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 27 – October 3, 2008)
A Visual Guide to Saving Money with a Baby This is a photographic journey through some of the specific things we did to trim our spending with our second child (our first was a baby long before The Simple Dollar got started). All of these tricks saved money, particularly if you consider having future children after the current baby.

The Only Thing We Have to Fear Is Fear Itself I wrote this during a period of great fear about the future of, well, the American economy as a whole. In short, I thought the fear was overblown, at least in terms of the average person. Turns out I was right on the money with this one.

How to Find and Utilize a Mentor, No Matter What You’re Doing Mentors are invaluable aids in helping you get started on a successful career or entrepreneurial path. I’ve had several mentors over the years and they’ve all had a huge impact on me.

Some Thoughts on the Fulfillment Curve The fulfillment curve underlines so much of what we choose to do in life. Most of the time, our financial mistakes come from being sorely out of touch with our fulfillment curve, often believing that more is better when, in truth, it’s not.

Thoughts on Children and Rewards for Normal Behavior In general, I oppose rewarding children for normal expected behavior. That behavior shouldn’t be met with a reward, but not exhibiting that behavior should be met with a punishment that’s non-financial. Allowances are great, but using money as a club to enforce standard behavior teaches really awkward money lessons, in my opinion.

Two Years Ago (September 27 – October 3, 2007)
The Backlash Against Frugality This is a topic I touch upon regularly on The Simple Dollar: the sense that culturally, frugality isn’t the normal method of behavior and that, after a while, people resist frugality. I generally think this comes from confusion between frugality (finding the maximum value in something) and cheapness (trimming every last cent from spending).

Review: The First National Bank of Dad This was the first really thought-provoking book I read about teaching children how to manage money. For me, this book was really the beginning of a journey towards discovering my philosophy on how to help my children learn about money and handle it responsibly.

Thirteen Ways To Reduce The Effect Of “Bad Luck” In Your Financial Life Some people seem to suffer from bad luck more than others, but quite often that bad luck is triggered by poor choices. Here are some of those choices. (Yes, the number thirteen was intentional here.)

Should You Give Yourself Material Rewards For Meeting Certain Milestones? It’s great to celebrate when you achieve things, but is it a good thing for that celebration to involve buying things? My suggestion is to celebrate, but find non-material ways to highlight your great accomplishment.

Five Personal Finance Lessons That Rocked Me Like A Hurricane When I Figured Them Out These lessons still rock me, especially when I consider how I lived my life before these realizations.

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.

I also participate on several other social networks. Feel free to check me out on del.icio.us (it’s where I collect links, from which I select the ones that appear in my weekly roundups), wakoopa (what software I use), GoodReads (what books I’m reading), Facebook, and FriendFeed (which aggregates everything). I also have an irregularly-updated personal site, TrentHamm.com.

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!

8. Become a “Friend of The Simple Dollar.” If you find the stuff on The Simple Dollar valuable and are willing to spend five minutes or so a month to help me out with small things, please consider signing up to be a “Friend of The Simple Dollar”.

9. Email a great article you find to a friend. Find an article that you think your friend would love? At the bottom of each article, you’ll find a link that says “Email this” – just click on that, type in your friend’s address, and send it right along to them!

This is the tenth 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 nineteenth and twentieth chapters, “Social Arbitrage” and “Pinging – All the Time,” which appear on pages 171 through 189.

In the past, I’ve worked with three kinds of people: information broadcasters, information sharers, and information hoarders.

The broadcasters were annoying. They would simply share gossip to the exclusion of everything else and, often, the material they broadcasted was useless. It was hard for people to build good relationships with them because anything that was said was immediately blabbed anywhere and everywhere.

Other people were information hoarders. You could at least be secure in that when you told them something, it would not be shared. Yet, these people never shared anything in return. They held onto their knowledge, content to build an empire with what they knew.

The people that were always the best to work with were the information sharers. They worked hard to acquire new knowledge and new friendships and would be discretionary in what they shared, sticking to the genuinely useful things that didn’t hurt other people. If you had questions, you could go to these people and receive information without worrying that your requests would be used against you. You wanted to work with them because they were genuinely helpful.

In this part of the book, Ferrazzi argues that those information sharers hold the real power in the world.

Become Indispensable
On page 174, Ferrazzi makes the case for why you should strive to be indispensable to others:

Real power comes from being indispensable. Indispensability comes from being a switchboard, parceling out as much information, contacts, and goodwill to as many people – in as many different worlds – as possible.

Ferrazzi basically makes the argument here that real power resides in the hands of people who have a lot of friends and acquaintances who view them as invaluable, not in the hands of the people nominally in charge (necessarily).

In almost every experience I can think of in my life, this is true. People that have a lot of strong connections and give information, ideas, and other things as freely as they can quickly become indispensable – they’re the heart of whatever organization (whether a true organization or just a group of people) they’re involved with. The person who is friends with everybody usually winds up being the leader of the group, whether or not that’s their title on the door or not.

I’ve seen companies that are basically ran by the guy on the floor who has good relationships with everyone, while the nominal president spends his time in the office with the door shut. The president could leave and it wouldn’t affect a thing – the floor leader leaves and everything falls apart.

Which position would you rather be in? The disposable one that’s out of touch and friendless, or the person who has lots of friends and is completely indispensable? Who would you rather be friends with?

A System of Bureaucracies
On page 175, a quote from Ron Burt pops up that’s really thought provoking:

“People who have contacts in separate groups have a competitive advantage because we live in a system of bureaucracies, and bureaucracies create walls,” says Burt. “Individual managers with entrepreneurial networks move information faster, are highly mobile relative to bureaucracy, and create solutions better adapted to the needs of the organization.”

When you think of our world as a system of bureaucracies, it actually makes a lot of sense. Our families are bureaucracies. Our circles of friends are each bureaucracies. Our workplace is a bureaucracy. Virtually every group we’re a part of is a bureaucracy.

The more bureaucracies you have access to, the more you can accomplish and the more valuable you become to every single bureaucracy you’re involved with.

Let me use an example to show you what I’m talking about. A close personal friend of yours is fired. Let’s say you have good friends in several businesses in the area in which your friend works – he’s likely to call you, right? And you’re likely to be able to help him, right? Your access to many different bureaucracies enables you to better help a friend and thus you’re more valuable to him. Plus, if you direct a good worker to a new company, the bureaucracy at that company will value the person you’re connected to there even more than before, again, adding value to you.

On the other hand, if you don’t know anyone, you won’t be able to help. You won’t have value to that friend and he probably won’t turn to you in his time of need.

A network of good relationships is very strong and it often leads to even stronger connections.

Be Interested in Others
Ferrazzi uses a Dale Carnegie quote on page 177 to make a point:

To paraphrase Dale Carnegie: You can be more successful in two months by becoming really interested in other people’s success than you can in two years trying to get other people interested in your own success.

It all comes back to listening and then thinking about how you can genuinely help someone. The more times you’re able to do that, the more valuable you become and the more power you’ll subtly accumulate.

On the other hand, if you just try to promote yourself and grab every opportunity blindly, you won’t be building those valuable relationships. You might get off to a slightly brighter start, but over the long run, the person with the relationships is king.

The way to build them is to listen, to stay in touch, and to help whenever you can without worrying about what you might get in return. It’ll just gradually flow your way.

What Is “Pinging”?
On page 181, Ferrazzi introduces the idea of pinging:

I call it “pinging.” It’s a quick, casual greeting, and it can be done in any number of creative ways. Once you develop your own style, you’ll find it easier to stay in touch with more people than you ever dreamed of in less time than you ever imagined.

Yes, there’s grunt work involved. Pinging takes effort. That’s the tough part. You have to keep pinging and pinging and pinging and never stop. You have to feed the fire of your network or it will wither and die.

To put it simply, pinging simply means staying in regular touch with the people in your network and not letting them drift away. This might take the form of quick emails, messages on Facebook, text messages, cell phone calls, and so forth.

The reason for doing this is to simply keep up to date with how people are doing and also remind them that you’re listening and that you care. Some people broadcast what they’re up to on social services like Twitter and Facebook, but it’s still a good idea to ping them sometimes, just so they know you’re actually involved and paying attention to their statements.

Contact Lists
On page 184, Ferrazzi makes a great case for putting effort into organizing all of the people you’re connected to:

The third step, as I mentioned in the chapter on taking names, is segmenting your network into call lists. In time, your master list will become to unwieldy to work with directly. Your call lists will save you time and keep your efforts focused. They can be organized by your number ratings, by geography, by industry, and so on. It’s totally flexible. If I’m flying to New York, for example, I’ll print out a “New York list” and make a few calls [...]

This is one area of my life that I didn’t have much organization on until recently. There are a lot of people that I keep touch with on a regular basis, but it was on such an ad hoc basis that people kept falling through the cracks – I wouldn’t intend for them to fall through, but the sheer number would make it happen sometimes.

My solution was easy. I just started putting everything in Google Address Book. I made up quite a few groupings of people within that to help me keep everyone organized. One thing I did to help myself is assign them all to numbered groups, groups 1 through 25, pretty much randomly. Each day, I’d contact everyone within that group electronically. So, one day I might shoot an email to the twenty people in group “1.” The next day, I’d do the same with the people in group ’2.”

This takes time, but it helps me maintain relationships with a LOT of people and contact them all at least once a month.

Making Pinging Normal
This needs to become part of your normal behavior or else it’ll be hard to maintain. On page 185, Ferrazzi explains it well:

The important thing is that you build the concept of pinging into your workflow. Some organizations go so far as to make pinging integral to their organizational processes.

In other words, for pinging to work, it needs to be a normal part of your day.

I’ve started taking a portion of my day – early in the day, usually – to simply ping people and respond to the replies I get (if needed). Yes, this sucks down some serious time – it usually adds up to 75 messages or so a day – but all of these messages are useful. They help me to maintain real relationships with a wide variety of people.

Then, when something of real importance comes up, I can contact any of these people. I’m fresh in their minds and when my request for help comes through, they’re usually glad to help me out. Similarly, they know I’m a person they can reach out to for help.

We make each other better, and this is maintained through pinging.

On Wednesday, we’ll tackle the twenty-first and twenty-second chapters – “Find Anchor Tenants and Feed Them” and “Be Interesting.”

A few weeks ago, my wife and children and I spent the weekend visiting several members of her extended family. On the final morning of the visit, I sat around the kitchen table with my wife’s grandfather and uncle and the conversation turned to the future. Her uncle turned to me and said, “What do you think you’ll be doing in five years?”

I didn’t really have an answer.

Sure, I have lots of long term goals of all kinds. My wife and I want a house in the country, of course, as I’ve mentioned many times. I’d like to get a novel published, one that I’ve been working on for a long time. Financial independence is a big goal, of course. I know, in broad strokes, what my life will look like in five years, barring anything I can’t predict.

But when I look back to the goals I’ve been successful with in life, they’ve been very, very specific in nature. If I set a goal of not spending any frivolous money for a month, I can achieve that goal because it’s clear to me what I need to do to get there.

On the other hand, with the less tangible big dreams in my future, I find myself a little more aimless. I have a hard time tying those big dreams to actions I can take today, so I’ll sometimes forget about them.

The challenge for me is this: I know where I want to be in five years, but the road to get there is sometimes covered in fog. I don’t have a good grasp on the things I need to be doing along the way – other than generic things like spending less than I make – in order to reach those goals.

On the way home, her uncle’s comment stirred me into action. I want to set a few very specific and clear goals for the future, along with very concrete paths on how to get there. Doing this lets me know what I need to be doing all the time to reach the things I want.

So, without further ado, here’s where I want to be in five years. I’ve set up three very specific goals, along with the path to reach each one.

Goal #1: Total Debt Freedom
That means paying off our entire mortgage, which has a balance around $165,000, as well as all other remaining debts. In five years. Including remaining student loans and auto loans, that adds up to about $190,000.

What can I specifically do this month to achieve this goal? Each month between now and October 31, 2014 (when my five years are up), I would need to knock an average of $3,200 off of my total debt balance. That’s an incredibly high number, one that pushes me to really bear down on our situation. In the first few months, I simply won’t be able to reasonably apply that much towards the total balance.

What else can I be doing to support this goal? The biggest thing I can do to support that goal is to make the $3,200 a month goal as reasonable as I possibly can. This means coming up with additional ways to earn income. Thus, each month, I need to develop a new potential avenue for income related to The Simple Dollar and my other endeavors. Preferably, these take the form of passive income – I can invest a substantial packet of time once and then enjoy the fruits of that labor over time. This would mean designing more “downloadables,” perhaps creating a few self-published books that are collections of posts organized in a logical fashion, and other such avenues.

Goal #2: Learn a New Language
By “learn a new language,” I intend to learn enough so that I can engage in an intelligent conversation with a native speaker of said language on pretty much any topic, and I’d be successful if I were to visit the countryside of a nation where everyone only spoke that language and no English to help me out. This is something I intend to do with my family in the future.

I’m not entirely sure which language, but I’ve narrowed it down to four options: German, French, Italian, and Norwegian. French and Norwegian are slightly in the lead.

What can I specifically do this month to achieve this goal? The goals for making this work are much more specific. Each weekday, I could spend an hour in language training using a tool like Rosetta Stone until I’m familiar with many of the words of the language and can hammer through basic conversation. Once I’m there, I would just continue to immerse myself in the language, listening to radio in that language as I worked and so on.

I’ve had a lot of success with short-term immersion in other languages in the past, but I never subjected myself to continued practice of the language.

What else can I be doing to support this goal? I live near a university, so one option would be to enroll as a part time student and take classes in my language of choice. This would enable me to gain some additional practice in actually speaking the language.

To put it simply, the best way for me to learn is to seek out every opportunity I can to immerse myself. The best way to start, though, is in my home.

Goal #3: Get a Novel Published
Right now, I spend maybe a few hours a week working on fiction, usually turning out a short story in that timeframe or editing/polishing an older one. I completed a novel several years ago, but when I look at it now, I deeply dislike it.

I actually enjoy writing fiction quite a lot, perhaps more than the essay-style writing I do on The Simple Dollar. I can purely focus on story and character rather than passing along information directly.

So why not take advantage of my situation and see if I can get my feet wet in the fiction world?

What can I specifically do this month to achieve this goal? Each month, I need to finish five short stories. By finish, I mean write a first draft, let it sit for a month or so, re-read it and polish it, and perhaps repeat the “let it sit and polish it” routine a few times. From there, I’ll pass the stories to my wife and let her choose the best one, then I’ll attempt to publish that one (and perhaps put the others out there on my personal site).

Once I feel much more adept at fiction (wait… does anyone really feel adept at writing? I still feel like an amateur and I’ve written millions of words over the past several years.), I’ll begin to tackle a novel that’s been forming in my head for a very long time. I’ll start that at roughly the two year mark.

What else can I be doing to support this goal? I should talk directly with the people I know in the publishing industry (thanks to my personal finance books) and see where they point me. I also need to put substantial effort into getting my good stories published so that I’m noticed in the fiction world.

Your Turn?
Now it’s your turn. Where do you want to be in five years? Can you pick out three specific goals that you want to achieve? From there, can you break those goals down into specific pieces that you can start working on now?

Setting goals have helped me get to my current station in life. There’s no reason why they won’t help me keep climbing the mountains to my dreams.

Now that my wife has returned to full time work, we’ve been focusing a lot on careful meal planning for the coming week. We’ll sit down on Sunday mornings, plot out what we’ll eat over the coming week, and prepare a grocery list.

One very helpful technique for a busy family like ours is making “modular” meals – ones with elements that can be easily reused in meals later in the week. Quite often, the meal preparation on Monday evening is helping to prepare some element of a meal that we’ll have on Wednesday or Thursday evening, for example. Even better, those “modular” meals can sometimes provide source materials for a quick hot breakfast or an easy lunch that goes far beyond leftovers.

Using and reusing meal components in this fashion is an incredible money and time saver. Here are some examples to get you started.

Roasted Chicken
When you get home one evening, put a whole chicken in the oven to roast. It’s easy – a whole chicken at the store is pretty inexpensive. Just rub the skin down with salt and pepper, put a few things in the chest cavity for flavor (like garlic cloves, quartered onions, celery, and the like), and put it in the oven at 350 F for about 75 minutes or so. I like to pull it out about halfway through and use a baster to get the juice out of the pan and squirt it all over the chicken itself.

In the end, you’ll have a golden-colored chicken with crinkly, tasty skin and deliciously moist chicken meat, somewhere between two and three pounds of it. Enjoy the chicken as the main entree for the meal, but then save the bones and the leftover meat.

The bones? Just put them in a crockpot with a few vegetables before you go to bed. Put in some onions, carrots, celery, and things along those lines – I also like to put in whole peppercorn. Then turn the crockpot on low and go to bed. When you get up in the morning, strain off the bones and large vegetable pieces and save the liquid in the fridge. That liquid, my friend, is an incredibly delicious chicken stock. It can be the basis of a great chicken soup a few days later, white chili, and countless other dishes. Stock is also easily frozen and saved for later. Be aware, though, that at cold temperatures, stock sometimes becomes gelatin-like – that’s completely normal.

The leftover meat can be used in countless ways. Save it for chicken chili, chicken soup, chicken stew (all three of which can also utilize the stock), chicken pizza, or a pasta with a chicken-oriented sauce. You can even dice the chicken and cook them with eggs for an interesting omelet.

Chili
Chili can easily be assembled in the morning, with ingredients tossed in a crock pot and left to cook all day long, resulting in a very quick and simple (and tasty) home-cooked meal in the evening.

Chili is a spectacular leftover dish, as it often has a completely different flavor when reheated as the ingredients tend to meld together more, meaning that a large pot of chili can directly be the source of a second meal.

Beyond that, thickened chili (with a bit of added corn starch) can also serve as a burger topping or as an ingredient in a breakfast omelet or alongside eggs. It’s a utilitarian food that can be used many different ways.

Tacos
Do-it-yourself tacos are a regular early-in-the-week meal here because the individual elements can be used in many other ways.

We generally only lightly spice the primary protein content of the taco – the meat or the beans – so that it can be reused in many ways, from soups to casseroles.

The remaining lettuce can form the foundation of a light starter salad for a later meal.

The remaining cheese can be used in any number of dishes, from casseroles to sandwiches.

The remaining tomatoes always find a home in soups, stews, or sauces. They can also find a home with a roast that’s left to slow cook all day long.

Roasts
Speaking of roasts left to cook all day long, we’ll often put a roast in the crock pot with some beef stock and some pepper and allow it to slowly cook all day until it’s nearly falling apart at dinner time. With some simply-prepared vegetables on the side (or even directly in the pot), it can be an incredibly delicious and savory meal.

The best part? The roast leftovers can be used in a wide variety of ways. A well cooked roast pulls apart easily to make hot beef sandwiches. The remaining roast can be chunked to make a beef stew or beef noodle soup.

The leftover broth is also a functional beef stock, which you can save to use as the basis for things like French onion soup and other hearty soups. It can be frozen easily until you need it.

Hamburgers
“How can hamburgers possibly be modular?” it’s actually incredibly simple. Make extra hamburgers and grill them all at once, then take the extra hamburgers and tear them into tiny chunks.

The cooked hamburger meat is then perfect for making a chili (yes, we might have hamburgers on Monday, chili on Wednesday, and chili and eggs for breakfast on Saturday) or inserted into a pasta sauce or a casserole of some fashion.

In Conclusion…
… the general idea is simple. If you prepare plenty of a staple, modular meal early in the week – which usually contains low-cost ingredients to begin with – you’ve already done much of the preparation for completely different meals later in the week. Your main course on Monday might turn into a stew on Wednesday or a pasta dish on Thursday. Your main course on Thursday might be part of a Saturday potluck dinner or a Sunday brunch.

And since the staple ingredients you start with are so inexpensive (I’m still convinced that a whole chicken is one of the best bargains out there), it ends up making several of your meals inexpensive, drastically cutting down your costs.

Chaining meals together in this fashion cuts down on your prep work (making it possible to prepare more meals at home much quicker) while also reducing your overall cost (by increasing your use of low-cost central utilitarian ingredients). Sounds like a big win in the kitchen to me!

A few weeks ago, I met up with an old friend of mine who reads The Simple Dollar. After a bit of catching up, he started criticizing me on my purchase of a Prius. “You’re basically throwing your money away there,” he told me. He then went on to describe how he buys cars – he buys old junkers for around $2,000 each on average and drives them until they fall apart.

I told him that I was intending to drive the Prius until it reached a little over 200,000 miles, so I asked him how many miles he gets out of one of his “junkers.” He thought about it and said, “Oh, about thirty thousand until they’re completely ready for the junk heap.”

A light bulb went off in my head. I started asking him some questions about his junker purchases.

“How much time do you spend looking for replacement junkers each time?” “Probably… twenty or twenty five hours, all told.”

“And you have to pay for the title transfer and new license each time, right?” “Yep.”

“Do you ever have to invest in these cars to get them road worthy?” “I usually wind up throwing $500 or so into each one to get that 30,000 out of them.”

I started scribbling on the back of a napkin.

Our one Prius purchase was $20,000. It took us probably twenty hours of active searching to find the one we wanted. We would pay about $100 for the title transfer and other paperwork. We intend to drive it 210,000 miles.

On the other hand, to get the same 210,000 miles, my friend would buy seven cars at $2,000 each, then put another $500 into them to get them road worthy. He’d also pay $100 each time for the title transfer and other paperwork. Each time, he would spend twenty hours looking for that next car.

So what’s the difference between the two? Seven cars at $2,000 each, plus another $500 for roadworthiness, plus another $100 for paperwork adds up to $18,200. The junkers are $1,900 cheaper (versus the $20,100 total for the Prius).

Now let’s add in fuel efficiency. The Prius averages 46 miles per gallon over 210,000 miles. I’ll be generous and estimate that his junkers get 20 miles per gallon on average. Over those miles, and assuming an average of $2.50 a gallon for gas, the Prius saves $10,000 on gas. Seriously – do the math yourself.

The difference is now $8,100 in favor of the Prius. Even if you start throwing in lots of other factors – insurance and the like – and forget reliability, that’s a shell shocker.

I’ll be generous and adjust the calculations a bit. Let’s say my friend managed to buy all of his junkers for only $500 instead of $1,500 – I’m giving him an extra $1,000 per car here. Let’s also say they get an average of 27 miles per gallon – he happens to stumble upon lots of Honda Civics, let’s say. Even then, it’s only $900 in his favor.

Now, my friend invested one hundred and forty hours in his car searching, while we invested twenty. That’s a difference of 120 hours.

Thus, my friend’s hourly savings for that 120 hours spent beating the pavement looking for a junker is $7.50 – less than minimum wage in many states. That’s after giving him the benefit of the doubt by assuming he gets a tremendous deal on every car he picks and they’re all fuel efficient. With the original assumptions, he loses $67 per hour.

Even if the cars were strictly equivalent in reliability, that wouldn’t be a good investment of my time. If you add in the fact that the first six junkers will be less reliable than the new car (and the seventh should be roughly the same, as they’re both junkers now), it’s clearly not worth it.

In this case, I’m not disputing that there is a cash savings by buying old used cars at all – there clearly is. In the example above, my friend does wind up with more cash in his pocket than I do if you’re looking strictly at the money invested in the cars. In fact, if you play with the assumptions a bit, you can probably increase (and also decrease) his hourly rate. I felt that some of the assumptions were actually favoring the junkers, actually.

However, our world doesn’t consist strictly of car purchases.

My friend’s car purchases took a lot more time than our single purchase. During those 120 hours, I could easily be doing something more productive than saving $7.50 per hour searching for an unreliable junk car. I could be writing a freelance article, air sealing my home, making homemade laundry detergent, preparing a triple batch of a home cooked meal, or going clothes shopping at a thrift store. Any one of those activities would earn me substantially more than the $7.50 an hour I would save doing repeated car searches.

What’s the lesson here? Time has significant value. Whenever you choose to spend time saving money in one way, you’re choosing not to spend it in another way. Thus, if you keep filling your time with things that earn a relatively small return, you might find that you’re excluding things that earn a much bigger return.

On top of that is the big consideration that we all put more value in spending our time in ways that are enjoyable to us. For me, looking for a car is complete misery. I do not enjoy the process at all. I hate talking to people trying to sell cars, whether it’s a dealership salesperson or a guy with a car parked alongside the road. I’d far rather be in my kitchen making three casseroles or brewing up a batch of homemade laundry detergent.

Other people, though, really enjoy the process and the time invested in it has an additional personal premium for them. They may also dislike cooking at the same time. If this is the case, there is a personal premium for them to invest their time beating the pavement looking for a car and then eating out for dinner – they’re still saving money and also doing something they enjoy.

Always remember, though, that time has a real cost in the form of lost opportunities.

Edit: I misplaced a decimal in my original math, so I fixed the math example to make more sense. (I shouldn’t do arithmetic in the evening.)

After some positive response to yesterday’s comments about an article explaining how I earn an income from The Simple Dollar, I decided to follow up and give the process a thorough description. Enjoy!

Quite often, when I tell people that I’m a full time writer, they’re surprised. They expect that by saying that I’m a writer, I write books (I have written two of them, with one in print and one forthcoming) and articles and that’s it – if I do anything online, it’s just promotional work for those books and articles.

That’s not the case at all. In fact, the majority of my income comes from The Simple Dollar – the books and articles I write are just continuations and further explorations of ideas I first touch on here.

How exactly does that work? Here’s the scoop on how I actually earn my income and how it all works.

How I Got Started
I didn’t start The Simple Dollar under the belief that it would earn me any sort of significant income. Instead, I started it because I love to write and I felt like the personal finance journey I was on – recovering from a nightmarish level of debt – was something other people were going through and could relate to.

Money was – and still is – something that’s difficult to talk about in the evenings when hanging out with my friends. People are generally uncomfortable revealing anything about their financial situation in social situations. I knew that, when I was going through my financial recovery, I did want to talk about it – but I knew that it was something of a conversational taboo.

At the same time, I love to write. I’ve written for my own enjoyment almost every day for more than a decade (and nearly approaching two decades at this point).

The two meshed naturally – I’ll just write about my money situation and share it freely with others. The internet provides a great forum for that. I didn’t really worry about income – I just started writing every day because it was fun. I put a few simple ads on the site, figuring I would just earn a few pennies from them, and I just wrote.

I started off with just my friends reading the site. I would link to other websites when I’d see an interesting article there and they’d notice, come visit, and sometimes become readers. They’d link to me. The Simple Dollar started showing up in Google search results because of the existing links and readers. More readers came in, and the snowball built.

Eventually, I had hundreds of thousands of readers a month, along with tens of thousands of people subscribing by email and RSS readers. With those numbers of readers came more responsibility – and more time. I started spending lots of time doing things like answering emails and approving comments and handling interview requests. At some point, the time investment I was making in The Simple Dollar needed to return a worthwhile income or else something had to give.

How do you transform that time investment into income?

Earning Income
Each time a reader visits a page on The Simple Dollar, they see a few ads. I make an effort to make them fairly unintrusive – when you first load up the site, for instance, you only see one ad, the one in the upper right. As you scroll down, you see a few others.

On other websites – as I’m sure you’ve noticed – ads can be a lot more intrusive. In general, the more intrusive an ad is, the more a website owner gets paid.

Here’s how “getting paid” works. Some ad broker – for many sites, it’s Google, but I’m transitioning to using Federated Media – sells some enormous number of ad views to ad agencies for specific campaigns. So, for example, Federated Media might sell 200 million ad views to American Express all at once. Since American Express is a large company, they want lots of ad views and don’t want to deal with hunting down individual sites that might display the ads, so they buy from an ad broker that does just that.

Federated Media, in turn, splits those 200 million ads among a large handful of sites they represent. For example, they might assign one million of those views to The Simple Dollar.

That’s where I come in. I go about my business writing good stuff that people want to read – just simply talking about money in a frank way and offering the money advice that actually works for me – and people then visit the site. Every time a person visits a page on The Simple Dollar, it counts as an ad view.

Over the course of a month or a month and a half, I’ll rack up a million pages viewed on The Simple Dollar from readers who come here to read what I’ve written. Once that’s completed, I’ve fulfilled my obligation to Federated Media and they then pay me my portion of what American Express paid them – the appropriate fraction of their total ad purchase minus Federated Media’s commission for handling it.

To put it in simplest terms, I earn a small amount for each page viewed on The Simple Dollar. It’s a tiny amount – a fraction of a cent – but if, over the course of a day, thirty thousand pages are viewed, that adds up to nine hundred thousand views over the course of a month. Even if I just earn two-tenths of a cent for each of those views, that’s still $1,800 per month. (I can’t actually disclose the true amount I earn per page viewed because of the contracts I’ve signed, but the numbers here are fairly realistic per campaign.)

I also earn a bit more from my book reviews, which I’ve been doing since the start of The Simple Dollar. Each book review includes links to Amazon because the pages about books on Amazon are usually pretty informative and interesting. However, if a person chooses to buy that book at Amazon after following the link there – or buy anything else at Amazon – I earn a small percentage of that revenue.

These things only work because I have a substantial amount of readers. When someone starts a website, the audience at first is just going to consist of family and friends – maybe a thousand pages per month. At two tenths of a cent per page, that’s $5 for the whole month – not worth the effort of writing a lot of posts.

What happens over time, though, is that a site that writes consistently good stuff slowly picks up more readers. The second month might see 1,500 pages viewed, then the month after that might see 2,500 pages. The rate will grow over time, in fits and starts, and so will the income.

It takes patience. It also takes the ability to write consistently well (not perfectly, but good enough to interest people) so that they’ll come back in the future. It also takes a consistent focus on a topic that people are interested in – if you just write about whatever interests you each day, you’d better be an exceptional writer or you’ll never make it.

Why Not Load Up With Ads?
As some of you might have already figured out, a site earns more per page if it’s loaded up with intrusive ads. The more ads a site owner can put on a page, the more they’ll earn from each person that visits the site.

So why not load the site up with ads?

In the short term, that works well. It earns you a big boost of income. If you double the amount of ads on a page, you double the amount you earn from that page (roughly), and thus double the amount you earn over the course of a month.

The only problem is that if you load a site down with ads, it becomes harder to read. It becomes less enjoyable to read. It goes from being something exciting and interesting to something that seems to just be attacking you with ads. And readers begin to go away.

Soon, you’re displaying less than half the pages you were once displaying, so you’re actually earning less than you were before. On top of that, you have substantially less influence as well.

The Value of Influence
Influence itself has a lot of tangible value. Here’s an example of how that works in my case.

For many years, I tried to get the attention of book publishers with a fiction novel that I completed in 1999. The rejection letters piled up, and many publishers didn’t even bother to respond. Only one publisher even nibbled a little bit, and then they rejected it.

Once The Simple Dollar became popular, book publishers started contacting me. One of the first ones was Adams Media, who worked together with me to build the idea behind 365 Ways to Live Cheap, my first book. Once that one was successful, several publishers contacted me about a follow-up and I chose the one that gave me the most creative control.

Why did this happen? Book publishers have direct evidence now that the things I write have an audience – a large group of people will come around consistently to read what I write. That influence led them to believe that a book written by me was worth investing in, whereas before I wasn’t worth the time of day to them.

This same principle holds true for magazine and newspaper articles, speeches, and other opportunities. There is additional value – and income opportunities – simply from having a large audience on The Simple Dollar.

“I Can Write Better Than You… So I Should Be Doing This!”
Yes, you probably can write better than I can – and good for you. But making even a small income from an internet site is a lot different than other avenues for earning income.

First, you have to have tons of patience. Your first few months are going to be incredibly lean. You’re not going to earn much at all at the start, even though you’re putting tons of time into writing worthwhile stuff.

Second, you have to write good content every single day. Writer’s block doesn’t fly here – if you have writer’s block, you can’t just choose not to write for a while until it comes back. It’s much like being a beat reporter – if you don’t make the deadline almost without fail, people will stop turning to you for the information they want or the entertainment they desire.

Third, you have to be selfless. The only thing that matters is the readers, period. When they read an article of yours, are they actually getting some value out of it? Here’s an example: linking to sites that are better than yours, even though it risks readers leaving to those sites and never coming back. In truth, though, you’re making an effort to link to the best stuff – the stuff that resonates with you – and bringing it to your readers, even if it means some risk to you. Sure, a few readers might leave and never return – but others will respect and value what you do.

Fourth, you have to be writing about something people care about from a perspective that’s either interesting or that they can identify with. Dooce is popular because she writes about something many people care about (parenting) from a perspective that’s interesting or identifiable, depending on who you are (self-deprecating and snarky). You have to have both elements – a topic that’s interesting to a lot of people from a perspective that’s interesting to a lot of people. Add on top of that the requirement to constantly write good content and blogging at a high level can drain any writer.

I’m not trying to dissuade anyone from earning a living doing this. It’s just important to note that these are the realities of the situation.

In Conclusion…
Yes, you can earn money from blogging, but it’s not as easy as just logging onto the internet and voicing whatever is on your mind. It takes patience, focus, passion for your topic, and some “short order” writing skill.