The podcast itself may appear earlier than that, however, if you subscribe using one of the above forms, but the notes won’t appear until I post about it here on The Simple Dollar.

Episode Notes
Here are some additional notes that go alongside the comments in the podcast. Approximate times for the corresponding links and notes are listed.

0:00 – The theme song is a snippet of a Camper van Beethoven concert on October 25, 1986, shared via their very open taping policy. Listen to the concert in its entirety.
0:31 – Some thoughts on why a “one-budget-fits-all” approach doesn’t really work.
0:42 – Here’s the early budgeting technique that worked well for me. It helped to get me on the right path.
1:21 – Here’s the full story on that coffee shop experience.
2:01 – I like the analogy of training wheels on a bike. At first, they teach you how to ride, but later, they’re a hindrance.
4:51 – Here are some thoughts on transitioning from budgeting to the net worth mentality.
5:50 – Some thoughts on budgeting with online bill pay.
6:59 – Here’s a preview of next week’s podcast, about personal finance media.

One thing I’d like to do in a future episode is have an audio reader’s mailbag. If you have a microphone on your computer and can record an MP3 of a simple, short question you might have on personal finance, careers, pop culture, or anything else you’d like me to answer, record it as an MP3 and send it to me. Keep the total recording under 15 seconds, please. Also, if you use Skype, feel free to ask your question that way – my username is trenttsd.

Comments and suggestions welcome.

A few days ago, I stumbled across a handful of pictures from my college dorm room (I considered posting them, but there are several people depicted and I don’t post pictures of people without asking them permission and I’m not sure how to contact them). As I looked them over (and enjoyed some memories), I couldn’t help but look at the background of the pictures, just to see how I lived then.

What I saw was a lot of clutter. A fridge I rarely used. A robe I think I used once. A big rack of rarely-watched videos. Way more clothes than I ever needed. Lots of little tchotchkes that just took up space.

When I was first planning for college, I had little idea what I was doing. I read lots of “here’s how to get ready for college” articles and vacuumed up the suggestions like a Hoover on overdrive. I spent the entire summer collecting and buying things I’d need for college.

When we finally arrived on campus, I had a pickup truck full of stuff. It filled up my half of a tiny dorm room. A dorm fridge. A microwave. A big television. A computer tower (actually, I didn’t get that one until I was on campus a while) and a monitor. A desk lamp. A giant teapot. A ridiculously huge shower bucket stuffed with stuff. Clothes that overflowed my dresser.

Virtually all of it was a waste of my time and my money. I didn’t use any of that stuff. I had little idea what I would actually use in advance, so I just more or less bought everything that I thought I might need – and it turned out I didn’t need most of it.

If I started college all over again, I could fit everything I’d use in a single backpack. Here’s what I’d take.

A laptop with a webcam and microphone This would take care of all of my research needs, report-writing needs, and, yes, telephone call needs. I suppose I might also take a prepaid phone with me for uses where I didn’t have a wi-fi signal.

A small reading lamp For studying and taking notes in dim lighting. I’d get a very tiny clip one that could go anywhere, powered by LEDs.

Enough clothes for about five days or so, rolled up tight Nothing fancy, just sturdy pants, shirts, and underclothes. I can do laundry once every five days or so.

Some basic toiletries Gotta keep clean.

Notebooks and writing supplies Obviously, for note-taking purposes. I find that taking notes longhand is the way for me to absorb complex ideas, but some people might find that just typing on their laptop might work – it depends on how you learn, which you should already know before college.

I’d also need textbooks, of course, but I could get them when I arrive via Amazon and re-sell them at semester’s end.

Sure, I might find that I needed some more items along the way, but wouldn’t it be better to find out the items that you actually need rather than buying a bunch of stuff you think you might need in advance?

Doing that saves money. It saves a lot of time. It saves space. It saves a lot of mental energy. It gives you a very clean and open space to rest your head and figure out what comes next in your life.

The next time you read a long list of things that people say you “need” for college, ask yourself a simple question: do you need it, or is it just something that seems like it might be useful? If it merely seems like it might be useful – even if you can envision a lot of scenarios where you’ll be using it – hold off. Pick it up later on.

My gameplan when I send my own children off to college is similar. I intend to send them with the minimum amount of stuff they need – basically, the stuff listed above, with variation based on the technology at that time. If they find they actually need more items, they can either use their own savings to get them or make the case to me with regards to it.

They’ll save time. They’ll save money. They’ll save energy. And in a college dorm, what exactly will they lose?

I’ve heard it all before.

You can’t earn more because of your boss. You can’t earn more because of your career path. You can’t earn more because of the economy. You can’t earn more because you don’t have enough time. You can’t earn more because you’re ugly and only the beautiful people get ahead.

You can’t save more because of inflation. You can’t save more because the things you need are expensive. You can’t save money because the government will just take it all. You can’t save money because you never learned how and it’s too late to teach an old dog new tricks.

Poor you. You’re just the victim of a society that’s out to get you.

Here in reality, though, things are a little different.

Every single day, we wake up and get out of bed with an opportunity to do something to change the rules of our life. We can stand up for what we deserve at work. We can take on projects that make us shine. We can turn off the television and do something productive. We can start doing more things for ourselves and stop paying for convenience. We can find more work. We can ask for more pay. We can get creative with the money we do have.

It’s scary to take that leap. It’s hard. But whenever you decide it’s too scary or it’s too hard, you’re the one making the decision. All of those external factors that make it hard aren’t keeping you in place. You’re keeping you in place.

Four years ago, I was thoroughly unhappy with my life. I was going nowhere as a writer. I was sinking into debt. I had a child coming, but I had no idea how to be a parent or how to take care of that child. I worked at a job that had started to become something I didn’t want to do. I was really overweight. I had a marriage that wasn’t particularly happy, mostly because I wasn’t happy.

It was easy to blame things. “I need this thing in order to be happy.” “I can’t make a career change because this one is safe and reliable.” “I’d like to go exercise, but it’s too cold outside and I don’t like the gym.” “I can’t succeed as a writer because I’m not in New York hobnobbing with publishers.”

The truth? The only person to blame there was myself. The blame didn’t fall anywhere else. It wasn’t the weather’s fault that I wasn’t getting in shape. It wasn’t my location’s fault that I wasn’t pushing myself as a writer. It wasn’t clever advertising’s fault that I felt I needed so much stuff. It wasn’t my job’s fault that I was scared to make a leap.

It was my fault.

I let these things that didn’t really matter guide my choices, time and time again. I blamed them for my problems – it couldn’t have been me, after all.

I chose to be a victim of circumstance. And it almost buried me.

You have two choices in life. You can either be a victim, tossed about by whatever provides a convenient excuse. Or you can say, “You know what? This is my situation, but I can fight it. I can stand up and change it.”

Which way will you go?

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.

We currently have a propane-fueled water heater. I live in AZ which has fairly reasonable electricity rates. Since propane is pegged to the price of oil, if we ever have to replace the water heater, would it pay to convert to an electric water heater? If so, do you have any idea how much time it would take to recoup any differential costs for the switch?
- Jeff

It’s absolutely impossible to say without rates. Real numbers are needed for these kinds of calculations.

However, I will say this: replacing a functional piece of equipment in order to save on energy rates is rarely a good idea unless you’re certain that you’ll be able to quickly recoup the cost. Replacing a functional item is a reliability risk – if you know it works, why risk replacing it with a lemon?

It’s also environmentally costly to simply replace equipment with such abandon.

What is your favorite thing about blogging?
- Journey

Probably the respectful and thought-provoking discussions I have with readers.

There’s nothing more interesting than a refreshing new angle on an idea. It makes me think about whether I’m right, whether they’re right, and sometimes whether the question itself is worthwhile.

Part of the reason that purely negative comments frustrate me so much is that they’re usually presenting a good idea, but they bury it in attacks and vitriol that take that good idea and bury it in negativity. This helps no one.

I have recently lost my job and am collecting unemployment. My former employer sent me paperwork about my 401(k). What should I do with that money? I don’t need to take it out but don’t want to leave it with the company if I have other options. Thanks.
- Josh

The traditional advice is to tell people to roll over their 401(k) into an IRA the second they walk out the door. This advice is usually given under the assumption that IRAs are competitive – meaning they have lower fees – while 401(k)s are larded with high fees.

That’s not always the case. Quite often, IRAs nickel and dime you with fees and, at the same time, 401(k) plans are often managed quite well with low fees.

My suggestion is to figure out where you would want to put your IRA – probably in a low-fee place like Vanguard – and figure out all of the fees and costs associated with what you want to invest. Then, compare that with where you’re at now. Are they comparable?

How is it possible that you get paid to blog? Is it from like, page views, advertisements or something? Do you get paid per blog post?
Just curious, I’ve never heard of anyone being paid to do something that sounds as fun as that.
- Steve

I get paid in several ways. The most straightforward one is advertisements on the site. Most advertisers pay me a small amount (a few bucks) per thousand views of their ad. Since The Simple Dollar gets quite a bit of traffic and I show multiple ads, that can add up.

A secondary way I earn income is through links to Amazon. If I review a book or talk about some product and link to Amazon in my description of that item, if someone clicks on that link and then decides to buy the book, I get a small percentage of the cover price of the book, and I also get a small percentage out of anything else they choose to buy while there. Since I already link to Amazon because I think their pages have a lot of information about books and products, this is more or less icing on the cake.

Lately, my income from non-blogging sources has risen as well due to the impact and popularity of The Simple Dollar. I’ve been able to sell some freelance articles and sign two separate book deals, things that only happened because of The Simple Dollar.

The problem with making money blogging is that it’s a long slog. It takes a very long time to build up an audience to the point that you would earn more than a pittance from it.

I am 36 years old and have been spinning my wheels career-wise for the past 7-8 years. Five years ago, I got two useless licenses and last year, I got another one.

If I go to a “trade school”, I can go full-time for as little as 4 months for $4500 or I can get my masters for $40K and up (and everything in between). Obviously, I would be without an income during this time.
What would be a better investment for me at this stage in my life? Keep in mind that I have less than 30-years to “get my money back”. I’m open to just about anything: my personal choice would be to continue working and go to school part time, but I’m curious if anyone knows what the “pay back” for higher education really is. When does it start becoming profitable?
Oh and I currently make about $18K as an “entry level” clerical position.
- Ashley

Again, without specifics, it’s hard to draw very clear answers here.

The best possible thing you can do in your situation is to follow your natural passions and talents. What are you naturally good at? What are you passionate about? Those are the areas where you should be pushing for your future career.

Sometimes that path leads to trade school. Sometimes it leads to college. Sometimes it leads to starting a small business.

Don’t worry about the money. If you follow something you’re passionate about and utilize the talents you have, money will always come.

The best thing you can do right now is simply live as lean as you can, take stock of your already-existing talents and passions, and start following up on them to see where they might lead.

Are you a conservative or a liberal? I can’t tell from your comments!
- James

I’m definitely a libertarian. I believe highly in the value of privacy and I believe that any activity that a person can do without harming someone else shouldn’t be punished by law. As long as you’re not hurting someone else, I don’t care what you do with your time and energy and money, as far as the law is concerned.

On most political issues, I see both sides of the coin. I think that most political issues end up coming back to an individual’s own moral code and I think it’s very hard to make a law that everyone should abide by that’s beholden to one person or one group’s set of moral values.

I’m an ardent believer that the best investment the government can make is in education, because education sets the stage for solving society’s problems over the long run. I would happily forego Social Security and Medicare and Medicaid to give the children in my town a better education. But, again, there you go – that’s my own values speaking, and I have a hard time believing that my own values should trump your values in terms of the law.

I think this is why I’m continually more interested in local politics and care less about national party politics. Individual liberty, quality education, and personal safety are best protected on the local level, where elected officials are directly connected to their constituency every day instead of sheltered in an office in Washington surrounded by aides with their own agendas.

Does that make me a liberal or a conservative? I have no idea. It just makes me me.

I want very much to budget our money well so that we can pay off debt, create an emergency reserve, and prosper. What is making it difficult for me (besides my right-brained tendencies :) is that our income is in part from seasonal work. We have one job paid by a salary year round, and another job paid by hourly wages only during the school year. So during the summer, our income drops to about 1/3 of what it is the rest of the year.

I had worked out a system of saving during the more prosperous months to make it through the dry summer, but was doing all the record-keeping on paper. Do you have any suggestions for how to make this situation work using a program such as Quicken?
- Michelle

You’ve already got the right idea – when both of you are working, you need to save as hard as you can so you can survive the lean months.

I don’t really think the best solution for this is Quicken. I think the best solution is to set up an automatic savings plan at your local bank and make adequate savings automatic. Set up the plan so that you’re putting enough money into your savings account each month that you could actually survive on it, then make it your goal to make ends meet with the excess.

So, let’s say your living costs each month are about $2,000 and you find that you bring in anywhere from $1,000 to $5,000 each month. Set up your automatic savings plan to knock $2,000 each month into savings, then attempt to live out of your checking account. Only tap your savings when you absolutely must.

Should I feel obligated to attend a dinner party held by someone that I don’t like? I invited this couple to a dinner party we held several months ago and they were really loud and borderline rude. They loudly asserted some borderline racist opinions and left everyone feeling uncomfortable. Now they’ve invited me to a dinner party of their own. Should I go?
- Shanda

Absolutely not. You should never feel obligated to attend a purely social event if you’re going to feel uncomfortable.

Having said that, not accepting their invitation without an iron-clad reason will likely damage that social connection. Is that something you’re quite comfortable with doing? It sounds as if it is, but many people often try to have their cake and eat it, too – they’ll avoid spending any time with a loosely-connected friend, but expect that person to be there when needed.

Life doesn’t work that way.

In 2010, Lexington, KY (where I live) will be hosting the World Equestrian Games. The whole city is getting revamped in anticipation of the many people coming here from all over the world. Our newspaper recently ran an article about people renting out their houses during that time. Based on the article, my fiance and I (we will be married by the time the games come around) determined that we could probably get about $1000/day to rent out the house. The article had a smaller home with no yard that was going for that much. The games last for 15 days. During that time, we could go on vacation or stay with my fiance’s parents without any trouble. We’d have to clear out our clothes and some valuables, but for $15,000, it seems well worth it. There might be some issues with damage, but a damage waiver would at least help, and we might need to update our insurance policy for the home. The article even listed 3 companies that offer different levels of help with the process (i.e. hands off and no commission or hands on with commission). Do you think this is a good idea to pursue? Do you have any thoughts on this that might be helpful?
- Katie

If I were in your situation, this is something I would do.

Before I did it, I’d contact a lawyer and see what sort of legal protection I needed. Insurance coverage? Damage waivers? What other issues are worth considering here?

$15,000 is mighty lucrative, but you definitely need to protect yourself. I would strip that house down to the point of being like a hotel before I left, removing everything that could possibly be used for identity purposes and blocking all mail delivery.

At meals, do you feed your children different foods than you eat yourself?
- Leonard

Since the children were old enough to actually eat at the table with us, we haven’t done this. We serve them a plate that’s as identical to ours as possible and let them decide for themselves.

We only make one simple request at dinnertime: they have to eat one bite of everything on their plate. Beyond that is entirely at their discretion, but they are required to sit at the table until everyone is finished. Mostly, this is a good way to maintain conversation and to get them to try multiple bites of an unfamiliar food, since it’s right there and they see us eating it.

If they refuse, then we literally put their plate in the fridge and they are served that plate whenever they’re hungry in the future until they’ve tried everything on it.

This really seems to work well in practice. They’re constantly exposed to new foods and have found that they like unusual things. My son, for example, has utterly fallen in love with black olives, while my daughter is the biggest one year old connoisseur of broccoli in the world.

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

Every other Sunday, The Simple Dollar reviews a personal finance book.

As time goes on, I begin to see more and more that personal finance is mostly psychological. Sure, it’s useful to have a long list of money saving tactics, but if you’re under the belief that such tools are useless, it doesn’t matter how great the tips are. I can talk about savings tactics until the sun goes down, but if you’re psychologically committed to living paycheck to paycheck and don’t want to change, change won’t happen.

That’s why it makes a lot of sense to ignore the dollars and start with goals and values. What’s really important in your life? If you figure that out, it becomes a really powerful motivator for your other choices. Looking at the difficult financial choices in your life becomes easier – it becomes fun. Doing things like making your own laundry detergent move from being boring to being personally fulfilling, because you can actually see the bigger values behind that choice.

Arun Abey and Andrew Ford’s How Much Is Enough? digs right into that philosophy. The argument behind the book is that long-term financial security and personal peace comes from a place beyond money. It comes from a life oriented around your key values, with other, less-important things cast aside to make room for those key values and dreams to grow.

Let’s dig in.

1. The Foundations
How Much Is Enough? argues that there are three “simple” steps to financial well-being: define and understand your values and goals, apply your resources to achieve your goals, and develop your investment strategy.

One odd portion is how this chapter calculates retirement needs. From my perspective, they seriously underestimate it, suggesting that you run out of money when you reach the average estimated lifespan. I fully expect that the “average” lifespan in forty years will be longer than it is now – potentially much longer – and so my planning points towards full self-sustainability (or close to it).

2. The Meaning of Money
Here, the authors argue that a combination of peer pressure, “groupthink,” and a popular culture that overly values materialism and undervalues other attitudes opens us up to a lot of damaging emotions. Greed. Low self-esteem. Envy.

These emotions are powerful, and they often fuel reckless decisions that result in long-term disasters. We buy things to show off and live up to some unreal image. We focus on material gains instead of focusing on achieving our big goals. And, in the end, we feel lost.

3. The Happiness Challenge
The first big step is to abandon the idea that the value of everything can be expressed in terms of money. Value means more than just dollars and cents. A great example of this can be found in the possessions you most value. For most people, the things they would grab if the house was burning down aren’t things with a large monetary value – they’re things with a large personal value.

Doesn’t it make sense to focus on things with a large personal value? The things you wouldn’t save during that mad dash through your home aren’t really that important to you, so why invest so much money in them?

4. Strategies for Well-Being
Instead of focusing on better (and more) stuff, spend your energy focused on building your safety, competence, self-esteem, connectedness, and authenticity. Become good at things. Do things that you enjoy – and things that others enjoy. In other words, focus on the aspects of yourself that are independent of things.

One interesting tactic they suggest is being mindful about very ordinary things. For example, be mindful of a meal. Don’t do anything else while eating. Instead, focus carefully on each bite you take – the feeling of the food in your mouth, the textures, the flavor. It completely changes the experience of an ordinary meal, transforming it into something extraordinary. Do the same thing when you’re walking, focusing on how each step feels and the whole environment around you.

5. Kids, Money, and Happiness
It can be a real challenge raising children in a world that gravitates towards more and better stuff. How can you instill basic values in your children that don’t revolve around things?

One big suggestion is to buy gifts that revolve around experiences rather than things. Have their Christmas present be a family trip to a place they’ve been talking about going for a while. Instead of giving them more items to fill their room, give them a membership to a museum or a science center or something else that reflects their interests. Have a really memorable party as part of their birthday gift instead of just buying an expensive gift.

6. Giving with Meaning
Giving of yourself can be very difficult for some, but it’s a powerful part of expressing the things that are most important to you in the world.

The authors suggest by focusing specifically on the things that really tug the strongest at your heartstrings. Where you you feel there is great injustice? Where do you feel gratitude for the good work of others? Right there, you have a powerful place to give. Don’t worry about the other causes that aren’t as powerful – focus instead on the things that really rock your world.

7. The Investment Prize
Often, one’s goals are big and expensive, and it’s hard to see the connection between the things we do today and those big goals. It’s vital, then, to take a look at the long term potential of the money we’re able to save by being careful with our spending. If we’re able to scrape together $10,000 by cutting spending each year, then are able to invest it at 7% annually for 15 years, you have $269,000 in the bank.

What about that $10,000? That’s just $27.40 a day – on average. If you can find a few big ways to save – putting off that car upgrade for another year or two, not buying a new house without a big down payment, doing a bunch of one-time savings tactics – you can easily knock that number down to $10 a day. In our lives, it can often be easy to find ways to trim away $10 a day – not stopping at the coffee shop, for example, might do it.

Think of what $269,000 could do in your life. That’s the result of the little choices you make.

8. The Madness of Myopia
How can you get returns like that? You need to let go of the short term. In the short term, stocks have very painful drops, but they’re counterbalanced by very nice gains in other years. Thus, looking at what happens over one year won’t get the job done.

If your goal is more than ten years away and you’re not a professional investor, you have to let go of the day-to-day and even year-to-year fluctuations in the stock market. Instead, you have to sit back and ride the overall tide.

9. How to Be Prudent and Take the Long View
So, how can you ride that tide? The big key is wide diversification (again, assuming you’re not an investor that’s going to devote tons of time to study). Buy very broadly-based index funds and just sit on them.

A great example is the Vanguard Total Stock Market Index. It allows you to effectively own a tiny sliver of every publicly traded stock sold on the New York Stock Exchange. If the market goes up, you go up. If it goes down, you go down. You are not at the mercy of a single company’s mistakes.

10. The Puzzling Properties of Prosperity
In a nutshell, the authors advise individuals to stay away from investing in real estate if they’re not getting additional value from it.

Their argument is simple: real estate risks are often understated, returns are often overstated, and there’s no clear market that absolutely establishes real estate values. Thus, without careful study, it’s hard for real estate to be a great value.

11. Confronting the Enemy Within
So why not just do the studying and investing ourselves if we can do better? The biggest reason is that our own psychology is the enemy.

People have a tendency to see patterns, even when there are none. They find patterns in market data, in real estate sales, and in buying patterns, even though there often is no pattern at all. When they move on that false pattern and make an investment, it’s akin to gambling, since they’re investing for a nonexistent reason.

Even professional investors fall prey to this, especially since there are people out there constantly trying to muddy the waters with questionable information (like CNBC and various analysts who are out there just trying to improve their own bottom line).

12. Good and Bad Advisers
How Much Is Enough? largely argues that you should avoid advisors and do your investing yourself unless you have a ton of money to invest or have a very unusual situation. If you’re not in those situations, a financial advisor is mostly just a salesman seeking a cut when you could just do the shopping yourself quite easily.

Thanks to the internet, we live in an era where people can learn about investing and actually do it on their own without advisors holding their hand.

13. How Much Is Enough?
The book closes with a clear, simple message: your future is up to you. You get to make the choices every single day to determine your future. What do you want?

Is How Much Is Enough? Worth Reading?
How Much Is Enough? is very philosophical in nature, focusing more on big ideas and concepts than specific action. For some (like me), that makes How Much Is Enough? a very compelling read – it forces you to think. However, if you’re seeking specific, tangible personal finance advice, How Much Is Enough? isn’t going to be the right book for you.

I actually found many of the ideas in How Much Is Enough? to be thought-provoking. More than most personal finance books I’ve read lately, I was left thinking about my own life and the choices I make in a daily basis. It takes many of the good philosophical ideas presented in other books and builds on them, making a thoughtful reader turn introspective and reflect in new and unusual ways.

If that sounds like it’s your kind of book, How Much Is Enough? is really worth a read. If it sounds … boring, you’re probably better off staying away.

That’s probably pretty shocking. “WHAT DID TRENT DO?” I can already sense the regular batch of critics in the comments cracking their knuckles over this one.

Actually, the change is pretty simple. I made the decision to stop counting the value of my home as an asset in my net worth calculations. I also did the same with our automobiles.

Let’s back up a bit. I’m a big believer that calculating your net worth – which is your total assets minus your total debts – is the best way to keep track of your overall financial progress. If you’re making good progress, your net worth will go up each time you calculate it (or at least have a strong general positive trend, since you can’t control the short term fluctuations of the stock market).

It’s pretty easy to calculate it. You can either use a personal finance tool like Quicken or, better yet, build your own net worth calculator in a spreadsheet. I calculate mine every month using a spreadsheet (though I’m considering giving Quicken a serious try when the new Mac version is released later this year).

As I mentioned in the past, I was using the assessed value of my home and property as an asset for calculating my net worth, and that pushed me well into positive territory overall. By including the value of my home as an asset, it was a big fat net positive – $175,000 worth.

But every time I calculated my net worth, I asked myself about the home and the automobiles. Could they actually be liquidated without really altering our life? Is it even realistic at all that we would just sell our house if we needed cash?

Our primary resident is an asset we need to use. It’s where we live. It’s something that would be very difficult to liquidate from our current position because it would require us to move elsewhere. Similarly, an automobile is something we need to use and to liquidate it would require us to make major life changes.

To put it simply, our home and our car aren’t liquid assets. Yes, of course, we could get cash value for them, but it would involve major life changes and significant effort.

Instead, they’re tools. They’re things we utilize to live our life. If we lost those tools, our lives would radically and severely change, something that wouldn’t happen with any other assets we hold.

So we just made a simple change. We’re no longer counting our “tools” – our not-very-liquid assets – in our net worth calculations, and that means we just dropped about $200,000 from our net worth.

And this put us right back in the negative. Our debts, including our mortgage, significantly exceed our other assets.

Many people might say, “Wow, that’s painful.” And in some ways it is. But what I see each month is that our net worth is going up. We’re heading in the right direction each and every month. That negative net worth is getting smaller and smaller.

I have a nice new goal now. I want us to have a positive net worth without our home or our automobiles as assets as soon as possible. That’s a further psychological carrot to live lean and look for more ways to earn money.

What about you? Do you calculate your own net worth regularly? Do you include your home as an asset?