Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest. You can check out my reviews of hundreds of personal finance books (and other related books of interest) all on one page.

Bargain Junkie is an unabashed frugality book, focusing mostly on maximizing your “bang for the buck” when spending money.

The book itself is broken down into a large number of very short sections covering specific frugality issues, often written in a humorous and often self-deprecating tone that’s pretty appealing.

Obviously, when you read a lot of frugality books, you begin to recognize that some of the central points in each book appear in all the books – which is fine, since there’s a very good chance that this is the first book on frugality that the person has picked up and many of the repeated ideas are the very good ideas that a person should use. Bargain Junkie follows this pattern and spends a significant number of its pages on what I would call Frugality 101, which makes it an equally good “starter” book as many other frugality titles out there.

What sets it apart, though? Instead of doing a section-by-section review of the multitude of short pieces in the book, I picked out ten short sections that really stood out to me.

Television Is A Model For How Not To Live
Instead of looking at how people live on television as something to strive for, use it as a guide for something to avoid. After all, do you want a unique and wonderful life or do you want to just be a pale imitation of that guy in the television commercial? Do you want to live by your own rules, or merely imitate the crass consumerism of The Real Housewives of East Overshoe?

Extended Households
Living quarters are one of the biggest expenses in our lives. Yet, quite often, large portions of our living quarters go completely unused as we often get into the routine of using just a room or two in our home for most of our activities. So why not share that extra space? Consider a more communal living arrangement, where you actually live with friends and family and split the housing cost appropriately. It works surprisingly well and it can save a truckload of money.

Collecting
Collecting can be a worthwhile venture for frugal people provided two things are true. First, you’re quite willing to sell off what you’ve collected. Second, you’re willing to keep up with the hobby and stay abreast of prices and information about it. If you do both of these, you can often find a very lucrative hobby from hitting thrift stores and the like. I actually have a friend who buys and sells vintage video games who claims to have bought games at many thrift stores for fifty cents and resold them for hundreds (think Chase the Chuck Wagon). I’ve even done it myself with trading cards of various types.

Try It Yourself Before Paying an Expert
Home repairs? Try it yourself by reading documentation online and giving it a shot. Exercise? Try home exercise before buying a gym membership and paying a trainer. Virtually everything you do that you hire someone else for can be done yourself. So why not try it and make sure you actually need to shell out the money for someone else to do it? Exercise at home first and make sure you’re willing to keep up some routine before hiring a trainer, for example, and you might find you don’t even need one.

Go Monastic
Why do you have to live the same life everyone else does? If you live cheap and build up a bankroll, there’s no reason you can’t sell everything and live out of your kayak for a couple of years. The only thing keeping you from doing something completely different in your life is your own fears. Most of the big dreams people have are usually really cheap when you get right down to it, so it’s rarely the cost that keeps us from doing something like driving around the country in a solar car talking at public libraries.

Buy Your Own Presents
Quite often, gift-giving occasions come down to giving other people stuff they don’t want and you receiving stuff you don’t want. Why? Sit down and have a heart-to-heart with the person and, instead of just exchanging gifts, pledge to do something fun and unique together that you both want to do. You’ll probably save money and almost always wind up doing something much more memorable, enjoyable, and long lasting.

Craigslist/Freecycle First
Whenever you need anything, it’s usually worth your time to check the local Craigslist or Freecycle before going out and buying it. You can often find great stuff for pennies or for free. Heck, I’m learning how to play the keyboard on a free Craigslist item. Similarly, if you have something you’re getting rid of, put it up on that list with a low price tag. Quite often, it’ll be off your hands without breaking a sweat.

Large City Travel
If you’re traveling to a large city, study the public transportation information for that city online before you go. In many large cities, you can have a wonderful trip there without renting a car or paying for a taxi by simply knowing and using their public transportation system. My wife and I spent a week in London several years ago without renting a car or taking a taxi, even from the airport.

The Biggest Element of Dressing Well
The biggest element in dressing well isn’t buying clothes from the expensive stores. It’s self-confidence. You have to be proud of yourself no matter what you’re wearing. If your confidence is the same no matter what you’re wearing, then it really doesn’t matter much at all what you’re wearing. A person’s confidence and personality always comes through.

I used to be fairly nervous wearing things bought at thrift stores. “Won’t people look down at these secondhand clothes?” I would think. I’d be more self-conscious and then I’d find that people did think less of me than I would have liked. But it wasn’t because of the clothes – it was because I was so self-conscious, nervous, and shy. The clothes don’t make the person.

Hit Ethnic Restaurants – Hard
This is something I did myself in college and still do on occasion. In terms of the quantity and quality of food you get for the dollar, few places beat ethnic restaurants. Go there, order something intriguing, and you’ll find yourself leaving with a doggy bag containing enough food for two more meals or so. I can’t tell you the number of times I’ve eaten leftover sauteed vegetables over rice where the price of each meal I actually got from the restaurant dish was cut down to the $2 level. I know some professors at my old college who almost exclusively eat (even to the exclusion of home food prep) at local ethnic restaurants.

Is Bargain Junkie Worth Reading?
Bargain Junkie feels very much to me like a collection of posts from a frugality blog with a very good writer and entertaining voice. The sections in the book are quick reads that usually each convey a central point or two or provide a checklist of highly specific tips and are packed with anecdotes that either make you laugh or breed familiarity with the reader.

Annie should start a blog, period. I would happily link to some of those entries and she’d probably end up earning more revenue from it than she would from this book over the long run. If you enjoy reading well-written, occasionally humorous blog post length articles about frugality and maximizing your buying dollar, you will enjoy this book.

My biggest problem with the book, actually, is in the design. To me, the design of the cover is poor to the point that I would have not picked up this book had I not had a vested interest in reviewing it. There are thousands of great books out there to read – I would probably walk on by this book on a bookshelf simply because there are so many other great books that I could be reading that didn’t give me a “go away, this book isn’t for you” vibe right from the cover. Yes, I know the cover was shooting for a certain demographic, but you can reach those people without giving a “go away” vibe to others outside that demographic.

Still, once I got past the cover, the book inside was quite worthwhile – an entertaining survey of frugal ideas.

Martin writes in:

I’m glad to see you’re writing reviews of books like Payback Time instead of just blindly preaching about index funds. You’ll never make real money with them.

I’m including Martin’s note because he’s actually right: you’ll never be able to beat the market with an index fund.

But that’s not the point of an index fund.

Investment strategies like the one described in Payback Time or Real Money or any other book that describes an investment strategy that focuses on individual stocks have one thing in common. They all require a lot of homework.

Cramer, for example, in his excellent book Real Money (which is far, far superior to his television show) recommends holding at least ten different individual stocks at the absolute minimum to spread out risk – and basically suggests people should hold twenty or more. However, he suggests spending at least one hour per week per stock you own for homework, plus additional time to study stocks not yet in your portfolio. With a twenty stock portfolio, you’re easily approaching thirty hours per week every single week just to study your portfolio.

Some people who are passionate about investing may actually enjoy spending 1,560 hours a year studying their stock picks. Those people, however, are in the minority.

I’m not going to argue that there isn’t some financial gain for that time invested. I absolutely believe that individuals (who are investing relatively small amounts) absolutely can beat the market to a certain degree with significant homework.

The question is whether or not that time is really worth it.

For a person who is passionate about investing, those thousands of hours are enjoyable fun for their spare time. Studying stocks is their hobby – and it’s potentially a lucrative way to mill away the hours instead of consuming other forms of entertainment.

If you haven’t got that passion, though, all of those hours spent doing an appropriate amount of homework are going to seem an awful lot like work on top of the normal workload a person has. It essentially turns your free time into more work time just to squeeze a few more percentage points out of your investment dollars – and that’s if you can execute a good strategy well.

Alternately, people in that position can toss their investment money into index funds, sit back, and simply match the market. You’ll never beat the market, and you’ll likely never beat a focused person who does adequate research into stock picking.

But you also won’t be spending big chunks of your week doing something you don’t really enjoy just to earn a little bit more than you’re already earning.

To me, the answer comes down to this. If you have the passion, make individual stock investing your hobby. Study it. Invest using your research. You’ll be spending your time doing something you enjoy and probably earning some extra cash from it.

If you don’t have that passion, though, stick with index funds. They’ll earn well for you by simply matching the market and let you spend your spare time on something else that you value more.

As I discussed yesterday in a pair of articles (this one and this one), I dream of a future where my children and I are completely financially independent from one another. I’m not dependent on them, nor are they dependent on me.

The real question that both articles strive to answer, though, is where should I put my money to ensure the best possible outcome for both me and my children? Retirement savings? College savings? Splitting it up?

In my eyes, the issue really comes down to the job every parent is charged with: raising a functional, critically thinking, independent child. If you are truly able to succeed in this regard throughout their childhood, you’re going to raise a child that doesn’t really need your help at all to succeed in the world.

In other words, if you take the time to really focus on parenting your kids in a way that makes them functionally independent and critically thinking adults, you don’t need to save for their education. They’ll be able to make their own way in the world without your financial support. Thus, you can channel almost all of your long-term savings into retirement savings so that you’re not a burden to them in whatever they wind up doing in life.

How do you do that?

Over the last five years, I’ve read a pile of books on the psychological needs of children and young adults, everything from Mindset and Born to Buy to The Read-Aloud Handbook and Raising Financially Fit Kids. I’ve come up with three basic conclusions.

First of all, praise children on their hard work, not their natural gifts. Focus on when they improve their results, not on when they simply succeed because of their talents.

Second, give them room to explore independently. Don’t hover. Don’t be paranoid about kidnapping. Send them out in the yard to explore things on their own, then when they’re done, ask them about it. The more independent exploration they do, the more resourceful they’ll become.

Finally, put them into challenging situations. Don’t protect them from failure. One of the most valuable childhood lessons is learning how to fail. What do you do next? You pick yourself back up and try again. If you go through childhood without knowing how to do this, adulthood becomes much, much harder.

If you are constantly conscious of these three things, you’re going to naturally mold your children to be self-reliant and independent. Those traits will serve them very well in whatever they choose to do in life, and because of that, you don’t need to hand them their education.

They’ll be able to make it themselves.

A final reason to save for retirement: if you do choose to help, retirement savings are usually flexible enough to allow you to help. You can often take out loans to help with education purposes from a 401(k), and you can take back your Roth contributions whenever you’d like to spend as you wish. If you decide that financial help is really needed, you can provide it with retirement savings.

So fund the 401(k) and the Roth IRA and don’t worry as much about the 529. Instead, focus your parental energies on being a parent that raises an independent and curious child.

Good luck.

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, two years ago this week, and three years ago this week. I call it … the Time Machine.

One Year Ago (February 21 – February 27, 2009)
A Walkthrough and Cost Breakdown of Brewing Your Own Beer We do this on a regular basis at our house. It saves us a bit of money, but more importantly, it’s a very low cost hobby that provides many hours of enjoyment.

Some Thoughts on Building a Successful Marriage If you’re married, keeping your marriage strong is a powerful personal and financial prerogative. Here are thoughts on what works from my own marriage.

Should You Use a Credit Card As Your Emergency Fund? It’s easy to simply just say “no” to a question like this, but I walk through the reasons why it’s a bad idea here.

When You Go Too Cheap Sometimes we cut spending too much and find ourselves in an unhappy place. Where do we go from there that doesn’t just undo all financial discipline?

Understanding CD Rates A basic discussion of how certificates of deposit work and what the rates banks offer for them mean.

Two Years Ago (February 21 – February 27, 2008)
I Quit This is perhaps the most personally life-altering thing I’ve ever written on The Simple Dollar. In it, I announce that I’m quitting my nine-to-five job to write full time. It was a truly scary leap.

Adam Smith, David Ricardo, Comparative Advantage, and You Here, I dug into some classic economic theory to make a few interesting points about managing your money today.

The Chorus of Voices for Index Funds I dug into a big pile of personal finance books here to discover that many, many writers (even Jim Cramer) strongly advocate the use of index funds for saving and investing.

The Three Basic Money Groups – And Why So Many People Struggle With Their Personal Finances Everyone spends their money on three basic things. A simple small shift from one thing to another thing can make a profound difference in peace of mind and financial stability.

Investing in Yourself: Socializing and Networking I had a long series of “Investing in Yourself” posts. This was probably my favorite one of the bunch.

Three Years Ago (February 21 – February 27, 2007)
An Introduction To Compound Interest With Spreadsheets, Part 1: Getting Started And Defining Compound Interest Spreadsheets are a fundamental part of personal finance today, and knowing how to use them is key.

An Introduction To Compound Interest With Spreadsheets, Part 2: Monthly Compound Interest, APRs, and APYs So, I wrote a three-part series showing some of the basic personal finance uses for a spreadsheet, how to acquire a spreadsheet for yourself, and a step-by-step guide for doing some of these basic tasks.

An Introduction To Compound Interest With Spreadsheets, Part 3: A Simple Mortgage Calculator The culmination of this series was a simple home mortgage calculator. If you understand how this works, you can do pretty much anything with a spreadsheet.

A Beginner’s Guide To Kitchen Equipment Cooking at home is a tremendous way to save money, but many people don’t know what to have in their kitchens. Here’s a “getting started” guide that I would actually pare down even more if I were writing it today. Seriously, I don’t think you need anything but a skillet and an enameled pot in your kitchen.

Dave Ramsey vs. Suze Orman: Which Plan For Dealing With Debts Is Best? Mathematically, Suze’s is a bit more optimal than Dave’s most of the time. Psychologically, I think Dave’s is a bit better. They both work, though.

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!

One of the most common debates I hear about from people such as myself – twenty- and thirtysomethings with young children at home – is whether it makes more sense to save adequately for retirement or save adequately for their child’s college education. Quite often, young career folks (like myself) don’t have the means to do both, so it becomes a choice. Retirement or college? Today, I’ll look at both sides of this coin that’s central in my own life.

When I envision my life thirty years from now, one key part of that vision is that my children are financially independent and not relying on me for any of their financial needs. I don’t want to be in a situation where they’re still living at home or they’re relying on regular cash infusions from me when they’re thirty.

One major avenue to this level of success is earning a college degree, which can directly lead to a much higher level of earning than life without a degree. I can help pay for this degree, but it may come at the expense of saving adequately for retirement.

What are the advantages of college savings when you’re young? An adequately funded college savings plan, started when a child is young, can grow into a major resource for paying for significant portions of a child’s college education.

For example, let’s say you start funding a 529 plan with $250 a month when your child is born. The account returns 8% per year. On their eighteenth birthday, you’ll have $116,844 sitting there waiting for their college education. If you don’t worry about it until they’re in junior high, starting at age twelve, they’ll have only $22,888 in savings.

What about your retirement? Many people who make this choice are also making the choice to work later in their lives than the typical “retirement” age. They have no qualms with starting their retirement savings in earnest after the kids are out of the house (say, age forty five or fifty) and planning on a retirement that starts much later (say, seventy or seventy-five).

For some people – especially people who find a great deal of personal value in their work – this makes a great deal of sense. Take myself, for example – I pretty much never want to be idle until I literally am unable to do anything at all. I’m just not wired that way.

What if I change my mind? If you’re using a 529 savings plan to save for college, you can withdraw the money from the account as you wish. You will have to pay taxes on the gains plus a 10% additional penalty for misusing the account.

However, if you wish to use that money for educational purposes for someone else – say, yourself or a child’s sibling – you can change the beneficiary without a penalty as long as the new beneficiary is a close family member.

I don’t want to burden my children in my dotage. If you find yourself needing their assistance in your old age, you will have given them a tremendously strong platform from which to help you if they so choose. The financial advantage you gave to them by ensuring that they were not burdened by student loans puts them in a much stronger financial position in adulthood, one in which they can afford to help you if you need it.

What if I reach my retirement age and don’t have adequate savings because of this choice? You’re finally pushed out the door, but you don’t have enough money to make ends meet. What happens then?

To put it bluntly, you’ll have to find a source of additional income. It’s important to recognize, however, that reaching this point without adequate money isn’t necessarily a disaster. Most people in this situation – having chosen to help their children instead of saving for themselves – do have a myriad of options available to them when they reach old age.

This might come from finding another job. It might come from financial support from your children. It might come from goverment support. It might come from something as simple as being the daycare provider for your grandchildren. If you choose this route, there will be options available to you at this point. It does not have to be devoid of options if you’re willing to step up and take action.

Wait a second! You’re probably wondering what my actual conclusion on this topic is. Is it better for the parents of young children to save for retirement first – or save for education first? As you’ve seen, there is a case to be made for both sides of the coin, but I actually do have an answer… which you’ll read about tomorrow afternoon.

One of the most common debates I hear about from people such as myself – twenty- and thirtysomethings with young children at home – is whether it makes more sense to save adequately for retirement or save adequately for their child’s college education. Quite often, young career folks (like myself) don’t have the means to do both, so it becomes a choice. Retirement or college? Today, I’ll look at both sides of this coin that’s central in my own life.

When I envision my life thirty years from now, one key part of that vision is that I’m not financially dependent on my children. I’m able to live the life I want to lead without them worrying about me (at least financially) in the least, particularly in my final years.

The best way to ensure that kind of a future is to focus primarily on shoring up retirement savings, even if it comes at the expense of saving adequately for the college experience of one’s children.

What are the advantages of retirement savings when you’re young? The big advantage of retirement savings when you’re young is that it has a huge number of years to grow and grow and grow. The power of compound interest has plenty of time to work in your favor.

The real numbers tell the story better than anything else. If you invest $10,000 when you’re 45 at an 8% rate of return, you’ll have $46,609 when you’re 65. Invest $10,000 when you’re 35 and you’ll have $100,626 when you’re 65. Invest $10,000 when you’re 25 and you’ll have $217,245 when you’re 65. The earlier you sock away money for retirement, the better the deal is.

What about their education? Self-motivated students can always make college work if they choose to do so. There is a myriad of financial aid options available, plus most schools also accept transfer credits from very low-cost institutions, enabling students to fulfill many of their general education requirements at a very low cost from community colleges.

Beyond that, having a student take a large deal of responsiblity for their education forces them to learn some personal responsibility that they might not otherwise learn. It can also show them, first hand, the cost of their education – and the value of it. Those are lessons that aren’t taught by simply writing a check for them.

What if I change my mind? If you start saving for retirement, then change your mind about your choice, you’re not completely without options. Most common retirement savings plans allow you to use some – if not all – of your retirement savings to help with college education.

Most 401(k) plans allow you to borrow against them to pay for educational expenses. However, if you do this, you lose out on the returns during the years that you’ve got the money out on loan. If you’ve used a Roth IRA, you can withdraw the amount you’ve contributed at any time without penalty, but you can’t put that money back.

I’ll feel guilty about saddling my children with lots of student loans. There’s no reason you can’t help them pay off those loans when you’re very secure in retirement. At Christmas, write a check to their student loan holder, knocking off a chunk of their loans for them. This way, you’ll be making the payments from a position of total security rather than from a position where the future is uncertain.

What if this makes my children fail to get an education? From my perspective, that’s more of a commentary on the initiative of your children than anything else. If this roadblock somehow “prevents” them from going to college, they’re showing a lack of self-motivation that will hinder them in more ways than just not getting a degree. Without that kind of drive, they’ll be hard-pressed to succeed in any high-pressure field.

They might also simply not be interested in what college has to provide for them and are intelligent enough to make that decision on their own. In that situation, a trade school or something similar might actually be the best situation for their temperment, for one example. Students who attend trade schools can often earn a very good salary doing a wide variety of skilled labor.

This makes a strong case for saving for retirement instead of saving for your kid’s education. But what about the flip side of the coin? Tune in later today to see that discussion.

Yesterday, while in the middle of a conference call, our home telephone dropped dead.

The phone’s small screen went black, came back on, and then refused to connect to the base. I switched to another phone – and the same problem occurred. I called back into the conference call using Skype, but afterwards, I continued to investigate. I ran through every diagnostic in the manual and a few more I found online to no avail.

Something was simply broken with the phone.

I needed a functional replacement quickly. The very next day (yes, that means today), I was scheduled for two additional phone calls that I needed to be on, plus we were receiving regular updates about an ailing relative.

This would have been a perfect excuse to just run to the store, pick up an imperfect quick replacement, and muddle through using it.

Instead, it was an opportunity to figure out what the best method is when you need to buy an immediate replacement for an item.

First, I researched the item thoroughly online. What phones were out there that had the options I needed? I hit Amazon. I hit a few other sites that offered many reviews of cordless phones.

After some deliberation, I found myself with a list of models that I would consider buying. This took about half an hour.

I then hit the websites of various retailers in my area. I searched to find out if they had any of the models in stock in the stores near me. I actually found several different options when doing it, as certain phones were carried by certain chains and a few were carried by multiple chains.

This gave me a list of phone models, prices, and locations in my area from which to make a decision. This list, made in a spreasheet, took about fifteen minutes.

Once I had that list, I read through a few reviews again to help me make my final decision and then moved forward with the purchase by selecting a store and a model to buy. I verified it was in stock before I went to purchase it.

One other big step: I made this trip into a multi-errand stop. I also needed to pick up a few groceries and stop by the post office, so I got those things in order as well. I finished up my shopping list before I left and collected together all of my mail, too.

The end result? I wound up with a pretty good phone at the best price I could find. In other words, for about fifty minutes’ worth of work, I maximized the bang for the buck from my phone purchase (with the caveat, of course, that I needed to pick it up quickly). I also focused on maximizing the value of my trip by compounding it with other stops.

Sometimes, life hands you unexpected expenses. That doesn’t mean you have to stop, throw your hands up in the air, and just pay out the nose for an inferior product. Even if you need to have something quickly, you can still take the time to improve the bang for the buck you’ll get with your purchase.

Good luck!

Welcome to today’s reader mailbag!

My husband and I are currently a two-car family looking to make the transition to one car for awhile. My husband will be telecommuting for work at least through the end of the year (we are moving to a different state where he will continue to work for his current company). Our new city will also have significantly better public transportation options (the Twin Cities area). We own his car (2004 Chevy Malibu with about 75,000 miles on it) and have $7,000 left on the loan for my 2006 Chevy Malibu Maxx (45,000ish miles) with 6.8% interest. We will pay this off before the end of the year.

Our question is, does it make sense to sell his car? If he switches jobs around a year from now we might need to purchase another vehicle, depending on where it is located. If we don’t sell it, it will just sit in the garage.
- Ashley

Congratulations on moving to the Twin Cities? I live just a couple hours south of there and I really enjoy visiting there (my wife has family in the outer edges of the metro area).

When you say “switches jobs around a year from now,” I’m assuming you’re referring to the move to the Twin Cities and not leaving his current company. If that’s the case, I would sell the car. Then, when you move to the Twin Cities, I would give public transportation a genuine shot before jumping on board buying a replacement car.

Once you move, it may make sense also to carpool. I’m not sure what you’re doing in terms of work, but if you can both get into carpools at your work on different days, you may be able to both use the car for commuting. Of course, you might be staying at home, too – it’s unclear from the email.

Anyway, I don’t believe you’ll necessarily need the car when you move and if you don’t need it now, I would sell it. Even with leaving it in your garage, you may have to maintain a minimal insurance on it (depending on laws in your state), and if there’s a good likelihood you won’t need it again, I’d sell it.

Given all the uncertainty in today’s economy, what methods do you use to keep fear from creeping into your financial decision-making process? Is there any such thing as “healthy” fear?
- Jesse

I’ve always been a believer that the only thing we have to fear is fear itself. I don’t feel that there is anything to truly fear in this economy that doesn’t exist at other times in our national life.

The biggest thing that I do to keep fear from creeping up on me is I ignore fear peddlers. I don’t waste my time listening to or thinking about people who try to make me afraid of the future. For one, those people are usually salesman in some regard, trying to sell you books or magazines or gold investments or long-term food products, so they have a personal economic interest in making you afraid. For another, you can still get the facts you need without the fear by acquiring your information from a variety of sources. This eliminates the salesmanship and political angles (or at least neutralizes them).

There are some things people should always do to ensure a secure future. A healthy emergency fund – at least a few months’ worth of emergency expenses in cash – is one. A well-rounded set of transferable skills is another. Those things should be done in strong economic times or poor ones.

Just take a critical eye to the reasons you’re afraid. Who’s delivering those reasons to you? Is it a person or business that has financial incentive to make you afraid? Often, it is.

I am a 23 year old female college graduate. I graduated with a degree in mathematical science. When I first graduated last May, I had an extremely hard time landing myself a job because of the economy. Finally, I found a position doing A/P work (although I was over-qualified) in a corporate HVAC office. I do not like my pay and continued my side jobs with tutoring and waitressing to help cover my college credit card debt. An old boss offered me a position to replace his current office manager making $10G more a year of my current salary. His office is a private, family owned company. I accepted the offer. What an exciting challenge I thought to myself, to be 23 and offered such a high position! When I handed in my letter of resignation, my current job matched the offer. Both parties said they see a lot of potential in me. It was honestly, one of the nicest (yet hardest) compliments I have ever received.

Now, here is my big decision: do I go corporate? or private? The big advantage of the private position is that he is willing to match a 401K and the corporate position does not. Other than that, all offers on the table are the exact. Should I allow these two factors (an old boss, and a 401K) to sway my decision?
- Erin

I think the factors you should care about don’t have to do with compensation at all. I would go for the position that puts you in the best long-term situation for your career.

Since I don’t know about your career or the two positions in any detail, my suggestion would be to find someone in your field that you trust – maybe an old professor or something like that – and have a long conversation where you lay all of the details down. You want to choose the one that will give you the best platform for a great career for a long time.

My feeling would be that the office manager job would probably fill that requirement better. When you leave your current job, make that reasoning very clear. They may just suddenly promote you to something better to keep you – it sounds like you’re valued there. There is nothing wrong with both companies trying to get you / retain you and competing over you a bit.

Put yourself where you need to be for the long term.

I just read your archive post about making breakfast burritos in bulk. I love the idea and look forward to trying this.

I’d appreciate any advice you may have about this.
- Maya

I have made that burrito recipe (or variations on it) many times, along with other “convenience foods in the freezer.” Each time, I either wrap them individually in Saran Wrap or freezer bags.

In my experience, the items are usually good for a couple of months and edible after that if you haven’t finished them off.

There are two big keys, though. First, package them as well as you can. Make sure they’re minimally exposed to the conditions of your freezer. Second, when you cook them later, wrap them in a paper towel or a hand towel when cooking so that you don’t lose retained, frozen moisture to the microwave. These two things will make all the difference in the world.

You mentioned you’ve started using EA Active instead of Wii Fit for simple exercising on your Wii. How is it working for you?
- Billy

I use them both, actually.

I find Wii Fit to be more fun, but provides less actual exercise. The games in Wii Fit are more enjoyable than the other game and there’s much more of a sense of trying to beat your high score while also moving around quite a bit.

On the other hand, EA Active provides a much better workout, but doesn’t have as much of a “fun” factor. I can actually get sore with EA Active (provided one replaces the elastic band the game comes with with a band with much more resistance or with wrist weights) and the exercises are enjoyable and clear, even if they’re not as “fun” as Wii Fit. My one complaint is that the leg band with EA Active slips like crazy. I fixed this by wearing cargo shorts when I do it and just putting the nunchuk in a pocket.

I play them both a few times a week. I can actually get sore from EA Active but I usually have more fun trying to beat high scores on Wii Fit.

Long story short – my husband is on a 10-year payment schedule for about $130K in student loans from undergraduate and law school. The bulk of his income goes to those loan payments, leaving us enough to pay utilities bills, groceries and such. But we also have a combined credit card debt balance of close to $10K.

It’s a discussion that comes up every few months with no solution or agreement on how to handle this. Sure it’s great to pay down debt, but are we paying off the wrong kind of debt? Shouldn’t we extend the student loan payments in order to pay down the credit cards and start saving for unforseables and other investments (namely a home)???
- Lauren

The obvious answer here is to tell you to re-evaluate your spending and look for some ways to spend less, because that’s the best method you have for improving your situation.

Beyond that, though, I think it’s reasonable to take a look at extending his loans, depending on what the interest rates on the various loan options are. If the loan extension causes the interest rates on the loans to jump up, it’s not a good idea to extend them, even if it reduces your monthly payments by a little bit.

I’d probably say your best plan would be to throw your credit cards in a blender and live without them for a while. Use your debit card (as a credit card, of course) for purchases.

Is it better to pay one extra principal payment a year or pay half your mortgage twice a month? I paid our typical payment Feb 1st, but then paid half of our normal payment on Feb 15th and will continue paying half on the 1st and 15th…

I know I am ahead by approximately half of the principal now and will make up the rest on each payment a little at a time. I just thought it would be better because it drops down the principal every month which would mean less interest.
- Krissy

Many people argue that it’s better to pay half of the mortgage payment early in the month. On paper, that can make sense, but it only makes sense if your lender is compounding interest daily (rarely) or using a daily average to calculate the interest on a monthly basis (much more likely). If they are truly just compounding the interest monthly based on the balance at the end of that month, it won’t help a bit.

Thus, your first step is to either read through your mortgage or call your lender to find out how the monthly interest is calculated. Many lenders do a daily average with monthly compounding, which means they calculate the balance of your mortgage each day over the course of a month, add them all up, then divide by the number of days in the month. If you get a half-payment in early, you reduce the balance of your mortgage for half of those days, thus reducing the calculated interest at the end of the month.

You just need to know how your lender calculates these things. Once you find that out, you’ll quickly be able to figure out whether an early payment will help you out.

I am going to be voluntarily jobless for the next 3 months without much income (oddjobs and part time stuff here and there but nothing substantial). I have 2 credit cards with about $1000 on each and one with $2000, would it be better to pull out my money from my retirement (Im 25, its not much, but after taxes it would be right at 2k) and pay off the 2 cards, or leave the money in the bank and just make payments slightly above the minumum?
- Will

I would leave the money in the account and make minimum payments on the credit cards for these jobless months.

For one, you’re suggesting pulling money out of retirement to pay off debts. The only time you should take money out of retirement is when you’re legally allowed to pay it back or you’re absolutely forced to do it. Neither case is on the table here.

For another, if you use that money now for credit card debt, it will not be there when you’re actually in a situation where you genuinely need it, and it won’t be there for retirement, either. Since I’m not sure what “voluntarily jobless” means – do you actually have a job lined up in a few months? – I would be very hesitant to take out that money.

I’m a 26 year old reader, I’ve been reading since 2006. I saw this story on Huffington Post and it blew my mind. If she is the poster child for a “broken system that needs to be corrected” they need to pick their stories better. It kind of made me want to pull my hair out, and, for some reason, I’ve chosen to give you that same frustration by linking the story below, haha. Overview- she chose to go to Tulane instead of a local state school that would have “basically paid me to go there”, and now she’s complaining because she’s racked up 100,000 in debt on an English degree and traveling abroad. Le sigh…

http://www.huffingtonpost.com/sara-tobin/college-debt-100000-in-de_b_471034.html
- Cortney

Here’s the problem with confessions like this: hindsight is 20/20.

At her current stage in life, she’s very worried about money. Looking back, she can see a lot of situations where she made choices that were very poor in terms of the immediate financial consequence, such as going to Tulane and studying abroad. She regrets it, because her current concern (money) is now the focus.

At the earlier stage, her focus was not on money, but on receiving the best education she could get. She made choices solely with that in mind and it sounds like, even today, she recognizes that she receives value from it.

The problem is that today, with her new realization that money is a scarce resource, she’s faced with choices that she doesn’t like. It’s now time to pay for that education.

There is absolutely no point in looking back at the past and getting angry with yourself over the choices you made. It’s a waste of time. Instead, you need to look at where you are now and ask yourself what choices you can make today – and tomorrow – to put yourself in a better position in the future.

Today isn’t the day to sit back and whine. Today is the day to step up and take action.

My wife and I are 26 years old and we are getting about $3k in tax refunds and work bonuses this year. We’re trying to decide how best to use it.

My thought is start a Roth IRA, I’ve been talking about it forever and this is a good opportunity to start with $3k to avoid fees with Vanguard and start a Target age fund. Then we scrape to reduce the mortgage as it has the highest interest rate and work to get rid of the PMI as soon as we can and build equity in the house we plan to sell in 5-7 years. We then can also funnel a higher percentage of pay to the emergency fund as there is some room with the credit cards now paid off to do that.
- Jay

I think there are valid arguments for a lot of different ways you could spend your money here. You make the case yourself for the Roth IRA. There’s also a good argument for putting the money towards your mortgage, since it’s your highest interest remaining debt and you’re thinking about upgrading in the future. There’s also a good argument for simply supplementing your emergency fund.

I would step back and look at your situation more deeply. What would you do if you lost your job? Do you have resources to help you manage that situation well? What if one of you got sick and had to go on an extended FMLA leave?

This pushes you either toward the emergency fund or the Roth, I know, which is where I would go.

Since Roth saving is for long-term saving, I think what I would do is take the $3,000, put it in my emergency fund for now, and then keep trying to fund it to build it even bigger. At the end of the year, I would look at my emergency fund and ask myself how much of it I could reasonably afford to put into a Roth IRA without putting myself at risk.

Good luck!

Got any questions? Ask them in the comments and I’ll try to include them in a future reader mailbag.