This is the ninth of sixteen parts of a “book club” reading and discussion of Keith Ferrazzi and Tahl Raz’s Never Eat Alone, where this book on building a lifelong community of colleagues, contacts, friends, and mentors is teased apart and looked at in detail. This entry covers the seventeenth and eighteenth chapters, “The Art of Small Talk” and “Health, Wealth, and Children,” which appear on pages 143 through 170.

I’m terrible at small talk.

Those little slivers of time right after you meet someone but before a real conversation starts is almost painful to me. I never know what to say and I usually just hope that it doesn’t last too long.

What I’ve come to do is to rely on a handful of standard icebreakers that tend to fill the gap quite well and often lead into some real conversation (which I actually enjoy). They’re just silly things – references to the top news story of the day, a comment on the weather, a compliment of the other person’s clothes or reading material, and so on. However, they get me over the “hump” of small talk nervousness and allow me to begin to get to know the other person.

Ferrazzi addresses the “small talk problem” in this section of the book. Let’s dig in.

Vulnerability
On page 146, Ferrazzi outlines the principle of vulnerability:

Being up front with people confers respect: it pays them the compliment of candor. The issues we all care about most are the issues we all want to talk about most. Of course, this isn’t a call to be confrontational or disrespectful. It’s a call to be honest, open, and vulnerable enough to genuinely allow other people into your life so that they can be vulnerable in return.

How many negotiations would have ended better if both parties involved were simply honest and forthright about their needs? Even when there is disagreement, I’ve found people will respect you more for putting your cards on the table.

In other words, if you’re nervous before a meeting, commenting on that nervousness is a win-win. It not only provides a great conversational icebreaker, but it opens yourself up a bit to others. It’s likely a feeling that they’re having as well and hearing that you’re feeling the same way builds a bond between the two of you.

I often do this. If a situation makes me feel slightly uncomfortable, I’ll say so. If I’m nervous about making small talk, I’ll say that I’m nervous about making small talk. Quite often, the other person feels the same way and is relieved to find that you do, too. It immediately gives you something in common and, at the same time, lowers the threshold for what you have to say next, since the need to impress isn’t as strong as it once was. You already have a rapport.

There may be some situations – such as a negotiation that is going to result with a clear “winner” and a clear “loser” – where vulnerability might not help, but in virtually every other situation, vulnerability is a great way to build rapport with people.

Focus on One Person
Ferrazzi addresses the tendency some people have to constantly “scan the room,” a practice I find pretty weaselly. On page 151, Ferrazzi hammers it hard:

Whether you spend five seconds or five hours with a new contact or acquaintance, make the time count. In Los Angeles, where I live, eye darters are a party staple. They’re constantly looking to and fro in an attempt to ferret out the most important person in the room. Frankly, it’s a disgusting habit, and one that’s sure to put off those around you.

The surest way to become special in others’ eyes is to make them feel special. The correlate, of course, is equally true: Make people feel insignificant and your significance to them shall certainly diminish.

The only person worth paying attention to is the person in front of you. Everyone else can wait – they don’t matter yet.

The counter-argument many people offer against this method is that you might miss something important if you just focus on one person. To those people, I make the point that in your need to find out what’s “going on” around the room, you’re actively alienating the person in front of you.

If I begin a conversation with someone, I make an effort to focus on nothing but that conversation until there’s a lull in that conversation. If the lull happens and I’m not interested in continuing it, then I’ll excuse myself (sometimes after making plans to meet the person later). Otherwise, as far as I’m concerned, the other person (or small group of people) are the only one(s) in the room.

How to Listen
Ferrazzi also argues on behalf of the art of listening. On page 155:

As William James pointed out, “The deepest principle in human nature is the craving to be appreciated.”

You should be governed by the idea that one should seek first to understand, then to be understood. We’re often so worried about what we’re going to say next that we don’t hear what’s being said to us now.

[...] Take the initiative and be the first person to say hello. This demonstrates confidence and immediately shows your interest in the other person. When the conversation starts, don’t interrupt. Show empathy and understanding by nodding your head and involving your whole body in engaging the person you’re talking with. Ask questions that demonstrate (sincerely) you believe the other person’s opinion is particularly worth seeking out. Focus on their triumphs. Laugh at their jokes. And always, always remember the other person’s name.

This should come naturally if you’re focused solely on one person. If you’re focusing your attention on the person – and that person alone – then following their words and asking appropriate questions is the natural response to a conversation. Not doing so is a sign that you’re not paying attention.

I don’t really worry about doing such specific things as nodding and so forth. Instead, I just concentrate on the words they’re saying and my honest reaction to them. My physical reactions and follow-up questions simply fall into place behind them.

Having said that, I’m pretty poor at reading people. Quite often, my only indication that others are interested in hearing what I have to say is whether or not they have follow up questions or conversation.

If All Else Fails, Five Words that Never Do
If you’re stuck as to what to say next when making small talk, Ferrazzi has a simple suggestion on page 155:

“You’re wonderful. Tell me more.”

In other words, encourage the other person to talk more about themselves. Why? In the end, everyone enjoys talking about themselves to people who they believe are interested in them.

Thus, encourage people to follow up when they talk about themselves. Dig in for more details (without prying). Tell them you’re interested and listen to their story. Even if you’re not fully interested, attempt to grab onto the threads where you are interested.

This has a double advantage for me – it allows me to get comfortable with the other person without talking too much. I often get self-conscious when speaking.

What’s Your Motivation?
On page 161, Ferrazzi looks broadly at the motivations of others:

In my initial conversation with someone I’m just getting to know, whether it’s a new mentee or simply a new business contact, I try to find out what motivations drive that person. It often comes down to one of three things: making money, finding love, or changing the world. You laugh – most people do when confronted with the reality of their deepest desires.

Get comfortable with that reality.

If you think about your deepest motivations, they really do fall into those three categories that Keith outlines here.

Take me, for example. My biggest motivation is my family – a mix of finding love with a bit of changing the world (by raising my kids to do great things). If I walk through every person I know very well, their motivations usually fall along these lines. My friend who’s in a Christian band hopes to change the world. My career-obsessed friend is all about making the money. Some people have motivations that mix these areas.

It goes even further. What if you simply aren’t motivated by one of these areas? If that’s the case, it’s likely that you’re not in a situation where actually conversing with others and making new friends holds much value for you. Why? If you’re actually interested in building relationships, then your motivation is finding love – not in the romantic sense, necessarily, but in the sense of camaraderie and friendship.

How to Motivate
So, how do you utilize that understanding of people? On page 163:

The only way to get people to do anything is to recognize their importance and thereby make them feel important. Every person’s deepest lifelong desire is to be significant and to be recognized.

In other words, recognize that people are motivated by something very important to them, even if it’s not something you share with them, and realize that the person wants to be seen as being important and significant.

My desires to be a great parent and to be a great writer are central to me. They’re very important to me. Knowing that, it’s easy to connect with me – ask me about my family and chase it with some follow-up questions, or ask me how my novel is going. Follow up. Before you know it, I’m talking up a storm – and you’ll find many avenues to build the conversation from there.

The trick is figuring out what’s central to people, but once you find it, it’s the key to connecting to them.

On Saturday, we’ll tackle the nineteenth and twentieth chapters – “Social Arbitrage” and “Pinging – All the Time.”

For her eighth birthday, I gave one of my nieces the book The Giving Tree by Shel Silverstein. It’s one of those books that, in my mind, is a masterpiece of children’s literature, one that I wish every child everywhere would have a chance to read. I actually have a (fairly long) list of such books that I intend to read to my own children as they get older and I’ve managed to cross off a few of them already (like Where the Wild Things Are by Maurice Sendak).

What books do you consider to be essential children’s literature? Give me a few titles – they can be anything from picture books to young adult books. I’m curious to what books you’d consider absolutely mandatory for your children to read.

10 Things Warehouse Clubs Won’t Tell You I’m linking to this one because I’ve never seen such a blatant hatchet job. Among the reasons: it’s dangerous because twice in twenty years objects have fallen off shelves and hit customers, and it might take “several minutes” for them to inspect your receipt before you leave (I’ve never had this process take more than a minute, not even the weekend before Christmas). The author of this article has an axe to grind, to the point of undermining what might be a good point or two. This is, quite simply, an example of over-the-top borderline slander that anyone should be able to see through, and it discredits SmartMoney and Yahoo! Shopping for posting it. (@ yahoo via free money finance)

Ten Things I Will Teach My Children About Money This is the type of thinking that’s worthwhile for every parent to embark on. Even if the lessons that each parent considers important and worth teaching aren’t the same, the fact that a parent puts importance on such lessons is vital. Plus, sharing such thoughts gives other parents food for thought. (@ consumerism commentary)

Is the Key to Wealth Found in a Book? The answer is simple – knowledge is only one piece of the puzzle. Taking action on that knowledge is substantially harder. Most people have some semblance of an idea as to how to become a distance runner, yet most people aren’t distance runners. (@ millionaire mommy next door)

Why Good Writing Matters – And How You Can Improve Your writing ability is often the first thing people have to judge you on – and if you don’t bother to write well, that creates a negative first impression. (@ dumb little man)

Determining the Perfect Amount How much is too little? How much is too much? Getting a good sense of both helps you to regularly use the perfect amount, which can save you a lot of money and time. (@ unclutterer)

When Is It Okay to Finance Fun? I’m much more in favor of saving up for fun than financing fun. Financing fun means that, after the fun is over, you undo the joy you gained by having to face down the debt. By delaying gratification, you don’t have the downside of debt, just the upside of the fun. (@ get rich slowly)

If Craigslist Cost $1 If Craigslist cost $1, I would actually use it. As it is now, with free postings, it’s a cesspool of nonsense. This model really does work – see Ask Metafilter for proof. (@ seth godin)

Want to Hear More About the Business Side? Given the number of times I’ve been asked about how I earn money doing The Simple Dollar, I’ve considered writing a complete article along these lines to explain it. Is this of interest to you guys? (@ i will teach you to be rich)

For me, September is the unhappiest month of the year.

Sarah, after being off all summer, returns to work at the end of August, leaving me alone at home many days with my thoughts and my work. This also means that the children’s daycare attendance increases as well.

The house goes from noisy and happy to empty and quiet. Even as I attempt to fill it with music and NPR, it still feels somehow vacant and still. The liveliness is gone – no more children’s laughter floating up the stairs to cheer me while I’m working and no more occasional interruptions by Sarah just to let me know she’s thinking of me.

Unsurprisingly, my mood slips a little bit. I tend to get more caught up in details – and I also have a greater tendency to get distracted.

Perhaps most worrying is that I have a greater tendency to spend without really thinking about it. It’s the old “comfort” thing – I’m unhappy with the way things are, but if I buy something, I’ll feel better about it.

Over the past few weeks, that feeling has manifested itself several times. I bought a few books and a couple board games that I would have never bought.

On Monday, it manifested itself incredibly clearly, in a way that almost shocked me. My kids both needed some new socks and perhaps a few new pairs of pants, as fall is coming on and their supply of well-fitting long pants is pretty small. Buying the socks and pants wasn’t the problem, though.

After I left the store, I stopped by a gaming shop on a pure impulse. I was just walking past it and it crossed my mind to stop in and say hello to one of the employees that I knew.

Almost before I thought about it, I left with a game under my arm.

Many people might say, “So what?” I don’t buy myself many items. The few things I do buy myself are bargain-shopped to death. So why not live a little?

Here’s the problem: the game doesn’t solve the problem that is making me unhappy – in fact, it just makes it a little worse.

The piece of my situation that makes me unhappy is not seeing my wife and children as much as I’d like. I love spending time with them and, after spending so much time together with them all summer long, I miss them.

Buying a game is a short term panacea – it might bring me a fleeting sense of enjoyment, but in the long run, I could have easily just played one of the other games in our board game collection in the basement closet.

I know what the solution to that problem is. If I keep my nose to the grindstone each day, I can take more time off and go do fun things with my children. If I take advantage of the writing and presentation opportunities I have, perhaps my wife can take a year or two off from her job while the children are young (I know quite well that she’s doing the work she loves and that she simply wouldn’t permanently choose not to do it). If I’m careful with my spending, I can open the door to some amazing experiences in my children’s future.

If I had chosen not to spend the $30 on the game, I could have tossed that money into a savings account. If I had simply chosen not to wander into that store, I would have had an extra hour to focus on finishing up my book or writing a stellar article.

It’s easy to say that I’m being too hard on myself. On the other hand, if I don’t keep an eye on the little choices, the big dreams start to float away.

In the end, the truth is simple: if you’re buying things to console yourself, ask yourself if that purchase is really going to solve your problem. Is buying a new video game going to make it easier for you to interact with people socially? Is buying a new wardrobe going to help you get into better shape? Is restocking your liquor cabinet going to make it easier to actually invite people over? is buying a new car going to help you get a date?

The answer to each of these things is “no.” The solution to these problems doesn’t come from buying things. They come from making authentic changes in your life – how you interact with others, how you work, and how you take care of yourself. They might put a little bit of grease on the skids, but if you can’t get the engine moving forward on your own, all the grease in the world won’t make a difference – and you’ll find, in the end, that you wasted a lot of time and money and energy on that useless grease.

Put your wallet back in your pocket and ask yourself one thing: what is it that you really want? The more of your energy you put towards that real goal, the better off you’ll feel about yourself over the long haul.

(The Simple Dollar podcast is on a one (or possibly two) week hiatus while I finish my book. It’ll return to your Tuesday afternoons shortly.)

Jenna writes in:

Do you think frugality is more socially acceptable now than it was a few years ago? Many of my friends are spending less money than they used to and we swap tips on how to save money all the time. This is a new thing for us.

I’ve been asked questions along the same lines by reporters many, many times over the last year. “People are now acting frugal. Why is this? Do you think it will last?” The reaction seems to be that frugality is this once-despised behavior that is now socially acceptable at this moment in time.

First of all, I do believe that more people are open to frugality and cutting spending than there were a few years ago. The economic crisis of 2008, along with the stock market staggering like a drunken sailor over the last two years, has shocked a lot of people. Young people aren’t finding jobs easily, and older people are seeing their retirement funs shockingly depleted. Such economic shock waves lead people directly towards trying new behaviors, if only in the short term.

Beyond that, though, Jenna’s comment still reveals that there is some cultural negativity towards the “pop” idea of frugality. For her – and for many others – frugality is something new and a bit taboo to dabble in.

My belief is that for many people (not all, of course), this newfound frugality is a fad, much like going green was two or three years ago. For some people, a greater awareness of their money and where it goes will stick with them – for many others, though, it’s just a fad and will drift away whenever a new media-pushed cultural movement comes along.

Another factor that runs through Jenna’s comment is the sense that frugal means cheap. As I’ve said in so many words before, frugal isn’t cheap.

Frugality refers to finding the best value for your dollar in the overall context of your life. A frugal person might take everything into account in their life and decide that buying a bulk box of higher-cost trash bags is the best value for their family because of the time saved by not having ripped bags and the money saved by buying in bulk and the ability to fill the bag to the absolute limit without tearing, minimizing the financial cost per bag.

Cheapness means finding the absolute minimum cost for any situation. A cheap person will always buy the garbage bags that have the lowest cost per bag, ignoring the fact that the cheapest bags have a lower per-bag capacity and tend to tear more often than better bags.

The difference between frugality and cheapness is thought. A frugal person steps back and evaluates the situation for criteria beyond that of simple dollars and sense and then seeks the best value for all things considered. It’s often confused with cheapness because in many situations, the cheap person and the frugal person come to the same conclusion as to how to handle a situation – and it’s different than the one that’s considered the “normal, mainstream” choice.

For example, both the frugal person and the cheap person might have a vegetable garden. They might both make their homemade laundry detergent, and they might both drive used cars. However, the cheap person tends to avoid leaving a tip at a restaurant they won’t visit again, while the frugal person steps back and looks at the situation through the eyes of the people they’re dining with as well as the eyes of the staff at the restaurant and then leaves a reasonable tip.

What will happen in a year or two when it’s no longer cool to be frugal? I predict that many people will retain a good handful of the frugal tactics they learned in 2008 and 2009. However, the money they save through more sensible living in some areas will simply be poured into extravagance in other areas. The money saved by that programmable thermostat installed in 2008 will help buy an HDTV, for example.

Is that a “win” for frugality? I think it is, even if it’s not the home run life changer that it could be.

Unless your last name is Rockefeller or Vanderbilt or Gates or Ellison or Buffett, you probably can’t be both.

Many, many people choose to appear rich. This usually means buying a house you can’t really afford, cars you can’t really afford, and all sorts of electronic devices and jewelry and other items that you can’t really afford. Outwardly, you appear to have lots of money, but you’re actually sinking in a giant pile of debt, barely able to keep your head above water.

In this case, the appearance of affluence doesn’t equal financial independence. Instead, it equals a huge amount of financial dependence. People in such situations depend on their employer for steady employment. They depend on their continued good health. They depend on minimizing major unexpected events – a transmission failure can be devastating. They depend on a reasonably strong credit rating while they juggle all of the debt.

That’s far from financial independence. But from the outside, it does look good.

These are the people who have a nice house and nice cars but seem not to have high paying careers. Do they have it all? Maybe at a glance, but the stress is intense. They’re constantly walking a high wire. If someone loses a job or the car’s transmission fails or a child gets devastatingly sick, the whole thing falls apart. And it’s scary. Most of the time, people who appear rich do all they can to pretend such things can’t possibly happen to them, but late at night, they know such things certainly can happen to them – and they worry. A lot.

A big part of the focus tends to be short term happiness and impressing other people – but long term happiness and enjoying yourself takes a big back seat. Fake it until you make it? Only if you’re bringing something more to the table – and that “something more” comes through without lots of superficial elements to impress others.

Trust me, I’ve been there. It can be fun in the short term, but over the long haul, you realize how many opportunities in life you’re missing.

On the other hand, one can choose to be rich. From my perspective, being rich means being as financially independent as possible – almost no life events can impact your situation – and being surrounded by the things you care the most about.

Yes, this has one disadvantage over appearing rich: you don’t get lots of shiny things whenever you want them. But it comes with tons of additional advantages.

You’re not tied to your job for purposes of compensation. If you hate your job, quit and find something you don’t hate. The money isn’t the constraint.

You’re not buried in bills. Each month, you don’t have to pay much at all out in required bills.

You don’t have tons of different things that need constant care and maintenance. You’re not cleaning a 6,000 square foot house. You’re not caring for five different cars. You’re not keeping up an immaculately landscaped yard. Sure, if you’re passionate about one of these, you can chase it – but if you don’t care, there’s no need to have them or maintain them at all.

You don’t have “friends” that constantly judge you based on the stuff you have.

You don’t worry about having enough money when you retire.

In the end, it comes back to one simple question: do you want to appear rich, or do you want to be rich?

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.

Do you really believe it’s better for the earth to have more children?
- Kelly

I’m a big believer in what I call the “Idiocracy” theory, so dubbed because of the very eloquent and humorous explanation of the idea at the start of the film Idiocracy.

To put it simply, if you believe strongly in a cause to the point of taking action to push your cause forward, the best thing you can possibly do is have children, raise them to think and be independent, and get them involved in the cause, too.

Many people who are driven to success in life or push themselves toward a cause eschew the idea of having children – they don’t have time, or they’ve convinced themselves it’s a moral wrong. Instead, people who are not driven and not committed to a cause tend to have more children – they do have time and they haven’t convinced themselves it’s a moral wrong.

Thus, the next generation has a higher proportion of people who aren’t driven towards causes, towards self-improvement, or towards improving the world.

If smart and driven people want to make the world a better place, they should consider having children, who will often also be smart and driven. The more smart and driven people there are in the world, the better off the world will be.

If you’re smart and driven and have chosen to not have children, you’re much like a candle in the wind that’s not lighting any other ones.

The only way I can stop using credit cards is to not have them at all. I have balances on my cards though. I just want to close the account & pay down the balance. However, I read that will hurt my score. What is going to hurt more – high balances on maxed out cards or closing the account and paying it off? This really is my only option. I would love to hear your opinion!! Thanks!
- Allie

Your best bet is to leave the accounts open for now, destroy the cards, and pay off the debt as quickly as you can without missing a payment.

In terms of your credit score, one big factor is the percentage of your credit limit that you’re utilizing. The way to do that is to leave your total credit limit alone – not canceling anything for now – and simply keep yourself from using it while paying down the debt. Over time, your percent of utilization will go down and your credit rating will go up.

You don’t have to cancel the account – just destroy the cards themselves (and erase the numbers from any online accounts)!

I was wondering if you have looked into “lifetime webhosting” – how do ensure that your content lives on (i.e. your blog keeps being hosted) without your active renewal, for example, 75 years from now?
- chessiq

For one, I don’t believe the web as we know it will exist in seventy five years. And for another, The Simple Dollar is being archived in several ways – archive.org, for starters.

My intent is to maintain The Simple Dollar as is for a long time, but inevitably, the period of the World Wide Web will wane and be supplanted by other forms of media. When that happens, I may move it to another format if it’s still relevant.

I’m considering some other options for maintaining the content, including a print anthology of the best timeless articles from The Simple Dollar.

Do you ever feel that you have many things pulling at you at once, frugality being just one of them? When purchasing food for dinner, I like to eat some protein (meat), as I go to the gym a lot. I like to eat healthy, so that meat should probably chicken or fish. And, I’m not a big fan of fish, so I find myself eating grilled chicken 5+ nights a week. (I’ll vary rice/pasta and veggies on the side). Without limiting the quantity of chicken, I can’t really get the price down, although it’s usually around $2 a meal. I’d like to be more frugal, but I don’t want to sacrifice my health to save $1/lb on meat, or make my effort in the gym worthless, by eating a protein-free dinner. I don’t too much mind the monotony (although I am open to suggestions), but was more curious if you ever feel the same way?
- Dave

Eating the right foods is an investment in your health. I have no objections whatsoever to spending more on food to get higher quality food.

Think of it this way: most foods that enable you to get a very cheap meal aren’t healthy for you. Over the long term, they’ll cost you in the form of lost energy, health care costs, and other effects.

$2 per meal is completely reasonable in my eyes if you’re eating healthy, high quality foods and eating such foods is one of your key values in life (as it clearly is for you).

One note, though: consider eating more beans. Beans have quite a bit of protein, can be prepared tons of different ways, and are incredibly cheap. I’m a big fan of beans.

When the Security and Exchange Commission fines a business or individual for an infraction or violation of the rules, usually the fine is pretty hefty – sometimes in the millions of dollars. What does the commission do with the fines they receive?
- Steven

SEC fines are rolled back into the SEC’s annual budget, but it’s only a small part of their budget. The rest is funded directly with taxpayer money.

If the SEC grew a backbone and started cracking down hard on some of the grey area securities tactics that many companies use, they could bring in a boatload of money and make the market more open to individuals.

However, they have no real incentive to do that, especially since many people at the SEC are heavily connected in the securities industry. So much for regulation.

My son-in-law has all but given up on his favorite sport, golfing, because of the cost. What is the best place to look for golfing coupons?
- Barbie

My best source for golfing coupons has always been the Entertaiment Book, which is often sold as a fundraiser for community organizations. Most of them offer quite a few pretty nice discounts at area golf courses, as well as discounts and free buckets of balls at local driving ranges.

Since I rarely golf any more, that pretty much takes care of my needs. The only thing the Des Moines-area Entertainment Book doesn’t cover for me is a once-a-year (at most) golfing outing in my hometown with my in-laws.

I haven’t found any other really reliable solutions. Perhaps the readers have some ideas.

We had a company wide re-structuring and everyone got to know their new job title. would it be an acceptable code of conduct to ask people what their new job title is? (Just to know where we stand in the company).
- RU

I think that’s completely appropriate. In fact, I think if such a thing happens in a company, they should require name tags with everyone’s new job description on it and have everyone wear them for a month or so just so everyone can figure things out and get on the same page.

Perhaps you can suggest this. It would be useful for everyone in the company as they become used to the new corporate structure.

One big thing: you need to be completely willing to answer the question if you’re going to ask it. If you ask someone and then don’t respond to their query (or to the query of someone else), it will NOT reflect well on you.

I am a college student, just starting my final year. I was lucky enough to be able to pay for college with scholarships and the help of my parents, so I have absolutely no student debt. I’ve had a checking account for several years, but I have never opened any kind of credit card account as the idea of that much financial room has always intimidated me.

I was wondering what I could be doing to responsibly build my credit/ credit score so that it will be at the optimum point when I look into making significant purchases (house, car) in the future. I am worried about going down the wrong path if I’m not even sure where to start.
- laurenly

Your best bet – the simplest way to start – is to get a credit card. Use that credit card for ONLY one kind of purchase, one you make regularly. For example, if you commute, get a BP card and use it only for buying gas at the BP. If you’re in college, get an Amazon Visa and use it only for buying textbooks. Then, pay off the full balance each month and don’t use the card for anything else.

Doing this will help your credit score immensely. The trick is to not decide that using a credit card is “easy” and start using the card for other purchases – that’s where people get into trouble.

Get a card, use it for one type of purchase, and pay it off in full each month. Not only will it help your credit, but you’ll likely get a bit of a reward out of the card, too.

How can you make phone calls with Skype on your iPod Touch? I’ve heard you can’t use it on there because it doesn’t have an internal mic. Do you only use the messaging feature on your iPod touch?
- ema002

When I first got my iPod Touch, I didn’t realize it was possible to use a mic for it. Then I damaged my ear buds (I cut the cord, actually) and had to go get a replacement pair.

That’s when I discovered the Apple earphones with remote and mic. These plug into the headphone jack on an iPod Touch and function as a microphone on any apps that require it. I can sit there with my headphones on and use my iPod Touch as a Skype client.

I can also use the Voice Recorder and add voice notes to Evernote as well using these things. They’re great.

If you could live anywhere in the world, where would it be?
- Larry

First of all, I’m going to exclude any places I’ve never actually visited. It’s completely unfair to fetishize some place I’ve never been to and claim I want to live there. Instead, those are places I’d love to visit some day. On that list: rural France, Turkey, and Norway.

But what about living? I’ve visited two places that have really sung to me in a certain way, making me wish I lived there.

One was northeastern Iowa/southeastern Minnesota/southwestern Wisconsin, along the southern edge of where the glaciers reached during the last ice age. It’s very hilly there, with lots of old forests. The people are mostly Norwegian and Swedish, which means lots of calm and friendly temperaments. The weather rotates wonderfully through the seasons, having very nice and distinct summers, winters, falls, and springs. It’s just wonderful.

The other place is Washington state, out near the coast. Here, the temperature and weather is pretty stable throughout the year and the people seem to be very libertarian – in other words, they let you do your own thing without much snooping or prying. Mostly, though, it was the weather and vegetation – the large forests, the great access to Olympia National Forest, and so on.

The only large city I’ve visited that I would consider living in is San Diego. Again, the people are a big factor – it often felt like the sleepiest large city I’ve ever been in, which is a good thing, and the weather was beautiful during almost every season.

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.

This is the eighth book in the “Little Books” series on investment topics, and I’ve reviewed all of the previous ones (… of Bull Moves in Bear Markets, … of Common Sense Investing, … of Value Investing, … That Beats the Market, … That Builds Wealth, … That Makes You Rich, and … That Saves Your Assets – all links to my earlier reviews of these titles). For the most part, each one provides solid coverage of a specific investment topic – I particularly liked the “Common Sense Investing” (which covered index funds) and “Value Investing” entries in the series.

This one, Main Street Money, may be my favorite of the lot.

Instead of looking deeply at a specific investment strategy, Jonathan Clements (the author, and long time Wall Street Journal columnist) instead looks at how real people actually invest. For almost all of us, carefully following an investment strategy isn’t the center of our lives. Investments aren’t our life, they’re a way to protect our money and build a little more without consuming our lives with research and worry.

Clements’ book offers twenty one simple truths for this type of real-world investing and personal finance in general, and he does it in a very engaging way. Let’s dig in.

Our Finances Are Bigger than a Brokerage Account
Many people (at least those on stable financial ground) often associate their personal finance success entirely with their investments. It’s really a much bigger picture than that. Are you free from debt? Are you spending excessively? Do you have an easily accessible emergency fund? There are countless issues that point toward (or away from) personal finance health that have nothing to do with your investments. This really speaks to me, since I view investing as just one of many, many topics worth talking about on The Simple Dollar.

We Can’t Have It All
There’s not enough money in the world or time in the day to have everything we can possibly want. You can’t be a great parent, have a strong career, maintain tons of friendships, and keep up your health – something will slack somewhere. The key is spending the time to figure out what you want the most.

Money Can Buy Happiness – If We Spend It Carefully
The real reason many people find that more money doesn’t bring happiness is that they tend to spend it in ways and on things that don’t reaffirm what their life is all about. Unless your life is intrinsically defined by your cell phone, spending more money on a cell phone won’t bring you any sort of lasting happiness. Instead, focus your spending on the things that truly matter to you. Maybe it’s the hobby you’re constantly drawn to. Maybe it’s your family. Maybe it’s your life’s work (if you’ve discovered it). Focusing your money and energy and time towards maximizing that if you want lasting happiness.

Even the Best Investors Need to Be Great Savers
If you don’t live well within your means, you’ll never be a great investor. A great investor improves returns by being able to invest more to begin with, and they come up with that additional capital by employing some restraint in their lives. They live frugally and don’t waste money on frivolous things that are fairly unimportant to them.

Time Is as Valuable as Money
Most of the things we’re really working for in life boil down not to money, but to time. We save for retirement so that we can have a longer and more secure life. We carefully juggle work responsibilities so that we have more time to spend with the people most important to us. Time management is just as vital as money management when it comes to building the future we want.

No Investment Is Risk-Free
There are no guarantees in life, and every investment has some form of risk (yes, even Treasury notes, which have the risk of the failure of the United States government to repay its debts). Investing in cash has the risk of inflation, for another. However, it’s always vital to recognize that some investments have far more risk than other ones. Riskier investments often offer far greater upside than less risky investments, so you need to consider how much risk you can tolerate before you even invest.

Portfolio Performance: It’s All in the Mix
The best way to earn a good, strong, consistent return on your investments is to diversify across many different investment types – domestic stocks, international stocks, bonds, cash, real estate, and so on. There is no perfect formula for the “best” portfolio because different markets go up and down at different times, often not in relation to one another at all. However (unless you’re an incredibly focused investor), your best route is to diversify widely.

Stocks Are Worth Something
Stocks left a bitter taste in many people’s mouths after the 2008 stock market fiasco. However, as long as businesses operate, offer their shares to the public, and pay dividends on those shares, stocks will always be worth something. Stocks do have intrinsic value in the form of their dividends (or potential future dividends) as well as a fraction of the asset value of the company. The only danger is when these shares get overinflated due to hype, which happened in 2000 and 2007, as well as many other times. That’s why it’s worthwhile to mix stocks with other investments, so you don’t lose a large chunk of what you have during a bubble popping.

To Add Wealth, We Need to Overcome the Subtractions
Minimize your costs. If you allow even an extra percent worth of fees on your investments, you drastically reduce the long term returns on that investment. Thus, it’s well worth your time to study different investment options available to you and choose the one that offers the lowest fees while still giving you the option that you want. That extra time invested up front in finding a brokerage that doesn’t nickel and dime you to death pays off tremendously over time.

Aiming for Average Is the Only Sure Way to Win
Given the constant fluctuation of investments and the impossibility of predicting the future, attempting to constantly “beat the market” is a fool’s game. You might do it over a very short period, but then dynamics change and you quickly lose what you gained (and often more). Instead, shoot for just trying to match the average of any market you invest in and ride the tide. This has a big advantage because it means you can invest in index funds, which are known for having very low costs while merely matching the average of the market – exactly what you want.

Wild Investments Can Tame Our Portfolios
Some portion of your portfolio should actually be in risky investments that are themselves diverse – areas that are greatly out of sync with what’s going on in “mainstream” investments. In other words, put some (relatively small portion) of your money in things like precious metals and emerging markets. Often, these do the opposite of what the bigger markets are doing (since that’s where many investors move their money when other markets are faltering), so if you’re already there, you can ride it the whole way up, offsetting the losses in other areas. Mix up your risks and diversify – it’s good for you.

Short-Term Results Matter to Long-Term Investors
You might be investing over the long term, but you may in fact wind up needing that money in the short term. In other words, short term results do matter to long term investors. Don’t put your money in investments that can have big short term losses if you can’t afford those short term losses.

A Long Life Is a Big Risk
Many people plan for a retirement that lasts fifteen or twenty years – that’s a good number to live by. But what if you live far longer than that? If you retire at sixty five and live to 105, that’s forty years of living. A long life is a serious risk to consider when planning for retirement, and one way to hedge against it is to simply invest more into your retirement. I talked about this very idea a bit earlier today, in fact.

Markets May Be Rational, but We Aren’t
We aren’t perfect. Human psychology often gives us strong impulses that are great to follow in the real world, but incredibly dangerous to follow when it comes to investments. The best way to overcome these is to carefully consider a plan and simply follow it, not allowing ourselves to change course because of a sudden gut feeling or a particular scare.

Our Homes Are a Fine Investment that Won’t Appreciate Much
Many people talk about their primary residence as a major investment. It is a great investment, but only in the sense that it keeps a roof over your head. Most of the time (excepting a housing bubble), houses aren’t a great return on an investment. Sure, you can own homes for the purpose of renting them, but those arrangements cost time as well as money – and if you choose to pay someone to management, the return (after all of the costs are paid) rarely makes it worth the risk.

Paying off Debts Could Be Our Best Bond Investment
If you just want a great steady return on your money, most investment experts will point you towards bonds. However, it’s just as effective to pay off a debt – and often more lucrative. If you’re buying bonds at 3% while you have debts at 6%, you’re not making a very good investment choice. Consider debts as being equal to bonds and put your money wherever the highest percentage is.

Saving Taxes Can Cost Us Dearly
If you’re buying a house just for the tax benefits, you’re making a huge mistake. Quite often, tax benefits just help a person recover a small fraction of the costs – and sometimes not even that much. The same goes for many other kinds of investments – tax benefits are often completely overemphasized compared to the actual gains the average person can expect from the tax benefits.

A Tax Deferred Is Extra Money Made
Deferred taxes – like those with a 401(k) – are more useful than they seem on the surface. Obviously, there’s the advantage of the smaller tax burden right now, but what that also means is that you can afford to invest more than you otherwise would. Moving your 401(k) contributions from 1% to 11% doesn’t mean that you’ll bring home 10% less each paycheck – it’ll actually have less impact on that. With tax deferment, you can invest more now.

Insurance Won’t Make Us Any Money – If We’re Lucky
Never consider insurance to be an investment. Insurance is nothing more than protection against the unthinkable. If investments are tied into the package, it’s like buying a Swiss army knife – you’re getting a mediocre screwdriver with your knife and paying a hefty extra cost for the “convenience.” Keep your investments and insurance separate and minimize the cost on each one – separately.

Even If We Have a Will, We May Not Get Our Way
If you’ve accumulated significant wealth, a will alone may not protect your financial assets and ensure that they’re distributed how you like. It may be worthwhile, late in your life, to set up a trust and sign your assets over to that trust. The trust then effectively “pays” you for the remainder of your years, then the trust follows whatever instructions you set upon your passing. It’s a great way to ensure your financial assets are handled in the way you wish after you’ve passed on.

Financial Success: It’s About More than Money
Financial success means having the time and the resources to enjoy the things in life that are most important to you, whether they be

Is The Little Book of Main Street Money Worth Reading?
In terms of advice that’s actually appropriate and useful for 99% of the public, The Little Book of Main Street Money is far and away the best of the “Little Books” series. The advice is truly approachable and actually useful, particularly for people who are in reasonably good financial shape and have a lot of years left ahead of them.

It’s not a be-all end-all of financial planning. Instead, it just provides – in Clements’ approachable writing tone – excellent basic advice and principles to follow. This advice is timeless and forms the foundation of whatever personal finance strategy you might choose to follow – this book is a great starter.

Marcia writes in:

I’m having a hard time figuring out exactly how much to put away for retirement each week. I’m twenty five years old and most of the advice says to put away 10% of your salary into your 401(k) but I think I should be putting away more. I have three great grandparents that are still alive and over 100 and all of my grandparents are over 70 and still alive. Unless there’s something bad and unexpected I will probably live quite a bit longer than the average person. So should I be putting away more for retirement? How much more?

The best way to answer this question is to roll the clock ahead to age sixty five and ask yourself what you would like to be doing then.

Think about it. When you’re sixty five, do you intend to walk away from your job and settle into a non-employed retirement? Do you want to perhaps seek a different kind of employment, perhaps following a dream of being a writer or a painter or something like that? Do you want to keep doing the job you’re doing until you drop to the floor?

I’ve known the answer to this question all my life. I do not want to be idle in my later years – I’ve always intended to fill them with my writing and that dream is no different now than when I was younger.

Until the final year or two of my life (or when I’m unable), I intend to work and earn some sort of income. What does that mean for my retirement savings? For the later years of my life, my retirement savings will only be a part of my income. I won’t need to withdraw all the money I need to live on from it each year.

Thus, it makes sense for me to not save quite as much purely for retirement and instead invest in long term care and long term disability insurance – these cover the situations in which I’m unable to work.

What does your story look like? Assuming good health, do you intend to keep working productively for as long as you can? If so, then you don’t need to put as much away annually as you might otherwise. On the other hand, you might want to enjoy a long retirement period that doesn’t involve working for an income. If that’s the case, then you should scale up.

Here’s the truth: most retirement planning advice out there assumes that you’ll retire at sixty five and then live without an income for at most another twenty years. In many cases, neither one of those assumptions are true. I certainly don’t want to be completely idle for the last twenty years of my life and I’d love to be able to see my great-grandchildren born – I got to know one of my own great-grandparents very well, in fact.

Instead, I think retirement planning should involve assuming you’ll live as long as possible. I’d take the age of your ancestor that lived the longest and tack on five years. Then, I’d ask myself how many of those years I wanted to spend without earning money – or with earning only some of the money I needed for retirement. Do you want a long “retirement” period or not? Some do, some don’t.

From there, you’ll start getting an idea of how many years you want to cover. Start playing with retirement calculators using these assumptions and see what you come up with. After all, if you think you’ll live to 95 and intend to work until you’re 80, you have fifty five years to save for retirement, thus you don’t need to scale up at all. On the other hand, if you think you’ll live to 95 and intend to retire at 65, you’re almost assuredly going to have to put more away for retirement.

Remember, focus on what makes you happy. If there’s an endeavor that earns a good income that you would be happy spending the rest of your life doing, then spend the rest of your life doing it!

One final caveat: long term care and long term disability insurance are both worth considering. Mostly, they’re hedges against something devastating happening in your life. They ensure that if something does happen that prevents you from working in a productive way, you won’t be a financial burden to those around you. They should at least be considered as part of any long term financial planning.