Over the last week or so, my wife and I have been discussing when to start giving an allowance to our oldest child, Joe, who is almost four years old (long-time readers may recall that Joe was still a baby when The Simple Dollar started… where does the time go?). This conversation was spurred on by my recent reading of Raising Financially Fit Kids, along with a small pile of articles and research on the topic.

Here’s the plan we’ve decided on.

First, we’re going to begin his allowance on his fourth birthday. He’s reached a level of intellectual maturity that he now clearly understands that money is exchanged for goods and services. He also often requests items of various kinds at the store – and is told “no” virtually all of the time. Yet, he does see that Mom and Dad occasionally buy unnecessary items (like a book at the bookstore) and is intuitive enough to ask why Mom gets a book while he does not. His allowance allows him to make some basic money decisions for himself.

Second, his basic allowance will be very small. We don’t intend to throw a large amount at him. We’ve decided on an initial allowance of just $2 a week – and he won’t be allowed to even spend all of that in a given week (as I’ll explain below). This allowance isn’t intended to finance exorbitant spending on unnecessary things – instead, it’s a way to teach simple money management to a small child in small amounts.

Third, the allowance will come in three parts – for now. One part will be pure spending money – he can do whatever he wants with it. A second part will be saving for a specific goal, which we’ll let him identify. We’ll keep this in a jar on the refrigerator with a picture of the goal on the jar (and the price). A third part will be for giving – we’ll let this build up for a bit, then tell him about some local charities that he can give the money to to help their cause. We’ll give him his allowance in quarters, putting them one at a time into each group in the order above until they run out. So, at the start, he’ll get three quarters a week to spend, three quarters a week to save for a goal, and two quarters to give to others. The idea here is to teach some goal setting and also to teach the value of giving to others in need.

Fourth, his allowance will grow slowly in proportion to his age. Each year, we’ll increase the allowance by fifty cents. So, when he’s five, he’ll get $2.50. When he’s ten, he’ll get $5. As always, the allowance will be given in quarters and dollars so it can be divided evenly. So, next year, he’ll get a dollar (four quarters) to spend as he chooses, three quarters to save towards a goal, and three quarters to give to a charity. After that, a dollar goes into each grouping.

Fifth, his allowance will be “automatic” – not based on any specific behavior. There are some things that he’s expected to do at our house – pick up his toys, scrape his plate after meals and put it in the dishwasher, and so on. Those won’t be tied to his allowance – if he refuses to do them, his allowance won’t be the source of discipline (“time out” works really well for that, actually). The goal is to teach money management, not to use it as a tool for discipline.

Sixth, we will offer him optional extra chores to do to earn a little more. For example, we’ll give him a large basket and tell him if he fills it up with leaves from the yard, we’ll give him a quarter in each jar. If he wants to do it, he can – otherwise, Dad will get out the rake. Again, the goal here isn’t to get cheap labor (I could clear the leaves WAY faster myself), but to teach him that if you work, you earn financial rewards for it – which also must be budgeted.

Seventh, when he’s older, we’ll introduce an “investing” jar, too. Perhaps when he’s six, we’ll introduce a fourth “jar” into our system, splitting the allowance money into four equal parts. This final “jar” includes money to be invested for the future – not to be touched until he’s done with his schooling. Why so long term? With such a long timeframe, he’ll have adequate time to see how investing in stocks works, how investing in bonds works, how investing in cash works, and so on. Right now, he’s simply not ready for this and wouldn’t see the connection, but we think he might begin to understand it when he’s a bit older.

Eighth, all “gift money” will be split along these same lines. If he gets $5 from Grandma on his fourth birthday, $1.75 can be spent right now, $1.75 is saved for a big goal, and $1.50 is given to a good cause. In other words, gifted money is treated the same as allowance money.

Finally, he’s freely allowed to put “free spending” money into other jars if he so chooses – with a small bonus. This will allow him to push towards a big goal. What’s the small bonus, you ask? If he dumps all of his allowance that week into the “saving for a goal” jar, I’ll toss in an extra quarter to reward good saving. It’s also a hedge for our own sanity – I’d rather he use his money for a few more expensive toys than lots of $0.50 items that clutter the house.

That’s our allowance plan for Joe and, if it works well, we’ll replicate it in a couple years with our daughter. Any thoughts or comments?

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.

I have a question about savings and student loans. I am in graduate school and working on an emergency savings fund while paying off a student loan (deferred but accruing interest). Presently I am putting only a minimal amount towards the loan ($50/mo) and the bulk to my emergency savings ($950/mo). My plan is to get to the $6000 mark in the emergency fund, then apply the full $1000/mo to the student loan until its gone, then to start investing in an IRA. The catch is that due to funding I will take a pay hit in September 2010 and will only have ~$200/mo. to save.

Is my plan sound? Should I try to put money towards all three at once or is in sequential order best?
- Christina

I think doing things sequentially like you’re doing is sound. It’s better to work towards one goal than to split your efforts among a bunch of goals – you’ll have to wait a LOT longer to get to success if you split your efforts.

Having said that, though, I would actually go ahead and start that IRA now. Since you’re a student, a Roth IRA is probably the best option for you. I’d contribute $100 a week towards that, then put the other $600 a month toward the emergency fund and not even worry about the student loan. Once the e-fund is funded, take that $600 monthly and channel it toward the loan.

My only question is the reason for the $6,000 emergency fund. I assume it’s calculated based on how you spend money. Is it intended to provide a certain number of months of living expenses? My guess is that it’s for two or three months, depending on how you live.

Have you read the South Beach Diet book? It’s a good read even if you are not ‘dieting’. With your interest in food and nutrition (and reading) I’d highly recommend it.
- Mol

I’ve read a lot of diet books, many of them having conflicting advice.

In the end, the only pieces of human nutrition advice that seem to be consistent is that you should simply eat more vegetables than meat and to eat in moderation. Once you get much beyond that, the advice is heavily contradictory and confusing at times.

Lately, my interest in books about food tends more toward the art of preparing it (like Ratio) or where it comes from (like The Omnivore’s Dilemma). I don’t tend to bother much with books that provide a “plan” for losing weight, especially one supported by a lot of frozen foods sold in supermarkets.

How did you teach yourself how to cook? Do you watch Food Network?
- Adam

I don’t watch Food Network much at all, to tell the truth.

Most of my education in the kitchen was from books and a few YouTube videos for specific techniques. I’d read about it, then go give it a shot.

I’m not ashamed to admit that many kitchen skills are still quite challenging for me. I tend to over-butter things. I am slower than molasses chopping most vegetables – and it’s not because of the knife. I sometimes overcook meats.

Here’s the thing, though. It’s all fun for me. I love spending time in the kitchen. Best of all, I sometimes stun people with the things I make, like my potatoes and onions au gratin from scratch that takes about forty minutes of prep time and almost two hours to bake.

That’s my motivation – and that’s enough to get me in the kitchen, try things, occasionally fail, and sometimes succeed.

My husband and I have been noticing for awhile now that we’re outgrowing our friends. We are married and own our home, and are thinking about having kids in the next few years. Most of our friends still live with their parents, and are more focused on buying expensive toys (new vehicles, electronics, etc.) than they are about focusing on their future.

Is there a way we can politely bow out of these relationships, without causing many hurt feelings? Also, are there any relatively safe online communities that we could use to find people in our area that share our same interests? I know we can make new friends easily, but we don’t know where to start looking for them…
- Jessica

Just gradually slow down the interactions over time. Instead of doing something with them every week, scale it back to every two weeks or every month. That will leave you with the free time you need to build up new friends and new interests.

As for looking for people in your area, start with your interests. Visit businesses that sell products connected to your interests and see if they facilitate any groups. Get involved in any community groups and organizations connected to your interests.

Some of your friends will just drift away. Other ones – the better ones, actually – will want to know what’s going on. Be honest. Tell them you feel like there’s a gulf between what’s happening in your life and what’s happening in their life.

You’ll be surprised how flexible truly good friends can be. My best friend became my best friend when I was single. He stuck around while I seriously dated Sarah, married her, and had two young kids – he’s still single and he still stops in all the time. My kids think he’s the cat’s banana.

As for the rest? If they drift away, it’s not that big of a deal. Some friends exit stage left to make room for the new ones entering stage right.

I know you watch baseball. What other sports do you actively follow? Who are your favorite teams or players?
- Edward

I follow baseball faithfully. The only other sport I follow with anything approaching that kind of consistency is golf.

I also follow – on a somewhat more subdued basis – college and pro basketball, tennis, and soccer.

I follow football and NASCAR enough that I can talk about it in conversation with people, because I know many fans of both sports.

By following, though, I should say that I don’t slavishly watch them on television. I’ll usually watch the Sunday afternoon of a golf major and I’ll often watch the baseball playoffs. I’ll occasionally watch an NBA game or an NCAA tournament game or an English Premier League match or a semifinal or final match at a tennis major. I’ll listen to either sport whenever I find it on the radio. I also carefully read game and tournament highlights for both sports.

In the end, though, if you gave me a choice between watching a sport or playing it in the yard with my son, I’ll head outside any day. Most of my sports watching happens on days where the weather doesn’t mesh well with going outside.

You recently wrote about how your net worth is negative if you don’t count your home as an asset. When do you think your net worth will be positive again?
- Sandra

I was intrigued by Sandra’s question, so I ran some models in a spreadsheet. According to my math, I’ll be able to cross back over to a positive net worth sometime in 2011. Yes, that’s with the full crunch of my mortgage over my head and not counting my home as an asset.

My path for getting there is mostly based around whacking away at my remaining debt – my student loan and then our mortgage. I have plenty in savings to sustain us through almost any emergency.

Why is this important? In a strict way, it’s not. It’s mostly a way for me to look at the realities of my life – if I were to liquidate everything that’s easily liquidatable, where would I be?

I’ll certainly feel a lot better when that number’s in the positive, I’ll tell you that!

I am wondering if the real answer for why we never get in contact with you is that you in reality do not have time for all of us readers?

So is it not time to scale back, get more involved in the comments and with each reader instead of turning into one of those sites just pumps out information?
- Tordr

All of that stuff you list is for direct contact with readers. I interact with readers directly on Facebook, Twitter, and FriendFeed – and email, for that matter. I do reader mailbags specifically to respond to reader questions. I write articles in response to specific reader questions. And I comment, too, on occasion.

In the end, when I think about how to spend my time, I try to imagine the person I want to reach with my writing. For me, it’s that person who’s near their financial bottom. They’re scared. They’re typing search terms into Google, hoping that someone can provide them with the cool words they need to help them get a grasp on the problems around them. Maybe they hate their job. Maybe they’re scared about their debt. Maybe they just feel stuck in a serious rut revolving around consumerism. Maybe they’re trying to follow a new career path.

Whatever it is, it’s a big change, one that’s scary to face alone.

My hope is that those people find a page on The Simple Dollar. Much of what I write is with that person in mind, above all else.

We use paper plates for lunch, snacks, etc. I’ve always assumed that the cost of washing our regular plates (plus the time to do it) was probably equal to the cost of the paper plates. Also I assumed the same for paper vs. cloth napkins.

Do you have any thoughts on this?
- Ann

How exactly are you defining “cost”?

If you’re looking strictly at your own dollars and cents, you need to figure in the time you add to the equation due to the extra trash you generate, along with any extra costs you might incur due to putting more trash out by the curb. There’s also the cost of having to go to the store to re-buy those paper plates – some fraction of your grocery store trips are done to buy these plates, something you don’t have to do with normal plates.

Another factor – if you use the cheapest plates, they’re not sturdy and often cause messes (in my experience), which take time to clean up and often waste food. More expensive plates are – well, more expensive.

Beyond that, there’s the environmental factor. Paper plates take a long journey to get to your store shelf, starting with the trees in the forest that are cut to make the plates, the processing done to those trees to make the plates, and the shipping of those plates via ship and truck. With normal plates, you’re not contributing to that cost – and it certainly is a cost in a global sense.

For me, these factors tip the scale towards reusable plates.

Hey Trent, I’m also interested in canning salsa this year. How about sharing your recipe and techniques with us in the future?
- Kim

PickYourOwn (a site I quite like, even if the design is circa 1995) has a great guide for making and canning salsa.

To put it simply, canning salsa (and other tomato-based foods) is really easy because of the acidity of the tomatoes. You don’t need to pressure cook them – a boiling water bath will do the trick. Basically, just make what you want to can, boil the jars and lids for a bit to sterilize them, fill the jars, put lids on them, put the jars in boiling water for a while, and you’re done. Let them cool, check the lids, and put them up for storage.

These actually make great Christmas gifts. Homemade salsa almost always blows away stuff made in a factory.

I’m certainly no expert on libertarianism, but I’ve always had the impression that most libertarians are against taxes. Is this true for you? While it seems clear that you’re all for reallocating taxes to fund education more heavily, I was surprised that you didn’t seem more anti-tax in general.
- Georgia S.

There’s a big difference between being a libertarian and a Libertarian.

A “big-L” Libertarian is a member of the Libertarian Party and subscribes to their beliefs, many of which I view as being self-contradictory.

A “little-l” libertarian refers to a broad swath of people who believe strongly in individual liberty and smaller government. These people are basically outcasts in both major political parties.

A “big-L” Libertarian is basically just one extreme flavor of the broader group that is “little-l” libertarians. I would probably put myself in the latter group, but I’m far from the former group. I believe taxes are needed and I believe that many services are better handled by the government than privately, such as a standing army and roadways – pretty far from “big-L” Libertarians. I’m probably closest to the Republicans in terms of how public dollars should be used, but some of their uses still make me shudder.

I also believe that individual liberties should extend to the point that as long as it doesn’t violate someone else’s individual liberties, it shouldn’t matter at all in terms of the law. That’s close to “big-L” Libertarians, but very far from the Republicans and actually closer to the Democrats.

So, usually, I just vote for whatever candidate seems to match my views the best. Sometimes it’s a Republican, other times it’s a Democrat. Sometimes it’s a third party candidate.

I hope that clears things up a bit.

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.

It should come as no surprise to long-time readers of The Simple Dollar that I’m deeply passionate about raising my children with a strong sense of independence, self-motivation, and a strong ability to manage their own money in a sensible way. In fact, I’ve read and reviewed several books on this very topic; among them, Young Bucks, The First National Bank of Dad, and Make Your Kid a Millionaire.

Raising Financially Fit Kids by Joline Godfrey is perhaps the most thorough book on teaching personal finance to children that I’ve yet come across, as well as the best designed. It’s glossy, loaded with wonderful pictures of bright-eyed children, and organized in a thoughtful fashion.

But is it a really helpful guide to teaching children how to properly manage money? Let’s dig in and find out!

1 – From Safety Nets to Self-Sufficiency
Every kid is different. Some kids are naturally spenders – they can’t wait to spend every dollar they get. Others are hoarders – they carefully preserve every dime they see. Some kids are budding entrepreneurs who love to get out there and develop plans for making money. There are countless flavors – and countless different behaviors.

So how can you offer good financial education to all of these different types of children? All of these types are rewarded by teaching them how money flows – the benefits of saving, the benefits of spending, the benefits of investing, and the benefits of giving. In other words, don’t simply force them to go against their natural behaviors, but don’t just go along with them either. Instead, teach them balance – the balance between spending, saving, investing, and giving that’s an intrinsic part of adult life.

2 – Outwitting the Money Monsters
Time. Peers. Media and marketing. Magical thinking. These are all enemies of good money management for children (and for many adults, too). Time is a factor because in many modern households, both parents are working, the kids are in tons of activities, and there’s little time to spare. Peers are a factor because of peer pressure. Media and marketing constantly influence kids to want things that they would have never considered before. Magical thinking teaches them that plastic is free money, just like the tooth fairy.

The best solutions for each of these areas is the same: quality time spent with your kids (not just time running from activity to activity or parked in front of the television) and open and honest discussions about everything (so they feel okay asking you questions, mostly to take away unnecessary magical thinking).

The middle portion of the book focuses on specific issues for various age ranges of children. Godfrey argues that there are ten basic money skills that should be worked on (with different tactics depending on age) throughout a child’s life:

1. How to save
2. How to keep track of money
3. How to get paid what you are worth
4. How to spend wisely
5. How to talk about money
6. How to live on a budget
7. How to invest
8. How to exercise the entrepreneurial spirit
9. How to handle credit
10. How to use money to change the world

The meat and bones of this are laid out in four very nice fold-out tables, one for each of the four age ranges discussed in the following four chapters. It can almost serve as a checklist of sorts.

3 – Stage One: Ages 5-8: I’m Just a Kid
In the early years, the focus really should be on a basic introduction of the ten money skills above (so that the basics of the idea are clear to the kids) and positive reinforcement of good choices (not punishment of bad ones).

Godfrey encourages having a weekly allowance that’s given without any sort of requirement and that it should be split among spending, saving, and giving. In addition, Godfrey encourages developing a list of “bonus chores” that will stretch your child and really make them work, but earn them an additional amount (which is also split among the three areas). Another important part: talk about all shopping trips in detail. Explain to your child why you’re buying what you do and also talk about their spending choices and whether it’s a good idea to spend their spending money on bubble gum.

4 – Stage Two: Ages 9-12: Encouraging Passions
At this stage, the first flickers of independence are starting to appear and you should facilitate it. Give the child more control over their saving and spending and charity decisions. Encourage them to take on larger entrepreneurial projects and give them really big tasks for earning extra money. The more projects they start on their own, the better.

The real focus here is in making sure your child gains self-confidence and a realization that they’re doing it themselves and that they’re doing it right. You can do this by letting them make decisions, letting them follow through, and complimenting their efforts.

5 – Stage Three: Ages 13-15: Breaking Away
This is the perfect age to have your child get a simple job on their own (or perhaps kick an entrepreneurial project into high gear). Hit your own social network to find good job opportunities for your child and suggest them.

This is also a perfect time frame to have them do “dollar tracking.” In other words, have them keep careful track of every penny they spend over a period of time, then summarize and evaluate all of that information so they can clearly see where their spending goes. You should do the same at the same time so that they can see how an adult spends money – and both of you should strive to do it with full honesty.

6 – Stage Four: Ages 16-18: Standing Tall
This is an appropriate stage to really begin involving your child in your real financial situation. They’re just about to take the leap into their full independence, so this is the time to show them how you manage things. Show them your financial state. Review with them how you pay bills.

Another important way to help them take flight on their own is to let them start being in charge of important financial tasks. THEY should be managing their college applications. THEY should do their own FAFSA.

7 – Money and Gender
Boys and girls are different – does that mean you should be teaching them money lessons in a different fashion? In so many words, Godfrey basically says “no.”

The lessons that you should teach both your boys and your girls is that they can do this. They can succeed on their own merits and they can make their own rules. There are countless male and female success stories out there – people rising from humble backgrounds, people doing amazing things. Your children can do it, too.

8 – Raising Rich Kids
How can you do these things if you’re affluent? The most important thing is to discuss this forwards and backwards – if your children are affluent, it’s likely they’re aware of their lucky situation. Make it clear that they have been given a great opportunity to start, but that once they’re on their own, it’s up to them to make of themselves whatever they will. Point out that the kids who come from nothing are going to be hungry and they’re often going to work very hard to get ahead – and they’ll have to compete with those kids.

Finally, don’t helicopter kids into middle adulthood. Allow them to be independent as early as possible, making their own mistakes and mis-steps along the way. Offer a helping hand, but if you pave the road for them, they’ll never learn the self-reliance they need to make it in a world without you.

9 – Raising Young Philanthropists
How can you show your children the value of sharing what they have with the world? The best way to do this is to be an example yourself, all the way along. Be involved in charities. Give your time and your talents to causes you believe in and encourage them, as early as possible, to do the same.

As your child begins to develop a social conscience of their own, encourage them to follow up on that conscience and do what you can to get them involved in a charity. Few things will help a child grow more than a lot of hours invested in a charity that’s deeply meaningful to them.

10 – Yikes! My Kid Won’t Leave Home! Now What?
To put it simply, don’t. You shouldn’t provide a nonstop roof over their heads (although short term help is fine). Nor should you provide a constant subsidy for your kids.

Why not? Doing that discourages their independence. Free money means that they don’t have to put any effort forth to get the things they want in life, which teaches all the wrong lessons.

It’s okay to help on occasion, but never help in an open-ended fashion. That results in nothing positive with an adult child.

Is Raising Financially Fit Kids Worth Reading?
Let me put it this way: Raising Financially Fit Kids is the best book on financial education of children that I’ve yet read and I intend to give it a permanent place on my bookshelf soon (my review copy was checked out of the library).

What’s so good about it? Virtually every page is loaded with great specific ideas for teaching money concepts to children. More importantly, a great deal of thought was put into the layout of this information, making it very accessible and easy to read and find.

Add it all together and you’ve got a stellar book, one I look forward to utilizing as my kids grow older. In terms of practical use, it’s far and away the best book I’ve found on kids and money.

Chris writes in:

I’m a new reader and I was just wondering if you had an “introductory” guide to The Simple Dollar? Maybe a resource where I could find your best and most useful posts (”useful” is of course subjective). Any chance you could create one?

Good idea, Chris. Without further ado, here’s a “beginner’s guide to The Simple Dollar,” which should explain many of the questions people have when they read posts on here.

What Is The Simple Dollar?
The Simple Dollar is a site written by me, Trent Hamm. The basic idea behind The Simple Dollar is that anyone can build a better life for themselves, regardless of what they want in life, as long as they apply some thoughtfulness to their choices. The biggest trap that I see in modern American life is poor money choices – it keeps people from enjoying the freedoms that life has to offer. I post two articles a day and all articles welcome comments from you.

About Me
I’m a thirty one year old guy who lives in rural Iowa near Des Moines. I have a wife, Sarah, and two children – Joe, who is three years old, and Katie, who is two years old. Sarah teaches for a living, while I’m a writer with a pretty flexible schedule which enables me to spend lots of time with the children.

I grew up in a family without much money. Early on, I had a pretty strong entrepreneurial spirit, but it was crushed by an awful childhood experience. I worked my tail off and earned a full scholarship to a four year university straight out of high school – without it, I would likely be working in a factory right now, possibly the factory my father worked in. I started dating my wife during those college years. Although I dreamed of being a writer, I listened to the advice of others and selected a major with more earning potential.

After college, I got a very good job (even during the 2002 down market) and found myself on a career path in science research that excited me. Unfortunately, I had poor financial control and my marriage made it worse. Eventually, I found myself slowly becoming disenchanted with my career, mostly because the nature of the work changed, and combining that with the costs of having children, I felt really trapped.

This came to a head in April 2006, when we had a near financial meltdown and realized we were facing tons of debt – several student loans, credit card debt that went well into the five figures, two automobile loans, and a few more consumer loans (for furniture and the like). I spent a very long night doing some serious soul-searching and when I woke up the next day, I realized that I needed to start making some major changes now.

After some early success, I started writing The Simple Dollar, tapping into my own desire to be a writer along with my desire to share my story. Mostly, I just intended to write about my own experiences, but the site grew more popular than I ever expected – and ate up more of my time than I ever expected. In March 2008, I took a scary leap and quit my science career, devoting myself to writing full time (with enough flexibility to spend tons of time with my children). During this period, we paid off every debt listed above, although we made the decision (with our growing family) to purchase a home with a mortgage.

My Philosophy and Key Readings
The best place to start, without a doubt, would be “Everything You Ever Really Needed to Know About Personal Finance on the Back of Five Business Cards” (also available in extended form as a free 49 page PDF. This one article outlines the basics of my philosophy and ideas on personal finance, gained from the experience of turning around my financial, professional, and personal life. If you’d like to extend beyond that, I suggest reading through my fourteen money rules.

Many people have the perception that cutting one’s spending can’t possibly be enjoyable. My argument is simple: if it’s not enjoyable, don’t do it. All I suggest is stepping back and asking yourself some bigger questions. What are you truly passionate about? What are you most worried about? How do the little choices you make every day help you with your passions and help eliminate your worries? The best place to cut spending is in the areas of your life that aren’t important to you – or at least aren’t central values in your life.

My central goal (as with many readers of The Simple Dollar) is not getting rich. Instead, I just seek financial independence, meaning I can go through the actions of a normal day/week/month/year without relying on anyone for financial support – employers, clients, lenders – and be able to support myself and my family in a life that makes us happy and enables us to follow our goals and dreams independent of money and independent of the demands and constraints of employers or anyone else. If you’ve figured out what really matters to you in life, such independence is a much more attainable goal than you might think.

Beyond that, everything else is just details. I usually seek maximum simplicity in my financial choices – banks that don’t hassle me or charge me fees and give me lots of online banking automation, investments that require very little maintenance or stress without charging an arm and a leg, and so on. Endlessly comparing mutual funds and digging for the “ultimate” bank offer isn’t of interest to me – it makes my life more complicated and I prefer simplicity, thank you very much.

Are there any other posts you consider “essential” to The Simple Dollar? Please leave them in the comments if you have any!

Many newer readers of The Simple Dollar haven’t been exposed to the hundreds of great articles in the archives of the site, so this is a weekly series that highlights the five best posts from one year ago this week, as well as the five best posts from two years ago this week. I call it … the Time Machine.

One Year Ago (September 6-12, 2008)
Our Path to (Finally) Merging Our Finances It took about five years of marriage for my wife and I to finally merge our finances together. Here’s why we decided to do it – and how we did it.

The Aldi Question: Does One Bad Experience Spoil the Soup? I had a very bad experience at Aldi several years back which has made me wary to ever shop there. Is this a fair conclusion? This is a great discussion on that question.

Fifteen Ways to Have Cheap Fun With Your Kids Using a $1 End Roll of Paper We have a GIANT end roll (we paid $5 for it) right now that we use for all kinds of art projects, from paper hats to homemade wrapping paper for gifts.

Financial Success Isn’t About Who Has the Most (or Best) Stuff In fact, I’ve often seen that financial success is often related to having less stuff (with the stuff you have being of the highest quality).

Please, Recommend a Personal Finance Product to Me! I decided to compile all of the financial services that I use into one post. This one could actually use a bit of updating…

Two Years Ago (September 6-12, 2007)
Fifteen Ideas For A Deeply Fulfilling Money Free Weekend You don’t have to spend money during your free time. Here are fifteen deeply fulfilling ways to spend your spare time without popping open your wallet.

Starting Out And Overcoming A Financially Disastrous Background My childhood experiences involved mostly just scraping by financially, and during my early adulthood, that seemed like the norm. How can you overcome that mentality?

Does Cooking At Home Really Beat The McDonalds $1 Double Cheeseburger? Surprisingly, the cost isn’t that far apart, nor is the time. Cooking at home also tastes better, builds personal skills, and is substantially healthier. The value menu isn’t really a value.

Review: Why Smart People Make Big Money Mistakes This is a really good book for well-educated people to read. In fact, when I think of the book right now, I can actually think of several people who ought to read it.

Personal Finance and Nostalgia I love vintage baseball cards – really old stuff, like Goudy Gum cards from the 1930s. Unsurprisingly, that’s a really expensive hobby.

If you’d like to browse through more of the archives, visit the chronology, where all posts are listed in chronological order.

Nine Ways to Get More out of The Simple Dollar
This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are nine great ways for new readers to dig deeper into The Simple Dollar.

1. Subscribe by email or RSS. Visiting The Simple Dollar’s website is great, but for many people, it’s more convenient to receive the articles in another form. It’s easy to join 60,000 other subscribers and get The Simple Dollar’s content by email or in your RSS feeder (if you’re unfamiliar with RSS, check out Google Reader.

2. Comment. Each article on The Simple Dollar has lively discussion. Just click on the green square in the upper right of each article on the website and join in!

3. Read my story of financial meltdown and recovery. The Simple Dollar isn’t based on what I’ve read in books or learned in school. I’ve made a lifetime of financial mistakes – The Simple Dollar is a record of what works for me during the process of getting my life on a better track.

4. Download my free 49 page e-book. Everything You Ever Really Needed to Know About Personal Finance On Just One Page is completely free. It summarizes all of the key lessons I’ve learned along the way about personal finance in one tidy package – in fact, all of the main principles can be found right on the cover.

5. Follow me on Twitter – or other social networks. I post tons of interesting articles, quotes, follow-up material, commentary, and other material on Twitter. Follow me! If you’re unfamiliar with Twitter, it’s essentially an open discussion forum for people to share ideas and thoughts with other like-minded folks – you just choose the people you want to listen to and their ideas and thoughts are all delivered to you on a single page.

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6. Dig through “31 Days to Fix Your Finances.” 31 Days to Fix Your Finances is an article series that outlines how you can get a grip on your finances over the course of a month.

7. Send me your questions and suggestions. Send me an email and let me know what you’re thinking, what you’d like to see, and any questions you might have. I try to respond to as many emails as possible and I read them all. I may even use your question in a future article!

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This is the fourth 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 seventh and eighth chapters, “Do Your Homework” and “Take Names,” which appear on pages 67 through 78.

I’m planning on attending SXSW Interactive in March 2010. For those of you who don’t know what that is, SXSW Interactive is a conference that covers interactive media (which, of course, I’m involved with), and I may even be presenting. I also hope to be able to pass out some copies of my next book there.

Of course, a big reason for attending is that I hope to meet quite a few people (many of them I’ve talked to online, but meeting face to face is a bit more concrete). I actually have a list of people I want to meet, shake hands with, and perhaps get to know a bit – mostly other bloggers who write on topics that are of interest to me.

So how will I make that happen with any degree of success? This section of Never Eat Alone lays out a plan for that very thing.

Study Up!
On page 67, Ferrazzi offers great advice for anyone attending a conference with people they want to get to know – or even just a lunch with someone they don’t know well:

Before I meet with any new people I’ve been thinking of introducing myself to, I research who they are and what their business is. I find out what’s important to them: their hobbies, challenges, goals – inside their business and out. Before the meeting, I generally prepare, or have my assistant prepare, a one-page synopsis on the person I’m about to meet. The only criterion for what should be included is that I want to know what this person is like as a human being, what he or she feels strongly about, and what his or her proudest achievements are.

When I first read this, I actually thought it was almost creepy. Why would you prepare a profile of someone? That seems… stalker-ish.

But when I thought about it, I realized that it’s actually not creepy at all. Think of it this way – if you’re about to attend a professional conference, wouldn’t it be awesome if the people who actually were interested in meeting you had such a page in hand, so they would actually know what to talk to you about?

In other words, if you’re willing to prepare such a page about someone (so that you can get right past the small talk and start actually having a useful conversation), it’s a sign that you actually value making that connection. You’re putting forth effort in advance to make this work because it’s important to you to actually meet that person and click with them.

From that perspective, it’s a pretty cool idea. I’d actually be flattered if I found that someone who wanted to build a professional relationship with me came to the table prepared, allowing us to skip the small talk and get down to things we have in common.

Can You Help?
Why skip the small talk? The small talk doesn’t have any real value, and it doesn’t give you any opportunities to really help. On page 68:

Setting out to know someone inevitably means understanding what their problems or needs are. At work, it may be their product line. But as you talk with the person, you’ll also find out that perhaps their kids are hoping to land an internship, that they themselves have health issues, or they just want to cut strokes off their golf game. The point is, you have to reach beyond the abstract to get to someone as an individual.

Everyone has areas of their life that they care deeply about, and people that can help in those areas immediately become valuable.

Here’s a great example from my own life. I’ve been trying to join a farmer’s co-op in my area for years. There’s a long waiting list to get in, so I’d like to be able to find either someone who’s willing to give me their spot or another co-op that’s got room for me. If I met someone who could make that happen, I’d immediately find that person useful.

Obviously, you readers now know this. But if I bumped into someone on the street, they wouldn’t know this, and we’d likely never put it together through idle chit-chat. That’s where a bit of research pays off – you can get right past that idle chit-chat and start talking about things that actually matter, the things you’re both passionate about.

Someone who reads The Simple Dollar, has done a bit of research, and bumps into me at a conference (and wants to build a relationship) might say, “Hey, I know this great Italian restaurant. Want to catch dinner?” or “Have you seen that independent bookstore just down the block?” or “Don’t go to the hotel bar if you want a good gin and tonic – go across the street, where they use actual good gin.” Or many other things that you might have been able to figure out from reading The Simple Dollar.

Right there, your research has paid off – you know something I value and are able to contribute some useful information. I now find you valuable and worthwhile, at least more so than before, and I’m likely to invite you along for a much longer chat.

An Opportunity to Bond
What’s the advantage of this? Ferrazzi keeps going on page 70:

The idea is to find a point of common ground that is deeper and richer than what can be discovered in a serendipitous encounter. Armed with knowledge about a person’s passions, needs, or interests, you can do more than connect; you’ll have an opportunity to bond and impress.

That’s really it in a nutshell. If you can find that thread of common interest quickly and effectively and if you can find some value to exchange, you’re much, much more likely to start building a worthwhile relationship with the person in question.

This is the complete opposite of the “schmoozer” mentioned earlier in the book. This is all about being useful and providing value.

Of course, this takes time. If your goal is just to press as many business cards as you can into people’s palms, you’re never going to be able to build these kinds of value-based relationships.

By Location
One advantage of amassing connections all across the country is that it adds value to every trip you take. On page 76, Ferrazzi expands on this idea:

I … create call sheets by region, listing the people I know and those I’d like to know. When I’m in a given town, I try to phone as many people as I can.

This is one of the big reasons to have a big online address book that contains geographical locations. Let’s say you’re going to travel to, say, Tacoma, on a work trip. You can search your address book for everyone you know in Oregon and check to see which ones are in the Tacoma and Seattle areas.

Then, when you have a schedule for your trip, get ahold of those people and set up some meetings. Have coffee with those folks. Almost every trip has significant downtime – why not fill it with meeting people you’d like to know?

Near the end of my previous career, I started doing this with gusto. I would constantly meet with people both in my career path and outside of it while traveling and rarely ate alone. It not only made the trips more interesting, but it helped me build some really great relationships.

Who Do I Want To Know?
How can you have any idea who you want to meet if you’ve never gone to a conference before? Ferrazzi answers that question on page 76:

When you’re looking for people to reach out to, you’ll find them everywhere. One great resource for making lists is – it almost sounds absurd – other people’s lists. Newspapers and magazines do rankings of this sort all the time.

You know what field the conference is in. Just make a big list of people you’d like to meet. Find interesting people online and see if they’ll be there. Or start with the conference program – dig through it, see who’ll be there, and research some of them to learn more about them.

Eventually, you will find quite a few people you want to meet – and if you don’t, why on earth are you going to this meeting?

My problem is usually figuring out people to focus on, because when I read the program for an interesting meeting (and research some of the people), I see tons of people I want to meet.

Aspirational Contacts
On page 77, Ferrazzi talks about “aspirational contacts” – people we’d love to meet someday:

There’s another category you might want to add, something I call my “aspirational contacts.” There are those extremely high-level people who have nothing to do with my business at hand but are just, well, interesting or successful or both. The people on the list can be anyone from heads of state and media moguls to artists and actors, to people others speak highly of.

I have a list like this, actually. People on it include Dave Ramsey and Stephen King. These aren’t people that I know at all right now, nor do I have their contact information. But I’d like to, and if I ever have an opportunity to legitimately contact the people on this list, I’d jump at it.

Why have these people? To be honest, I have little interest in meeting most “famous” people. I’d only like to meet people whose work interests me in some deep way.

So I keep a list, to remind me that I should always keep looking up.

Who’s on your aspirational list? Why?

On Wednesday, we’ll tackle the ninth and tenth chapters – “Warming the Cold Call” and “Managing the Gatekeeper – Artfully.”

Many evenings, you’ll find me around my house reading a book or writing a short story or polishing a post for The Simple Dollar or working on a book of my own. I enjoy doing it – the act of writing, and even learning how to improve my writing, is very enjoyable to me. The real kicker, though, is that the more I write, the better I get. It gets easier to come up with ideas, find useful phrases, and put together a sequence of thoughts into something that others might enjoy reading. The better I get, the more enjoyable and pure it becomes – instead of struggling, I can usually turn those ideas in my head into words quite quickly and pretty effectively.

In other words, writing for fun is a synergistic activity for me – not only do I enjoy doing it, but the more I do it, the better I get at it (and thus the more I can potentially earn by doing it). For me, writing is “fun with a kicker” – it’s something I enjoy in the moment as a pastime, but it also builds into a useful skill – and sometimes a useful product.

One of my aunts does something similar. She doesn’t get around too well, but her hands are still steady and precise. In order to fill her hours with something that keeps her hands strong, is personally fulfilling to her, and turns a small profit, she knits and crochets for hours every day, producing blankets and sweaters by the ton. She gives many away as gifts and also sells some of them for pocket money. Her skill has grown to the point where her homemade items are highly prized.

Not too long ago, I also talked about my close friend John, who bought a piece of land to develop slowly entirely by himself. He gets to spend his free time outside doing things he enjoys, but it has a nice “kicker” in that the more he improves the land, the more value it has.

All of these examples are really examples of synergy – things that people enjoy in the now that also add value over the long term. I get to enjoy reading and writing now – but I build my skills as a writer and I sometimes produce things that can actually put cash in my pocket. My aunt enjoys knitting and crocheting – but she also produces gifts and a few things to sell for pocket money, too. John enjoys clearing brush and working outside – but he’s also improving the value of his land.

Over the last few years, I’ve found that the more synergy you add to your life, the easier it is to get ahead. Here are a few additional examples.

I started using a calendar (and carrying a pocket notebook). Until a few years ago, I didn’t really use a calendar at all – I didn’t believe I had enough things to remember. The end result is that I would often have lots of bits of info in my head, floating around, taking up space, and sometimes I’d still wind up slapping my forehead, realizing that I had forgotten something important. Starting a calendar (I use GCal) meant that I could quickly jot down any information that’s stuck in my mind right now (a current benefit, as it means I’m not wasting brain space on keeping things in the front of my mind) and also know what’s coming up on any given day (a future benefit, as I’m no longer forgetting important things). In short, I now believe everyone can really use a calendar. The same basic idea goes for a pocket notebook for writing down those things that aren’t associated with a particular date (ideas, etc.) – it helps me now by clearing out my brainspace and helps me later by allowing me to flawlessly retrieve information and ideas.

I started cooking at home. Cooking at home right now simply means that I get a meal on the table for my family to eat – an obvious short term benefit. Many people think that it ends there, though – you’re just saving a few bucks now compared to eating out. The truth, though, is that there’s a long-term benefit to cooking – you learn how to do it better, faster, and easier. I can now chop vegetables way faster than I used to (but still far slower than actual chefs). I can just throw together many basic dishes without glancing at a recipe, making them faster and more flexible. This makes meals prepared at home today cheaper and faster than meals prepared at home a few years ago – a skill that I’ve built myself that will stick with me forever. And there’s still tons of room for improvement, too – I’ll just keep getting better.

I spend undistracted time with my kids. The cell phone goes off. The iPod Touch stays in the house. The books remain on the shelf (unless I’m intentionally reading in front of them to show them that reading is a normal, healthy adult behavior). In the short term, the time playing with them is a lot of fun – lots of laughter, a bit of exercise, and pure enjoyment. In the long term, though, I’m building a trusting relationship there – one that might not hold up through everything, but is much more likely to sustain through both of our lives than a “relationship” where I do nothing with them.

I clean the house vigorously. About once a week, I’ll turn on the stereo on the main floor, pop in some up-tempo music, and clean like gangbusters for an hour or two. I rush around as fast as I can, getting myself out of breath in the process. I really enjoy this – I tend to get lost in the music and just rush around on a cloud of adrenaline. In the short term, it gets the house clean (or at least presentable) quickly. But there are several kickers to this. I’m quite happy to have guests pop in all the time because the house is almost always presentable, which helps with my social network. I’m also getting exercise (I always wind up really sweaty and out of breath after busting it for a good hour), which improves my long-term health.

Get the idea? I strive to fill my life with things I enjoy now that have long-term benefits down the road. The more activities with synergy that I choose today, the better my life is in the future.

Not sure how this can work in your life? Here are a few additional examples that you might be able to use yourself.

Enjoy hanging out with others? Start filling your social calendar with inexpensive activities, like dinner parties (even potluck ones), game nights, movie nights, and other such activities where you can invite people over to your house – and perhaps get invitations to others in return. Not only will you find yourself filling your evenings with inexpensive social activities (a big plus), you’ll also find that you’re building a lot of good relationships that will come through for you later (a big plus).

Enjoy sports? Get involved with the parks and recreation department in your town. Participate in as many activities as you can and volunteer to coach youth sports as well. This helps in the short term by giving you tons of activities to participate in, but it also helps in the long run because of the relationships you’ll be building with others – parents, teenagers, and so on. You’ll keep in shape, meet lots of new people, and grow as a person.

Enjoy watching television? Start a blog on those topics, throw a few ads on the site, and post every day. You can get started at Blogspot. Write episode summaries mixed in with your own commentary on your favorite shows. Having a keyboard in front of you typing your reactions to what you see takes something passive (just watching) into something that builds a skill (writing) and potentially turns a profit (the blog). No matter what, it’s better than sitting there just watching time pass.

What are you doing in your life today that’s both fun and synergistic? Are you simply burning through your hours – or are you engaged in enjoyable things that are also building skills, traits, and products that you can utilize in the long run?

A reader asked me if I could break down my ideas into a handful of principles. After some careful thought, I came up with a list of fourteen basic “rules” that summarize my money and life philosophy. I’ll be presenting these as a weekly series.

Throughout my life, I’ve found that there are two kinds of people. One group seems to be constantly bored, idling away their days and waiting for life to come to them. The other group does the opposite – they’re constantly busy, feel like there aren’t enough hours in the day, and are out there chasing life.

I’m in that opposite group. I feel annoyed with myself when I see myself wasting time. I don’t avoid relaxing and enjoying life by any means, but if I’m mentally and physically rested, I’d rather be doing something than just twiddling my thumbs. I’d rather be writing or researching something or reading for enrichment or doing something engaging with my wife or doing household chores or doing something engaging with my children.

And when those avenues are full, I look for other ways to improve myself.

Why? Why not just kick back when things are finished up?

It’s simple. The time I spend improving myself now always pays bigger dividends later. Self-improvement is an investment of time and energy instead of an investment of money, but both pay excellent returns. It can improve your health, your emotions, your career, and your financial state.

Here are five big areas (and there are many more) anyone can work on in their spare time – and notes on exactly how to make it happen.

Improve your health. Just walking thirty minutes a day for twelve years adds, on average, 1.3 healthy years to your life. That’s 49 days of walking in exchange for 1.3 years of additional life – a brilliant trade. Doing more vigorous exercise can add even more – 3.7 years of life on average.

If you want to break it down, on average, a thirty minute walk will add almost five hours to your life. Go on a thirty minute walk each night after work and a single week’s worth, on average, will add a day to your life. That’s a profound argument for improving your health, even by taking simple steps.

This doesn’t mean that you have to abandon more leisurely pursuits. One of my closest friends does sit-ups while watching television. Another friend has a treadmill that he walks on while reading magazines. They’re not abandoning the things they like to do to mentally unwind, but they realize that mental unwinding doesn’t mean you have to physically unwind, either. I like to jog while listening to podcasts or audiobooks. While out there running, my mind is engaged – but that doesn’t mean that I can’t improve my body as well.

Improve your knowledge. Ideas are incredibly valuable and grow more valuable every day as society moves in a direction where creativity is rewarded. Knowledge is the base upon which creativity is built. Exposure to new ideas and new angles in a mix with the unique set of ideas and life experiences you already have make it more and more likely that you’ll be able to produce unique ideas – and those unique ideas can be incredibly valuable.

One powerful way to do this is to read (which, I suppose, is what you’re doing if you’re here). Take on a book that challenges you and pushes the way you think. I like to read books that advocate positions I don’t agree with – books that advocate neoconservative thought and books that discuss atheism, for example. These books force me to understand other perspectives and, at the same time, re-evaluate and strengthen and perhaps change my own.

Another effective way to get there is through conversation with a person willing to engage ideas. Share your thoughts, listen to what they share, and debate their relative merits. Accept that criticism of an idea that you presented is not criticism of you, but of the idea itself.

Improve your transferable skills. I’ve written about transferable skills before, but the core of the matter is still true: transferable skills – the types of skills that fit well in almost any career path – are always worthwhile to build. Communication skills. Time management skills. Creativity. Leadership.

How can you do these things? Well, you might try implementing a new time management system in your life. Invest some time in figuring out GTD. Or you might volunteer to take a leadership position in a community group. Play a brainstorming game with friends, like Apples to Apples, or a strategic game like Ticket to Ride (they help you with communication skills, creativity, and logical thought).

Look at the things you choose to do in your “down time” and ask yourself if they’re also helping you build transferable skills in a subtle way. Then, choose activities that you really enjoy that do build these skills. You’ll grow a lot more playing Apples to Apples with creative people than you will watching a sitcom by yourself.

Improve your personal nature. Knowing who you are – your strengths, your weaknesses, your joys, your sadnesses – makes it a lot easier to navigate the minefield of life. It’s well worth your time to figure out who you are and what you truly value.

Spend some time being introspective. Ask yourself how you honestly feel about the elements in your life. Are these things bringing you joy or sadness? Why? What elements, you ask? Look at everything: your health, your relationships, your activities, your possessions, and so on.

This type of introspection can be very difficult. Often, we want to feel certain ways about certain things and, on some level, we convince ourselves that we do. Digging through that, figuring out our true feelings, and acting on them results in nothing but life improvement.

Improve your relationships. Most relationships need some amount of care and feeding, but in the busy nature of modern life, it’s easy to overlook the care and feeding that some of our most important relationships require.

Take some time and just talk to your spouse about how life is going. Give your mother a long phone call. Get in touch with your siblings. Look up some of your close friends that you’ve drifted away from over time. Listen to what they’re saying – don’t just look at it as an excuse to list what you’re up to.

Those relationships are invaluable, and any time spent maintaining them will pay off in surprising ways over time.

Here’s the real message: the difference between the successful and the non-successful appears in how they “waste” their time. People who succeed spend almost all of their time doing something that in some way improves themselves, their relationships, or their career situation. That’s not accomplished by idling.