One of my favorite ways to trim money from my spending is to find simple little substitutes for my regular expenses. If I can trim a few bucks from the cost of household supplies, routine purchases, and other things like that, over the long run, that can add up to a lot of money with virtually no change in my life. Here are twelve of my favorites (not including my “infamous” homemade laundry detergent).

Laundry Softener -> Vinegar
Instead of buying expensive laundry detergent, just use half a cup of white vinegar to the “softener” cup in your washing machine. It accomplishes the same effect as softener – it makes your clothes really soft – plus it breaks down the laundry detergent, making the clothes much better for people with sensitive skin or allergies. What about the smell? Once the clothes are dried, you smell nothing at all. You can buy four gallons of vinegar for $6, meaning the cost per load is about $0.05, while a load’s worth of Downy costs about $0.15. You save a dime per load and your clothes are less chemical laden.

Ziplocs -> Reusable Containers
Ziplocs – especially the small ones – usually wind up in the trash after one use. On the other hand, a reusable container can last for years. Since a typical Ziploc costs about $0.10 and you can get a reusable Rubbermaid container for about $1.00, you break even on the container after about twelve uses or so (the cost of washing the container in the dishwasher is estimated there) and everything thereafter is pure savings.

Dishwashing Detergent -> Simple Homebrew
Instead of using liquid or powder dishwashing detergent (and paying a stiff premium for it), just take an old milk jug, put two teaspoons of liquid dish detergent and four teaspoons of baking powder in it, then slowly fill the jug with warm water, sloshing it while you do it (even better, just slowly add the soap as you’re adding the water). Then put that jug under the sink. Each time you do a load, fill up the cup with the homebrew. It works like a charm. The jug will provide enough for eight to ten loads of dishes for about a penny each, compared to about thirteen cents per load for ordinary detergent.

Knife Set -> Chef’s Knife
You’re just getting started in the kitchen and you think it’s time to get yourself a big ol’ knife set. Don’t. Unless you’re doing crazy things in the kitchen, all day every day, you really only need one knife – a chef’s knife. Head down to your local retailer and check them out. One good chef’s knife will make kitchen work easier than an entire block’s worth of other knives. It’s really all you need – I can’t even remember the last time I used a knife besides that one. Just learn how to properly hone it and sharpen it (both are easy – check out this YouTube video).

Windex -> Vinegar
Seriously. Just use vinegar instead of Windex when you clean your windows. It cleans off almost anything on a window and doesn’t streak and, more importantly, doesn’t leave a film behind as Windex often does. Just put some vinegar in a spray bottle – maybe that Windex one that you didn’t buy a replacement for – and just wash windows as normal. You’ll be quite happy with the results – and you’ll save about a penny per squirt.

Paper Towels -> Reusable Cotton Cloths
Cotton cloths work better, absorb more, and you can get a five pound (!) box for about the same price as a jumbo pack of paper towels. But what about the WASHING? It’s easy – just keep a ton of them in a drawer in the kitchen and use them for spills and filtering and other purposes until they’re dirty, then just toss them into any load of socks or underwear or towels. Even a big handful take up barely any room at all and before you know it, you’ve refilled your supply. Better yet, you’re not buying any more paper towels and you’re reducing your garbage.

Drain Cleaner -> Baking Soda and Vinegar
Remember those nifty volcanoes that kids tend to make for science fair projects in grade school? The basic mixture that made them bubble up was baking soda and vinegar – it expands nicely and pushes itself into everything. Perfect for clearing a clogged drain, no? Just put in a quarter cup of baking soda, chase it with half a cup of vinegar, then cover the drain and wait fifteen minutes. Once that’s done, chase it with a gallon or so of boiling water. This will clean almost any drain and save you from blowing unnecessary amounts of money on a big bottle of Drano. This also works as a toilet bowl cleaner – it’ll foam up like crazy at first, but after fifteen minutes, you’ll be able to scrub your toilet with a brush with ease.

Television -> Old Computer
If you need a new television somewhere, why not just use an old computer instead? A computer that’s five years old with a ‘net connection can easily be a substitute for a television. You can watch tons of programs full screen on Hulu and many channels offer a full screen stream, too, plus it’s simple to watch DVDs on a computer as well. Even better, you can stow the box somewhere out of the way (in a cabinet, perhaps) and just leave the monitor somewhere easy to access. This can be a great solution in a kitchen, where you can watch television on it or use it to call up YouTube videos to tutor you through a meal prep – plus you don’t have the cost of buying anything to get it working.

Oven Cleaner -> Ammonia
If you cook at home, you’ll eventually have to clean your oven – and it can be a nasty job. There are lots of products out there that claim to be able to make this process easy, but the easiest way I’ve found is far cheaper – and far easier. Just put a cup of ammonia in a glass bowl in the evening, put that bowl in your oven, and close the door. Let it sit overnight. The next morning, get rid of the ammonia and you’ll find scrubbing down the inside of your oven is suddenly quite easy. The burnt-on drippings from spilled dishes will come right up with no problems. Plus, a jug of ammonia is far cheaper than some spray-on solution.

Soft Scrub -> Baking Soda and Dish Soap
Soft Scrub does a great job of cleaning up serious stains all around the house, but you don’t need to drop four bucks on a small bottle of it. Just put half a cup of baking soda (cost: about a quarter) and then add a little bit of liquid dish soap and stir. Add a bit more liquid soap and keep stirring until you have a paste that’s about the consistency of frosting – and you’re ready to go. It costs about forty cents to make more than enough to clean anything you want to clean – far cheaper than Soft Scrub and with the same results.

Air Freshener -> Baking Soda
I actually don’t like most air fresheners – they usually make a room smell like chemistry. Fortunately, there’s a much easier solution – just put out a saucer with some baking soda sprinkled in it near where the odor is and it’ll go away. Got a baby diaper pail? Just put some baking soda in it. Baking soda just eats odors.

Carpet Cleaner -> Baking Soda and Peroxide (or Club Soda)
Got a nasty spot on your carpet? (I could tell you a horrible story about a blood stain on a couch, but I’ll spare you the details.) You don’t need carpet cleaner to get rid of it. Just dump a few spoonfuls of baking soda on it, rub it in, then put some hydrogen peroxide (a capful) or club soda (as much as you want) on the soda and rub it in as it bubbles. This gets rid of almost any carpet or upholstery stain you’ll face – it literally saved some microfiber for us that seemed to have a permanent stain on it. Plus, it’s cheap – baking soda is really inexpensive and even club soda is something inexpensive you might have in the cupboard.

A few days ago, the AFL-CIO released the results of a surprising survey of workers under 35. This report, entitled Young Workers: A Lost Decade, contains some frightening statistics about the current state of employment and financial independence of people 35 and under.

A few of the most shocking facts:
- One in three young workers (those under 35) are currently living at home with their parents.
- Only 31% say they make enough money to cover their bills and put some money aside — 22% fewer than in 1999 – while 24% can’t pay their monthly bills.
- 37% have put off education or professional development because they can’t afford it.

After some reflection, I think two things are happening here.

First, high-income baby boomers aren’t retiring – at least not yet. Many of them – many of my own family members included – are earning more than they ever have in their lives and see no reason to step out of the workplace while their health is intact, while they have freedom to travel and enjoy some of the luxuries in life, and while their children are still somewhat reliant on them. Plus, they’re uncertain about the status of their retirement (after the two recent giant market hiccups) and are afraid to rely on their retirement savings yet.

Quite often – as I’ve witnessed myself in workplace turnover – many workplaces will happily remove two people near retirement in order to hire two or three young workers at a reasonable starting wage. However, many people approaching retirement age simply aren’t retiring. They’ve got their health, they’ve got a healthy income, and they’re not feeling good about the security of retiring. They’re staying in the workplace when previous generations would be leaving.

And they’ve got kids in that 35 and under group who are struggling to keep their head above water, which leads us to the second problem.

I’m thirty. Many people my age still receive money regularly from my parents – I know several people personally who do. Beyond that, I know a few that still live at home with their parents. I know one married couple who lives with the bride’s parents.

Yes, I know more people who are on their own and fully independent than the people who are in these situations, but the statistics bear out the painful truth: children are remaining reliant on their parents until an older and older age.

Sure, some of it can be blamed on the job market – if baby boomers aren’t leaving the job market, then fewer new, good jobs are opening up.

However, the growth of “helicopter parenting” also plays a role. It’s commonplace for parents to be heavily involved with their children’s lives in college and often this keeps going into the workplace, where parents are involved in the salary negotiations for their children and, obviously, provide a home for their children if the job hunt doesn’t go quite as expected.

As a parent, I understand the desire to want to provide safety for my children. I don’t want my daughter to scrape her knee and I don’t want my son to fall off his bike. But I realize that if I don’t let my daughter climb those monkey bars and I don’t let my son ride off on his bike, they’ll never build up the self-confidence they need to realize that they can do this. Instead, when they fall, they’ll simply expect me to help – and that reliance often breeds a secret resentment as well.

The solution to this sticky scenario is pretty straightforward: cut the cord.

Parents, let your children be independent. Let them fail a few times. Let them struggle a little. Yes, it’s tempting to go in there and solve their problems and kiss their scratches, but that short term balm causes a bigger long term problem of a lack of self-reliance. Don’t send your child money. Don’t call them constantly with encouragement. Don’t try to do things for them, either. Let them grow and figure it out.

Children, cut the connection yourself. Ask your parents not to send that money and not to be involved in the core of your life. If they keep interfering, stop telling them about what’s going on with you. It’s not a matter of rejecting them or hating them, it’s about a separation of your life from theirs. It’s about growing up and taking the reins of your own life.

Another point: don’t be afraid to take lesser jobs. You probably won’t get the perfect job right out of college. That doesn’t mean you just sit and wait for it to happen. Work somewhere, even if it’s just delivering pizzas. Make your own money. Put in your own hours to earn that money. And use that money to fly on your own. Yes, it’s expensive. Yes, you won’t get “ahead” as easy if your parents aren’t paying the bills. But you’ll learn how to rely on yourself and you’ll also learn how to make ends meet on a limited budget. The end result of that is that when things begin to turn around for you, you’ll have the self-reliance and maturity to grab things by the reins and take charge from day one.

It’s not about building the perfect, ideal path through life – there’s no such thing. Everyone will eventually fall at some point. Instead, it should be about learning that you can pick yourself up and dust yourself off on your own, and go on from there. This is an absolutely essential skill for the modern working world, and helicopter parenting makes this far more difficult.

This is the third 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 fifth and sixth chapters, “The Genius of Audacity” and “The Networking Jerk,” which appear on pages 48 through 66.

Let’s face it, I’m an introvert.

The idea of interacting with people, particularly people I don’t know well, makes me uneasy. My natural disposition is to just get quiet in a room full of people and just wait for people I know well or wait for the situation to be over.

It took me a long time to learn that such behavior is a fast route to failure.

It takes a lot of courage for me to do anything else. I have to focus on it carefully. I have to psychologically prepare myself. But, every time I do it, I find myself building relationships. And I also find that it becomes just a little bit easier to do it.

Be Gutsy
On page 49, Ferrazzi tells an awesome story about a childhood experience centered around poverty and audacity:

My father simply couldn’t be embarrassed when it came to fulfilling his family’s needs. I remember once we were driving down the road to our home when Dad spotted a broken Big Wheel tricycle in someone’s trash. He stopped the car, picked it up, and knocked on the door of the home where the discarded toy lay waiting to be picked up.

“I spotted this Big Wheel in your trash,” he told the owner. “Do you mind if I take it? I think I can fix it. It would make me feel wonderful to give my son something like this.”

What guts! Can you imagine such a proud, working-class guy approaching that woman and, essentially, admitting he’s so poor that he’d like to have her garbage?

Oh, but that’s not the half of it. Imagine how that woman felt, having been given an opportunity to give such a gift to another person. It surely made her day.

“Of course,” she gushed, explaining that her children were grown and that years had passed since the toy had been used. “You’re welcome to the bicycle I have, too. It’s nice enough that I just couldn’t throw it away…”

So we drove on. I had a “new” Big Wheel to ride on and a bike to grow into. She had a smile and a fluttering heart that only benevolence breeds. And Dad had taught me that there is genius, even kindness, in being bold.

I couldn’t help but think of my own childhood when I read this story. I grew up poor, probably at a level similar to Ferrazzi. I saw my father do similar things, picking through other’s junk to find things that were usable for us.

For a long time in my life, I saw it as sad. I saw it as something I should be trying to escape from. I didn’t want to be a parent that scavenged through junk for stuff for my kids.

Now, I see it as smart and resourceful and audacious and courageous. I’m perfectly happy to do that sort of digging if there’s something worth digging for.

What changed? I think the biggest switch was actually courage. It takes courage to do the unexpected.

Find a Role Model
Often, your friends are quite a bit like you – and that can be a disadvantage. On page 52:

We’re predisposed to seek out people like us – shy people tend to congregate with other shy people, and outgoing people congregate with outgoing people – because they unconsciously affirm our own behaviors. But everyone knows that one person in their group of friends and associates who seems to engage others with little or no fear. If you’re not yet ready to take the big leap of addressing new people on your own, let these people help you and show you the way. Take them with you, when appropriate, to social outings and observe their behaviors. Pay attention to their actions. Over time, you’ll adopt some of their techniques. Slowly, you’ll build up the courage to reach out by yourself.

A while ago, I used to think that I had little to say to other people. I didn’t think I had much in common with them, that my interests were very different.

What I found, actually, is that my lifetime history of reading almost everything I could get my hands on really paid off. I can converse about anything, allowing others to more or less choose the topic. I can talk about sports, art, popular culture, politics, or anything else that comes up. I might not be an expert, but I know something about it.

Sure, I have key interests, things that really light my fire. But when I realized that I could just hone in on what interests other people and at least be able to follow the conversation, it made it much easier to get to know people at least a little. Even better, I often would find that I had more in common with people than I would have thought, because everyone has a diversity of interests (even if they don’t come out at first).

This makes it easier for me to approach people that I don’t know. I usually just go up to them and try to figure out (as quickly as I can) something they’re passionate about. If I don’t know, I ask them to tell me about their hobbies and how they spend their free time, then I just hone in on the most promising thing. This almost always works.

A Modest Goal
How can you get started building relationships with others? On page 53, Ferrazzi suggests making it a goal:

Set a goal for yourself of initiating a meeting with one new person a week. It doesn’t matter where or with whom. Introduce yourself to someone on the bus. Slide up next to someone at the bar and say hello. Hang out at the company water cooler and force yourself to talk to a fellow employee you’ve never spoken with. You’ll find that it gets easier and easier with practice. Best of all, you’ll get comfortable with the idea of rejection. With that perspective, even failure becomes a step forward. Embrace it as learning. As the playwright Samuel Beckett wrote, “Fail, fail again. Fail better.”

This is a great habit to get into, actually. If you make it your goal to talk to someone new every week – or, even better, every day – you’re forcing yourself to at least attempt to build new relationships.

Sure, some of these will amount to nothing. I’d argue that most will amount to nothing. But that’s fine. Even if they don’t, you’ve become a little bit more comfortable approaching people and striking up conversations.

And, every once in a while, you’ll connect really well with someone, enough to exchange contact info with them. Those connections you do make will make the courage to try and the failures well worth it.

The Networking Jerk
On page 56, Ferrazzi looks at the negative impression that networking often has:

He is the man or she is the woman with a martini in one hand, business cards in the other, and a prerehearsed elevator pitch always at the ready. He or she is a schmooze artist, eyes darting at every event in a constant search for a bigger fish to fry. He or she is the insincere, ruthlessly ambitious glad-handler you don’t want to become.

The networking jerk is the image that many people have when they hear the word “networking.” But in my book, this breed of hyper-Rolodex-builder and card-counte fails to grasp the nuance of authentic connecting. Their shtick doesn’t work because they don’t know the first thing about creating meaningful relationships.

When Never Eat Alone was first recommended to me, I had an extremely negative view of networking. I had attended several meetings and conferences where a handful of people spent all their time “networking,” which meant that they just went from person to person, made pointless small talk, pushed their business cards into your hand, slapped you on the back, and moved on.

Needless to say, I wasn’t impressed. Those people came off as complete losers and the entire idea of “networking” left a really bad taste in my mouth. I pretty much resolved, right then and there, to never “network.”

Though my opinion on the behavior that those people exhibited hasn’t changed at all, over time, I have started to “network” – just not in their way.

For example, if I go to a meeting, I make a conscious effort to have as many worthwhile conversations as possible. I talk to speakers if I’m interested in what they’re talking about. I talk to people who are asking interesting questions.

Sometimes, I click with the people I talk to – sometimes I don’t. When I do click, I make sure to exchange contact info with them and often I’ll try to have dinner or lunch or breakfast or a drink with them during the conference later on. Then, when I get home, I follow up by Googling them, finding out more about them, and continuing the conversation over email.

The last thing I want to do is be the kind of sleazebag that goes from person to person, jamming unwanted business cards in their hands.

Don’t Schmooze
So how can you avoid being that kind of schmoozer that no one likes? Ferrazzi’s best tip is on page 58:

Have something to say, and say it with passion. Make sure you have something to offer when you speak, and offer it with sincerity. Most people haven’t figured out that it’s better to spend more time with fewer people at a one-hour get together and have one or two meaningful dialogues than engage in the wandering-eye routine and lose the respect of most of the people you meet.

If you have nothing to say to a person, don’t say anything at all. Don’t even bother unless you have something of value to contribute or to ask.

I think this is where most of the networking “sliminess” comes from. People attempt to make small talk out of the blue, just walking up to you and saying words that really have no value in an effort to just get a business card shoved in your hand.

That’s terrible. It’s not useful to either person. The person schmoozing wastes time and a business card. The person schmoozed wastes time and has to throw away a business card.

Instead, just focus on talking to people to which you actually have something useful to say. Have a question in mind that you’d actually like to know the answer to, or have some sort of information in mind that the person will obviously find useful. Without that, what are you doing, really? Just schmoozing.

Inefficiency
On page 60, Ferrazzi points out something really bad that people do all the time online:

Nothing comes off as less sincere than receiving a mass e-mail addressed to a long list of recipients. Reaching out to others is not a numbers game. Your goal is to make genuine connections with people you can count on.

Unless I’ve opted in for that email (like a mailing list I’ve chosen myself to sign up for), I find mass emails and auto-responses to be a massive turnoff. Nothing says “you’re just another entry in my address book” like an automatic email or an email with fifty recipients.

If you have a message you want to communicate to a lot of people, use a service where people have chosen to follow you, like Twitter or Facebook, or write individual emails. Otherwise, you’re just sending them spam, and most of the time, they won’t like it.

Even worse are automatic responses, like when I send an email to someone and I get an automatic response telling me that they may or may not actually respond to my email. You know, I expect that already. All your auto-reply did is waste my time and tell me that you’re likely far too busy to bother with me.

On Saturday, we’ll tackle the seventh and eighth chapters – “Do Your Homework” and “Take Names.”

Over the last week, I’ve been working on a “400 by 40″ list – a list of fairly simple things I’d like to do before my fortieth birthday (big thanks to Vicky for suggesting the idea). It’s been fun making the list, actually – I started it in a composition notebook and just jot down ideas as they come to me. They’re not big goals at all, just little things.

What I’ve realized while making the list is that so many of the things involve other people. “Do X with Y” is an extremely common entry. “Play Agricola with Joe.” “Read ‘Where the Red Fern Grows’ to my kids.” And so on.

In the end, it reveals how important the people around me really are in my life. At most, 10% of the items on the list are solitary ones, and even some of those could easily become social.

Here are my ten favorite personal finance articles I read in the past week.

Brand Loyalty and the Financial Crisis – Will We Return When Things Get Better? I think that trusted brands have actually increased in value, but the loyalty of a customer is much shorter than it once was. People have been bitten by so many brands that have produced a poor product or given poor customer support that they’re much less likely to trust a new brand. Instead, they tend to lean even more on the “old reliables” – ones that consistently treat them well. A few brands are gold – but there’s little loyalty to the rest. (@ wsj wallet)

Are You a Success Junkie? Is success addictive? If you achieve one thing and feel that rush of success, I do think it pushes you even harder to repeat it and feel that rush again. When people say that success breeds success, that may be what they’re talking about, at least in part. (@ brip blap)

What Is Your Curiosity Quotient? If I had to name one essential personality trait that I would want for a new worker in the information economy, I would point towards curiosity. The more curiosity a person has, the more likely they are to dig in deep on a particular subject or problem and perhaps come up with a really exciting solution. (@ pick the brain)

The Art of Changing Easily and Gracefully Changing an ingrained part of your nature (like shyness or a propensity to spend without thinking) is very difficult. While I don’t believe that anything can make ground-breaking change easy, these ideas certainly help people move in the right direction. (@ dumb little man)

Labor Day and the American Dream It’s an absolute falsehood that you need a college education to get a good paying job. There are LOTS of good jobs out there that pay well without a college degree, but those programs aren’t funded by marketing budgets fueled with $10,000 tuition bills. Electricians and plumbers of the world unite! (@ wsj)

12 Critical Things Your Family Needs to Know If your family can’t easily find this information about you, then you’re not doing your duty for them. They’ll HAVE to be able to find this when you pass on. If not, they’re going to be put in a bad situation. (@ free money finance)

The Paradox of Empty Storefronts Whenever I’m in a dying small town and I see lots of empty store fronts, I often wonder why the owners of those stores don’t just drop the rent through the floor to get businesses in there, make the town appear to be thriving, and at least make a LITTLE money. This is a great discussion of the pros and cons of that idea. (@ megan mcardle)

Who Gets to Decide What You Want? “Once again, it seems to come down to a personal decision. If you decide what you want (instead of letting someone else decide for you) perhaps you could choose the things that would actually bring you and your loved ones the satisfaction you can live with.” Indeed. (@ seth godin)

How to Set Priorities Do FIRST what you want to do LEAST. This is why I usually start my days by doing email and approving comments, which are the two regular tasks I have to do that I enjoy the least. Once they’re done, I feel good, like I’ve already been productive, and it helps me to get started on my other, more enjoyable, and more intellectually challenging tasks with a more fulfilled nature. (@ soul shelter)

Working Vacations Rule? I sometimes work on vacation in much the same way Jonathan does. If I have an idea, even if I’m on vacation, I’ll pull out that notepad and write it down. Why? If I DON’T, it sticks in my head and distracts my thoughts. My mind gets entangled in the idea. If I just stop, pull out that pad for ten minutes, and get a framework of my thoughts down on paper, it’s easier for me to just let it go. (@ jonathan fields)

The fifteenth episode looks at fixed mentalities and growth mentalities. Which do you have? How can you use that info to get ahead in your career? Total length: 5:30.

Listen In!

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

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

0:00 – The theme song is a snippet of a Camper van Beethoven concert on October 25, 1986, shared via their very open taping policy. Listen to the concert in its entirety.
0:20 – I should definitely mention the excellent book Mindset, which explains the differences well.
1:05 – This topic is covered really well by Michael Graham Richard on his blog.
2:02 – Here’s a great article by Jonathan Fields about cultivating the right mentality in your child.
2:52 – If you’re growth-oriented, Outliers by Malcolm Gladwell can be a powerful read.
3:40 – A fixed mindset would do well to work on these fifteen things you can do right now to help your career.
4:39 – Transferable skills are incredibly useful, particularly to growth mindset folks, but even fixed mindset folks might find them useful for solidifying their position.
5:20 – A preview of next week.

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

Comments and suggestions welcome.

During the month of July, I conducted a very detailed discussion of Dave Ramsey’s The Total Money Makeover. During the process, I realized that on most issues, I agreed fully with Dave.

To a degree, this put a damper on the book club. It’s always interesting when there’s disagreement, after all, if everyone conducts themselves in a mature fashion.

(Perhaps this means I should have a book club on Rich Dad, Poor Dad…)

Anyway, after the book club finished, a reader wrote in and asked me that very question. You agree with Dave Ramsey so much. Where do you disagree with him?

I spent some time thinking about that question and came up with five strong principles where my perspective on personal finance disagrees with Dave’s. It’s worth nothing that these are merely five points in comparison to dozens where I do agree with him – there’s a lot more that he says that’s spot on than things I disagree with.

Let’s dig in.

A 12% annual rate of return in stocks is not realistic.
If you look at the amazing run of the stock market from 1980 to 2000 – the years when Dave was actually figuring out his financial state – it’s easy to see where his concept of a 12% annual rate of return comes from. The stock market actually did return 12% or so a year.

During that timeframe, the baby boomers were putting tons of money into the stock market – an unprecedented flood of new investors. And as with any market, if demand goes up, so do prices.

Today, though, boomers are starting to retire and many others have moved – or are moving – their investments into something more conservative than stocks. The demand is slipping a little bit, so prices are adjusting accordingly. They’ll still go up (because more investors all over the globe are getting in than getting out), but the people getting out is going from a trickle to a big stream – and will gradually become a flood.

The 1980 to 2000 bull market is gone and is not going to return any time soon. Sure, you can still earn a nice, healthy return in stocks, but a much more reasonable estimate is Warren Buffett’s long term prediction that stocks will return about 7% annually.

So what’s the big deal? Much of Ramsey’s investing advice revolves around the idea that investing in stocks will return you 12% annually. It won’t. You can still build up the kind of nest egg he talks about, but you have to invest more yourself. The market won’t do that much work for you any more – and if you expect the market to return 12% for you on average over a very long period, you’re in for a very nasty surprise down the road.

Personal responsibility is the problem, not credit cards.
Dave is pretty much a credit card absolutist – cut ‘em up and get rid of ‘em. For people who have problems with credit cards, it’s not bad advice.

However, he goes too far, stating unequivocally that credit cards are bad and that people should live without them. This flies in the face of his usual message, which is that personal responsibility is what really matters.

A personally responsible person – one who does not carry a balance on their cards – can use credit cards as tools. Over the past three years, my wife and I have saved about $500 using our Target Visa without buying a frivolous thing with it – just food and household supplies, which we could easily buy with cash. Instead, each month the statement comes in and we just send out a check. Then, every few months, we get a 10% off card, which enables us to take a shopping trip at Target and get 10% off our total bill. We make an effort to save larger purchases until we have such a discount.

I could tell a very similar story about our Citi Driver’s Edge card, which provided us with about $700 cash to help with a recent auto repair. All we did is use the card on gas and minor auto expenses and pay off the balance each month.

If you’re personally responsible, you can handle your urges and keep the spending on such cards down to the staples. That means you’re never carrying a balance – no interest payments – while also building up a strong credit rating, which helps with your insurance rates.

Credit cards aren’t the problem when it comes to credit card debt – personal responsibility is.

A $1,000 emergency fund is enough if you’re paying off credit card debt.
One of the big parts of the Dave Ramsey plan is that one should save up a $1,000 emergency fund, then turn all extra money towards paying off debts. This is a great way to get rid of those debts as fast as possible, of course.

Dave’s argument is that the $1,000 emergency fund is more than enough to take care of most of life’s problems and that you can negotiate your way out of the rest. I disagree with that – many events that would require me to turn to my emergency fund would go far beyond that $1,000 level.

How exactly, pray tell, can one negotiate themselves out of a job loss in a tight job market, or barter when it comes to a broken arm?

Instead of just stopping when hitting that $1,000 emergency fund, I suggest setting up an automatic savings plan, dumping $25 a week into the emergency fund (or $50 if you can swing it), then forgetting about it. Use everything else that’s left to hit the debt hard and let that emergency fund slowly build.

Why do this? Here’s an example. Let’s say you set up that savings plan to sock away $50 a week, then you start whacking at your debt as hard as you can. Six months later, you lose your job. You turn to your emergency fund. Thanks to your savings, you have $2,300 there, enough to keep the bills paid for two months or so. Without that plan, you only have $1,000 – things aren’t going to go nearly as well.

If everything goes perfectly, Dave’s plan is better.

But when in life does everything go perfectly? That’s the point of an emergency fund. Fund it appropriately, and you’ll always be glad you did.

“Growth” mutual funds are not the be-all end-all of investments.
Whenever Dave talks about specific stock investments, he always mentions putting his money into a “growth” mutual fund. There are two problems with this.

One, it’s not diversified. Buying nothing but growth stocks makes your investments less diverse. Quite often, growth stock funds are very heavy into a few specific “hot” sectors – and when those sectors go cold, ouch. Growth mutual funds didn’t do very well in 2001 after the dot-com bubble burst, for example.

Two, an ordinary “mutual fund” charges a lot of fees. Invest instead in a low-cost index fund. An index fund is basically an automatically-managed mutual fund, one that operates according to some publicly-defined easy-to-follow rules instead of relying on the research of a team of fund managers. You can get similar returns with an index fund without the huge fees (which many mutual funds take to pay the salaries of the fund managers and pay for advertising).

What’s a better solution? If you’re investing in stocks, buy a very broadly based low cost index fund. You won’t ride the bull markets quite as strongly, but you won’t fall nearly as far during down markets or changing market conditions. More importantly, you won’t be paying huge fees to ride the roller coaster – index funds are pretty cost-effective.

Before you put big money into the stock market, at the very least, read more than one voice on stock investing. In fact, read as many voices as possible. You’ll find that diversity is good and low costs are even better.

Do not cut your retirement savings during the initial push to pay off debt.
One final piece of Dave’s advice that really bothers me is that he suggests people trim their retirement savings during their initial push to pay off their debt, even if it means foregoing matching from employers.

To me, this is simply throwing money away. No matter how bad your situation, refusing to get an immediate 50% or 100% return on your money – risk free – is a bad idea.

No matter what, if your employer offers matching funds on your retirement accounts, invest at least enough to get all of the matching they’re offering. You’ll never, ever regret it – it’s basically free money that enables your retirement savings to grow much more quickly than if you turned away.

Sure, it means that you’ll pay off debt a little more slowly. What you’ll gain, though, is a lot of free money for retirement from your employer. Never turn that down, no matter what.

Insanity: doing the same thing over and over again and expecting different results.
- Albert Einstein

In response to my recent article, Are Poor People Lazy?, where I concluded that laziness doesn’t always equate to poverty and vice versa, Pamela left this comment:

There are many factors that lead a person to the life they are living. I am quite shy. No matter how much I socialize no matter how many times I try to assert myself I remain shy. Because of this I do not take classes or do many of the things suggested for me to do to get ahead in life. So according to you I am lazy. NOT SO. If allowed I would work 12 hour days at my job.
I also agree with many of the comments that being in the right place at the right time can have a more positive outcome on you life than anything.

For most of my life, I’ve been very shy. Sometimes, I’ve been able to cover it up by essentially adopting another persona – simply pretending to be someone else who was outgoing – but that would only work for short stretches. Usually, I would just maintain that level of false outgoingness until I could get out of the situation.

I told myself that it was impossible to be any different than that. It was a convenient excuse, as are all excuses that take us away from great opportunities in life.

In truth, adopting that “outgoing” persona, escaping social situations, and believing I was just shy and nothing could be done about it was merely taking the path of least resistance in life. In other words, it was the easiest path available to me. Being more social and extroverted was far outside my comfort zone – it was a lot easier to just put on a mask, get through the situation, and remain introverted.

It has taken me a very long time to grow beyond that level of introversion and shyness. I’ve had a lot of painful social interactions along the way, and I’ve practiced in ways that would have seemed ludicrous to me years ago.

Now, though, I feel completely fine starting up conversations with people I’ve just met. I can lead conversations with others, as well as follow their lead, and I actually enjoy it because of the human interaction as well as learning a lot of things along the way.

Being more social has opened up a lot of avenues for me. I’ve met interesting people, gained some public speaking opportunities, and built a lot of friendships in the community.

If I had just continued to follow the path of least resistance, I would have never had these opportunities.

Is the path of least resistance laziness? Some might argue that it is – I don’t. People can work quite hard on the tasks that they’re most comfortable with.

However, opportunity rewards people who step outside their comfort zone. The Einstein quote that starts this article really sums it up: if you just keep doing things the same way over and over again, you’ll keep getting the same results. If you don’t like the results you’re getting in some aspect of your life – your economic situation, your personal situation, your health, and so on – it’s time to take a new path, one that’s not easy.

Find it hard to be social? Read Never Eat Alone and How to Win Friends and Influence People and start acting on what you read.

Find it hard to lose weight? Start exercising every day, even if it’s hard, and throw out most of the junk food. Try drinking water instead of soda – it’ll be hard at first, but fighting through that resistance is what will make change happen.

Find it hard to learn and grow your knowledge? Turn off the television and read books on subjects that you don’t know much about. If they’re over your head, back off and read simpler ones first.

Find it hard to execute some particular skill? Use your spare time and practice it, even if practice seems difficult and you’d rather be doing something else. Play the guitar until your fingers hurt. Cook every meal for a month from scratch.

Find it hard to get out of debt? Cut up all of your credit cards and erase those numbers from all of your online accounts and learn how to live on what you have.

Once you’ve broken through some personal barriers, you’ll find that opportunity knocks more often than before. You’ll understand the world around you better – and people will interact with you in a more positive fashion.

It’s hard to change course, but if you keep doing what you’re doing now, you’re going to keep getting the same results. Now’s the time to get off that path of least resistance and try the hard way.

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 very good friend, who is also very frugal. She has recieved this habit from her parents, who have told her to study hard, work hard, get a good, steady job and save your money. This is working out really well for her so far, and in our peer group, she actually has the highest savings ( most of the group still living from paycheck to paycheck).

How do I get her to see that she should look after herself more and that it is okay to start enjoying your money guilt free?
- Donna

At first, my impression of the friend was that she was in fact living “too tight” and was in danger of becoming a miser who misses out on life-fulfilling experiences in an effort to conserve every dime.

Then I read the part about loaning a family member $30,000 with little expectation of getting it back – I’m sure she was aware of this – and my opinion changed quite a lot.

It sounds to me like your friend has her values figured out – and it’s just that those values are fairly different than yours. Your friend’s values center around her family and she’d rather do without little things in life to help out her family – and possibly her close friends, too.

I know a couple people who do this – they scrimp and save, then occasionally help the people they care the most about in a big way, swooping in to do things like make down payments on houses or buy new cars. They also often do things like write $50,000 checks to charities when those charities most need it. At the same time, they won’t go out for coffee because it’s too expensive.

Is that miserliness? I’m torn. On one level, I think that these people are missing out on some of the joys in life. On the other hand, I think that perhaps they’ve just figured out what really makes them happy – helping their family and closest friends and the causes they care about.

It’s not a tradeoff I would make, but it’s a tradeoff I understand.

At last NBC began streaming Days of our Lives full episodes online, so theoretically, there’s no reason for me to subscribe to cable anymore, since this is the last of my “must have shows” to become available this way. I am considering giving up cable, in favor of a combination of internet and TV with rabbit ears. I live in an apartment, so indoor antennae is my only option, and since my TV is digital, would I even need a converter box? I am very low tech, but the reading I have done indicates no, however higher tech friends say I would. Also, I am thinking a VGA cord to attach my PC and TV would give me TV size streamed programming, any other considerations?
- Mary

Days of Our Lives? I actually watched that one summer almost two decades ago when I was convalescing. All I remember is that Satan was actually a character on it, which I found hilarious.

Anyway, if you have full access to the programs you want to watch, I see no reason to not abandon cable/satellite television. You can get emergency weather from a weather radio, local news from the internet, and there are lots of sources for the programming you want to watch.

Frankly, I’ve been watching almost no television over the last several months. I’ve watched some programs, but almost all of them have either been on sites like Hulu or on DVD.

On Twitter, you mentioned seeing District 9. Did you enjoy it?
- Ev

Very much so.

The best science fiction is basically just a morality tale on modern life where one element is altered in a fantastic way in order to make you consider the situation in a new light.

District 9 is essentially about immigration and looks at an individual’s change in perspective if they go from being the established citizen to being the immigrant.

In the end, I thoroughly enjoyed the movie and the questions it raised floated in my head for a good week. That, to me, is a sign of a very good movie.

i have a work offered HSA (health savings account) and high deductible health insurance. They take the money (i decide how much) out of my paycheck and put it into an account that i can then use to pay my deductible and other health related expenses. this is all pre tax money, its a great deal for me,a nd i can keep it as a sort of ‘health nest egg’ of sorts. what I guess I was wondering is, how should this affect my emergency fund, given that I have a fund which is of equivalent size for health emergencies alone?
- akb

I would consider that account to be a useful tool, but given the many restrictions on how the money can be used, I would not consider it part of my emergency fund.

To put it simply, many, many serious emergencies in life happen in situations where a health savings account won’t be able to help. It can’t help with a serious engine problem on your car. It can’t help with a job loss. It can’t help with a big unexpected personal expense. It can’t help with a forgotten tax bill.

It also can’t help with any big opportunities that come your way, either.

Thus, I would not count a health savings plan towards one’s emergency fund. That being said, I’m not sure putting a “cap” on an emergency fund is a good idea. I’ve been moving more and more towards looking at my cash savings as an emergency fund and an opportunity fund, so I don’t hesitate to continue to add to it over time.

If you don’t mind me asking, how do you promote the site, just seo or do you market as well? all tips gratefully received.
- Lee

I don’t promote The Simple Dollar directly at all. My audience has been built by word of mouth. I didn’t have any “connections” in the blogosphere to tap, either – no one has helped me with traffic because they’re an “old buddy.”

I also don’t worry that much about SEO. My only real concern in that area is just to write meaty articles. If I write meaty, thought-provoking, and useful articles, they’ll naturally attract links and search engines.

In the end, it comes back to good content.

Why do you think Skype is better than Magic Jack? Doesn’t Skype require you to have your computer on all the time?
- Kelly

I’ve used Skype and Magic Jack and personally found Skype to be the superior service. I’ve had fewer problems with it (using it for more than a year versus a few problem-plagued weeks with Magic Jack). I can use it on pretty much any computer, for starters, and I can use it for videoconferencing, too.

As for having a computer on all the time, I tend to do this anyway. My desktop machine does several different automated tasks (collecting data at certain times, mostly), so I just leave it on and have Skype run on startup. Thus, Skype is almost always running.

Skype’s not a great telephone solution for everyone, but it works pretty well around here.

I’ve been accepted to a MBA program and got a two year deferral so I can work for a couple years. My school’s website says that they don’t consider retirement assets up to $100k in their aid decisions. I’m looking about $50-55k per year in MBA expenses.

I have about $30k in other savings and expect to put $2.5k per year (state tax deductible) in a 529 plan.
- AK

Since you’re investing for a short term goal, you should invest in something very stable, like bonds or even cash.

Markets that don’t have a guaranteed return (stocks, metals, commodities, currency, etc.) aren’t stable short or medium-term investments – over a three year period, there’s enough fluctuations in those markets that you have a very high likelihood of simply losing money. Most such markets do gain money consistently – and quite nicely – but that’s over a long period, much more than just three years.

Just go conservative. It might seem like a small return, but it is a return, after all.

We purchased our home 6 years ago with 100% financing split between our 1st mortgage and a HELOC. We are able to make both payments. The 1st is at a 6.375% APR and the floating HELOC rate is 2.75%. We have an emergency fund equal to 105% of the HELOC balance. My question is this, should we: 1) take advantage of low rates to consolidate the 1st and HELOC, or 2) just pay the HELOC off and use that as our emergency fund?
- Michelle

I’d lean towards the first one, provided you don’t have to get PMI or other such insurance. Contact your local credit union and see how you can consolidate.

On the surface, that might not seem like a great idea because of the very low HELOC interest rate, but that rate is floating, which means that from here it’s got almost nowhere to go but up. I’m also assuming that the HELOC has a much smaller balance than the primary mortgage.

I would not tap your emergency fund to pay off debt, especially debt with this low of an interest rate. It’s a great goal to get rid of it, but Murphy’s Law pretty much guarantees that if you were to wipe out that emergency fund in this way, you’d need that emergency fund the next day.

I was just wondering how you first got into blogging, and what you used when you first started out.

Reading your blog and seeing your passion for writing about frugality and life has made me rather inspired to perhaps start blogging myself.
- Kayla D.

Whenever I start blogs – just to see if I can write consistently on a topic – I start on Blogspot. That was true for The Simple Dollar – I played around with some ideas on Blogspot in October 2006 before launching the main site.

I’ve also started a lot of blogs on Blogspot that never really went anywhere. They just didn’t click.

Once I realized that The Simple Dollar might be something that I could do for a long time, I got my own domain name and my own hosting plan, then migrated to WordPress. However, doing that is overkill if you’re not really committed to what you’re doing.

Your list of books you read last month was really impressive! Do you really read that much? What about the books you review here? Where do you find the time?
- Jason

Yes, I read that much. I read a book for personal enjoyment every three days (on average). I also read about a book a week for The Simple Dollar beyond that.

Most of my leisure time, frankly, is spent reading. My wife does the same thing – in the evenings, 90% of the time, we’re either both reading or we’re playing a board game against each other.

I also make a point to read in front of my children for at least a little while each day. This serves a lot of purposes. For one, it shows them that reading books is part of a normal adult life – I do it as a role model. For another, it gives them time to play independently and make up their own games, which I consider vital for child development.

I also usually take at least an hour out of my work day each day to simply read. Perhaps once or twice a week, I’ll read a book for personal enjoyment – the rest of the time, it’s reading for The Simple Dollar.

Add that up and it’s clear how I manage to read so much.

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