My wife and I are considering getting a puppy for our son, who really seems to love small dogs and often asks us whether we’ll ever have one. While we haven’t made up our minds yet on this decision, I did take a few moments to ask a few of my pet-owning friends if they had any advice about how to reduce the costs of acquiring and caring for a pet without skimping on the quality of care. Here’s what they suggested.

Visit a shelter to pick out your pet. Yes, you have to be more selective when visiting a shelter because some of the animals have been mistreated and may not react well to children (or adults). However, if you visit a hand full of shelters, you’ll often find many wonderful pets that will fit your needs well. There are a lot of reasons that pets wind up at shelters, and neglect/abuse is just one of them.

Donate $100 to the shelter. Check out their programs first, but quite often, a $100 donation will ensure that you get a pet that has already had vaccinations and has already been spayed or neutered. These procedures can cost hundreds of dollars if you take your pet in to a vet to have it done later.

Don’t skimp on food. A fifty pound bag of Ol’ Roy might be a cheap way to feed the pet, but it will result in long-term health issues that will be expensive to treat. Instead, research what kinds of food are most appropriate for your pet and be willing to spend a little more to get good food. This will help to keep your pet healthier, happier, and active for a lot longer. One of my friends doesn’t even feed her dog traditional “dog food,” but has studied what raw foods their diet should consist of and feeds the dog those items.

Buy that food in bulk. Once you figure out the best food for your pet, don’t hesitate to buy it in bulk and store it somewhere out of the pet’s reach. Depending on what you choose as the optimum food, you may find it at your local warehouse store or you may find a bulk seller in your area.

Groom the pet yourself. Taking your pet to a pet salon might be an easy way to get the pet clean, but almost everything done there can be done quite quickly at home and a lot cheaper. Don’t be afraid to get your hands dirty and clean your pet yourself.

Know their routine. Pay attention to your pet. If the pet’s routine starts to change, that’s a sign that there’s some sort of medical issue coming down the pipe. If you notice it now, it’s often easy to treat with a dietary change or something else that’s simple. If you wait until it’s disastrous, it can be very expensive.

Hit the library. If you have a new pet, learn about it. Learn what things it needs. Learn about some of the basics of caring for that pet, as well as signs for the most common ailments and how to treat them. Learn how to train your pet in the skills that it will need – and put in the time to train the pet yourself.

Treat simple things, like fleas, ticks, and heartworm, yourself. This involves understanding your pet’s health (the tips above), but if you’ve actually invested the time to know how to properly care for the pet, then you’ll know what simple ailments you can treat yourself instead of paying a vet to treat. It’s much less expensive to order the treatment yourself than to consult a vet for the most common ailments.

Keep the water bowl full. If you notice the water bowl for your pet is low, fill it, and keep an eye on the bowl throughout the day. Appropriate amounts of water is perhaps the best insurance for a pet’s long term health. The exception to this is when you’re housetraining a puppy, in which case you need to stick to a strict watering schedule. Too much water for a puppy can result in accidents and a big setback in training.

Check Craigslist for supplies. Need a pet carrier, a leash, or a food bowl? People on Craigslist are often selling this stuff for a pittance (and sometimes it’s free on freecycle). When you need reusable supplies like this, heading straight to the store is a sure way to spend more than you probably need to.

The best thing you can do for any pet, however, is to show the pet love. Just like humans, most pets thrive on being loved by others. So, go ahead and give that big, slobbery dog a vigorous petting and stroke the cat until it begins to purr.

At age 25, Jim makes $100,000 a year. He’s constantly traveling for business. He has a large home in which he often doesn’t visit some rooms for months at a time. He eats out every single night. He drives a leased Lexus, which he updates every few years at the end of the lease. He buys a whole new wardrobe every six months, taking the leftovers to Goodwill. He spends everything he brings in.

At age 25, Bill makes $35,000 a year. He lives in a smaller home and doesn’t travel much. He makes most of his own meals at home. He drives a Toyota Corolla, which he owns free and clear. He wears clothes until they’re worn, then shops at Goodwill for replacements, often picking up Jim’s barely-worn clothes. At the end of the year, he usually has about $5,000 of his income left over, which he sticks into his stock investments which earn 8% a year.

In ten years, Jim’s net worth hasn’t grown a cent. In those same ten years, Bill has $72,000 in the bank.

At the twenty year mark, Jim’s net worth still hasn’t grown a cent. In those same twenty years, Bill has built up $228,098 in the bank.

At the thirty year mark, Jim’s still breaking even. Bill, on the other hand, has $566,416 in the bank.

At age sixty five, Jim hasn’t accumulated a cent and will be working for the man for the rest of his life. At the same age, Bill has $1.3 million in the bank and can do whatever he wants for the rest of his life – and probably already started doing that a few years earlier.

It doesn’t matter how much you earn. It matters how much you save.

When I was twenty five, my net worth was negative and heading south rapidly. I spent more than I earned and I didn’t really worry about the consequences of it. I figured if I had the money – or the credit – I certainly ought to spend it in whatever way made my life more enjoyable right now.

I’m now thirty one. My net worth is still negative (although it would be positive if I counted the value of my home towards it, which I do not), but it grows every month in a positive direction and will soon become positive even without the house value.

One might immediately think that I must have made my life less enjoyable to make that change. Actually, my life is more enjoyable now.

I have a better grasp on the things that actually make me happy and I don’t waste my money on things that don’t.

I’m not chained to a desk and a career, fearing the pink slip – I set my own career rules and goals.

I’m not afraid of getting the mail any more and I don’t wake up at night worried about how I’m possibly going to make ends meet or pay all of this off in the future.

Perhaps best of all, my financial position is improving every single month and I no longer see the long-term future as some kind of musty cloud that will “work itself out.” I know it’s getting better and I know that, if I continue on this path, I’ll be able to easily have some of the big things I actually want in life, like a beautiful house in the country with some wooded land in the back.

My life now is something I’ll happily trade having a shiny new Lexus and an iPhone and a set of high-end golf clubs and eating out every night for. In exchange, I’m not worried about the future and I have career and personal freedom I would never otherwise have.

Wealth has little to do with how much you earn. It’s how you spend – or save – it.

I make financial mistakes. I make a lot of them, actually.

What I usually try to do when I screw up is not dwell on them. Instead, I try to identify why I made the mistake and then try to figure out how I can fix that issue. I don’t beat myself up over them – there’s no benefit in doing that. I’m human. I made a mistake. I’m going to make more in the future. The best thing I can do is just make sure that mistakes don’t turn into a culture of repeating them.

Here are ten mistakes I’ve made over the past year.

I’ve splurged too much on books. Most of the time, when I find out about a book I want to read, I either reserve it at the library and/or I check for it on PaperBackSwap. Most of the time. Far too often in the last year, I’ve allowed my impatience to get the better of me and I’ve just ordered the book off of Amazon.

Solution: The real problem is the convenience of book ordering from Amazon. My solution was simply to remove my card information from the site so that when I go on there to order, the “hassle factor” goes way up. It’s a lot easier to tell myself I can just patiently wait on Wolf Hall if it’s a hassle to order it.

I miscalculated my estimated taxes for 2009. Mostly, I’m just not very good yet at really estimating (at the start of the year) what I’ll make all year long. Trust me, if you’re self-employed and make an income that varies a lot from month to month and isn’t really predictable, the federal tax laws do not work in your favor. My mistake was estimating far too high at the start of the year this past year and then really struggling through the middle of the year as my income was really low.

Solution: I just need to be very, very careful when calculating my taxes and, because of the penalties involved if I miscalculate, I should calculate very much on the high end. It’s a lot better to pay extra now and forego the small amount of interest than it is to pay less now, realize you didn’t calculate quite right, and have to pay a stiff penalty.

I waffled too long on replacing my truck and passed on at least two great offers. As I shopped for a vehicle to replace my truck, I knew I had plenty of time. This led me directly to favor the “two birds in the bush” over the one in the hand and constantly skip over good deals I’d discovered.

Solution: We finally found a great vehicle and are moving forward with the purchase of it. I hope to write about it soon.

I left more cash than I should have in my checking account, foregoing nice interest returns elsewhere. Because our income is variable, our automatic savings transfers are on the low end of what they should be. Thus, during good months, money builds up in our checking account. I left it there instead of putting it into savings.

Solution: Be more vigilant with my balances and my automatic transfers. Check in on things at least twice a week and don’t be afraid to transfer money back and forth as needed.

I didn’t spend time re-evaluating long term goals. The big question, “where do I want to be in five years?” It’s something that I’ve learned is well worth reviewing on a very regular basis, particularly with the people most important to you. I didn’t do this and instead stuck with some visions from the past. Meanwhile, life goes on – we decide to have a third child and make some other personal decisions. Suddenly, the five year vision is quite a bit different – and our saving and planning tactics are a bit out of whack.

Solution: Look at the future more often. Talk to my wife at least every month about our future. Save our money for these goals in a way that’s pretty flexible so that if plans change, we’re not subject to financial penalties.

I gave less to charities in 2009 than I intended. Mostly, this was borne out of uncertainty about the uneven income I was making. I strongly padded my emergency fund during 2009 and charitable giving was one of the things that suffered in the process. We still gave, don’t get me wrong, but we didn’t give nearly as much as we could have.

Solution: Since most of the money we would have given is socked away right now, we can simply do more charitable giving in 2010 to make up for it. In addition, I’ve been steadily increasing my time given to volunteering over the past year, and time is money, after all.

I let my personal inbox overflow. The problem here wasn’t that I missed out on anything truly important (though I did come close to being late on a bill or two). The problem really was that I missed out on several opportunities for local political involvement and career advancement and, in one instance, in getting my child registered for youth sports.

Solution: I need to process my inbox to zero at least once a week. This was once a routine, but it got thrown off when I was in “crunch time” with my book. I need to get back to it.

I allowed myself to get talked into an expensive trip. Several of my friends and my wife persuaded me to take a trip to GenCon in Indianapolis this summer with a large circle of friends. I was resistant to this for months until I realized that at least one close friend had decided to go on the trip mostly because I was going. I let the guilt of that get to me.

Solution: I’m going to go on the trip and enjoy myself, but I’m going to save very carefully for the expenses. This is another reason to control the book spending, as mentioned in my first mistake.

I didn’t pay enough attention to my wife’s retirement planning. My wife’s investment advisor through her work had been managing her retirement savings. I made the mistake of assuming that the money was being managed well.

Solution: Even if there is an advisor involved with money management, I need to be involved myself and know exactly what’s going on. Even more important, if I see something I don’t like, I need to step up and make a change.

I backed away from some of my big career visions. During the crunch time of my upcoming book (and some cooldown afterwards), I let a lot of other ongoing projects slide for a while. This likely means some missed opportunities and some missed income.

Solution: I’ve recommitted myself to long-term projects with regards to my work. There are several projects that were allowed to run cold and I intend to pick them up and run with them in the coming weeks.

Yes, I mess up. A lot. Time to learn from them.

Several people have asked me recently why I have a “weekly roundup” (where I link to sites that write about similar things as me) and why I have a big list of blogs I like on every page of The Simple Dollar. Isn’t that just helping the competition?

Maybe. But I don’t really view those sites as competition. My entire purpose for linking is to share what I consider to be useful and interesting websites and articles with my readers. I figure that if you find value in them, you’ll come back here eventually to find more value.

If you don’t, at least I know I improved your life and reading experience.

I recently started seeing a Psychiatrist, and was diagnosed with depression. I’ve probably been living with it for about 6 years now, and now that I am receiving proper treatment, I feel like I just woke up from a coma. Its not that I don’t remember anything I did over the past six years, or that I didn’t do anything, its just that whatever I did had no forward thinking to it. I had no goals. I didn’t really care about anything except eating, playing video games, and making money so I could eat and play video games.

The good thing is, both the car loan and the pension loan (I have a state pension through my job) will be over within the next year. I have 4 months left on the pension loan and 8 on the car loan. I’m pretty much living month to month at this point, and I’m wondering – where would you start the digging out? How much should I try to save a month? How much should I put into paying things off, and what should be the priority for that be?
- Jeff

You’ve got to knock out those credit cards. I can’t imagine that your student loans are anywhere close to the interest rate on your credit cards.

What I would do in your case is make a simple debt repayment plan. At the top would be your highest interest debt, and after that all of your other debts are ordered in order of their interest rate.

Whenever you have extra money, you throw it into an extra payment on the highest interest loan (after making minimum payments on all of the loans, of course).

That’s really the best way to approach this. Once you have only a few debts left – all with interest rates under 10% – you can start really looking at other options. Of course, at that point, your monthly minimum debt payments will be eating a lot less of your income.

It seems that quite often there is a conflicting viewpoint between Consumer Reports (which bases its ratings on testing, and its reliability on consumer surveys) and the reviews/comments I see on the site from actual consumers, or from other comments on sites like epinions.com. Consumer Reports may say a certain model of vacuum cleaner is great, for example, while I’ll see many consumers say just the opposite.

How do you think is the best way to research the purchase of a particular model of appliance (like a vacuum cleaner)?
- Chris

I have a hard time giving a lot of trust to wide-open consumer review sites like Epinions and, frankly, Amazon. I trust Consumer Reports far more.

The reason is simple: when it comes to reviews on websites where anyone can post a review, you often have no idea who the person posting the review is. Sometimes, it’s an individual who has a vested interest in you not liking a particular product or liking another particular product. Given that such anonymity on accounts is easy to achieve, it’s hard to really trust any specific review.

I tend to trust reviews from individual reviewers much more. If I can establish a long history with that reviewer, then their reviews have merit for me. That’s why I love book review blogs and websites – I tend to trust the individual reviewers.

Consumer Reports is more of the “trusted” source. They have a reputation to uphold for unbiased reviews. They can’t afford to write biased ones because they have a reputation at stake. “Sandra from Ohio” on a review website doesn’t have a similar reputation to uphold.

Combined, my wife and I have about 50k in money market accounts (emergency, travel, repairs), about 100k in our 401k’s, 8k in our IRAs and my wife has an additional 10k mutual fund and participates in the ESP plan (roughly 10k). We are both 33 (no kids yet).

If we cannot contribute to the Roth IRA, is it worth it to max out a traditional IRA and convert to a Roth every year? Everything I read says this is fine to do (though you pay taxes on conversions). Are we better off just putting that money into our 401k? I’m confused as to the tax implications on converting IRAs every year vs. the tax savings on future withdrawals of the Roth.
- Sean

Essentially, your comparison is between the tax bracket you’re in right now versus the tax bracket you’ll be in when you retire. That involves some guesswork.

One great way to start is to estimate how much income you plan to have in retirement compared to your current income. Are you aiming to bring in the same amount? Substantially less? Figure that number.

My assumption is that if you’re making the same in retirement as you’re making now, you’re better off in the Roth. That’s because it is my belief that income tax rates are going to have to go up.

How many emails do you get a day? (How many do you answer?)
- Bryan

I get between 300 (weekend) and 500 (weekday) non-spam emails a day. I do my absolute best to keep up with them, but there are times where I simply cannot.

At this point, it would be somewhat reasonable for me to actually have an assistant whose job it is to deal with the deluge. However, that’s really an expense that we can’t swing at the moment.

I typically answer about 50 emails in a given day. I also usually use 3 to 5 of them directly for posts on The Simple Dollar – twenty a week for reader mailbags and maybe five more for other posts.

I have no current debt except for my mortgage which I make extra payments on each month. I have 8 months of emergency living expenses saved up. I have a 401k which I contribute up to my employer’s match and I have a Roth IRA which I contribute to continuously. I have also saved up over 30k in high interest savings account. My problem is that I am dying to buy a BMW 335. I sit in front of the computer everyday and read countless professional and consumer reviews and sometimes ride out to the dealership to look at the work of art in the lot calling my name. I just can’t come to terms with emptying out all my savings for a car that depreciates in value yet I want to have the car so bad. I guess my question is how can I deal with this? Should I buy the car if I want it that bad? Should I finance it and then just pay it off really quickly to help break the impact of draining my savings in one swoop? Thanks for your help.
- Christopher

Look, I want things like this, too. I’d love to just drive down to the dealership and buy the car of my dreams.

If I’ve learned one thing over the years, it’s that if you do that, it isn’t long before you want something else. And something else again. We all always want something.

If the BMW is truly the thing you want the most in the world, the thing that will add a ton of value to your life and make everything else pale in comparison, then you should buy it. I would not deplete all of my savings to do it because of Murphy’s Law – the second you empty it, something will come up where you need that money.

I think my wife put it best when she said, “He’d be giving up ten trips to Europe for that car.” That’s certainly another way to look at it.

I am currently carrying around a lot of credit card debt. In college, I never wanted to ask my parents for money so I just charged stuff. It also was the first time I cared about keeping up with what other people were wearing & doing. There began the habit of using credit cards for everything. Outside of college, I kept at it. I got a great job & salary however, did not know how to budget. Honestly, my parents never taught me about money and when I told them I needed help with a budget, they told me I should know how to do that already. But, can’t blame your parents for everything! haha.

What do you think? I’ve tried freezing the cards, cutting the cards, hiding the cards…nothing works.
- Alexis

How do you charge dinner if all of your credit cards are cut up?

Seriously, cut up all of your cards so that they’re completely unusable. Cut them into tiny, tiny pieces. Then see where you’re at.

If you find that you still can’t control the credit card spending, then close the accounts. However, if you’re still able to use a credit card to buy dinner, you haven’t actually cut them all up yet.

Should my HSA (Health Saving Account) be included in my net worth?
- Bryan

I don’t include our health savings in our net worth.

Essentially, I don’t include anything that I can’t easily liquidate in our net worth. If I can’t get cash out of it in less than a week, then it doesn’t go in.

Although you can get money out of an HSA pretty easily, the fees associated for doing so are crippling. Instead, I just ignore it in terms of our net worth. Then, if I actually need to use the account, I’m pretty happy that the medical expense isn’t causing a negative impact on our net worth.

How do you balance your finance goals and your health goals?

How do you make a decision when there’s no “right” answer? How do you decide what’s best when neither is the obvious choice? Financial health and physical health are both important.
- Liz

Your health is more important than your finances. Without your health, you won’t be able to get your finances into proper shape. Your health is already keeping you from financial success.

If there’s a way that you can truly restore your health, do it. Get your health in order. Once you have that, any financial problem can be fixed later on.

Get yourself right. Everything else will follow.

I’m about to graduate from college, and I have no debt and enough in my savings account to cover my expenses for at least 4-6 months (maybe more if I made some lifestyle changes). I want to relocate to another city because I like the climate, the culture, and pretty much everything else about it. I have spent time in this city, but I only know one person who lives there. The cost of living and wages there are similar to where I live now, but I have no job prospects and only somewhat shaky connections. I will have a B.A. and lots of work experience, and I’m pretty confident I could find a job before my emergency fund runs out. Financially, do you think it would be a mistake to go ahead and relocate after graduation?
- Alex

In my eyes, it depends on two things.

First, do you have employment there? If you’re going there without any route to employment, I view that as a mistake. If you’re unemployed, you’re far better off living in an area where you have a strong social network. So, I’d suggest job hunting there before you move.

Second, do you build relationships easily? Some people do, some people don’t. If you have a hard time establishing new relationships, then such a dramatic move will likely leave you feeling very lonely – and that can create all sorts of problems.

If you can safely answer yes to both of these things, I’d go ahead and make the move.

The question is this: I am 31 years old, married, no children, and have the opportunity for a job that would put me in a position to earn $25-$27,000 per year. This, with my husband’s income is more than enough to cover all of our bills and get the emergency fund where I’d like it. The twist? It requires a security clearance and good credit. I have one bill that is about $1000 to pay off. My only option at this time for doing so is to either take an old 401k from a previous job with about $1200 and close it, or withdraw the money from my existing emergency fund which is a Roth IRA w/about $2100. I am unemployed at the moment and was wondering what your take is on which of these 2 options is the better of two evils,since my husband’s income is currently going to all the bills. Once my credit is cleared, and I can start the job, I can repay/re-save the amount within 2-3 months.
- Stephanie

When you say “good credit,” what does that mean? Usually, it just means that your credit report doesn’t have any major delinquencies on it. A single $1,000 outstanding debt usually doesn’t mean bad credit unless it’s way overdue.

The first thing I’d do is get my credit report and check it over. Use annualcreditreport.com to do this – it’s run by the federal government and is actually free with no strings attached. See if you have anything delinquent on it.

If you don’t, I’d say your credit is what I would consider “good.” If you’re actually worried about this, ask your potential employer.

You’ve talked about how you enjoy writing fiction. What do you write? How often? Have you ever published anything?
- Leon

I try to write fiction at least two days a week, usually three. Each time, I attempt to get at least a thousand words on paper, and I try to finish (at least in rough draft form) a short story every week.

For now, I don’t publish them. They’re not what I consider to be “good enough.” I don’t feel comfortable with others reading them at this point, though I do feel that they’re getting better.

If I do publish some, I will certainly mention it on here.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Every Sunday, The Simple Dollar reviews a personal finance book or other book of related interest.

One thing I often do when looking for books to read and review for The Simple Dollar is simply go to the “new releases” section of my local library and browse the personal finance new releases. That is exactly how I stumbled upon Your Money Ratios by Charles Farrell.

My usual method of deciding whether to review a book is to simply study the dust jacket for a moment, seeing if there’s anything there that gives me an indication I should stay away (like talk about “financial apocalypse” or something else wholly fear based). I usually then open the book to several random places and see if I find anything interesting, and if I’m still unsure, I’ll take the book to a chair and read the first chapter or so.

I popped this book open to the start of the first chapter and was immediately intrigued. Let’s see what exactly Farrell has to say in this book.

1 | The Capital to Income Ratio
Farrell opens the book by arguing that, by the time you retire, you need to accumulate 12 times your annual salary, which will put you in the position to live on about 80% of your annual income. The “12 times” number comes about from an assumption that your money will return, on average, 8% a year. Thus, if you feel like that return is too optimistic, you should have a higher “times” number.

Let’s say you make $50,000 a year – not in take home, but in total income before taxes. Farrell argues that you need to have $600,000 saved for retirement. Then, each year, you would withdraw $40,000 (80% of your salary) of that $600,000 and leave the rest invested. In order to maintain the same balance of $600,000, your investment would have to earn 7.15% – and, ideally, it would earn a little bit more than that to help you keep pace with inflation.

2 | The Savings Ratio
In order to achieve that goal, you need to be saving some portion of your income. In some form or another, Farrell argues that you need to be saving 12% of your income (if you’re 45 or under) or 15% of your income (if you’re over 45). This means savings that you’re retaining, not savings that you’re simply spending in a year or two. The most common place people put this is in their retirement savings.

3 | Social Security
Farrell makes an impassioned argument about the long-term stability of Social Security and argues that it will make up around 20% of the average American’s retirement income. I tend to plan for retirement assuming nothing from Social Security, as I intend to look at any Social Security checks I receive as icing on the cake.

4 | Where to Save Your Money
As you sock away money to meet that “twelve times” goal from the first chapter, your priority should first be to your 401(k), then to your IRA, then to other investing options. I think that’s reasonable, though I think there are some fair arguments one could have about a Roth IRA versus a 401(k). You need this savings to be automatic, so set up automatic deductions from your paycheck or automatic transfers out of your checking account to cover this savings.

5 | The Debt Ratios
This chapter looks at the simple question of whether debt can help you to move from being a laborer to a capitalist. In a narrow sense, yes, it can, as debt can reduce the monthly cost of your housing and other needs in the short term. However, if you don’t pay off that debt at a reasonable rate – or if you acquire high-interest consumer debt – your debt will hold you down. His big point is that borrowing for a mortgage is pretty much the only significant debt an adult should acquire and that it should at most be two times one’s household income.

6 | The Investment Ratio
If you’re under sixty, Farrell recommends having half of your investment in stocks and the other half in bonds. If you’re over sixty, it should move more towards bonds. This is a pretty conservative investment stance, one that would be a bit of a stretch to get the 7% return that Farrell claims you will need in the first chapter. I think it’s reasonable, though, to park your money in a target retirement fund, as these will provide the same “more conservative as you age” effect, but add more risk and reward when you’re younger.

7 | Stocks and Bonds 101
Two things are needed here: rebalancing and diversification. Your stock investments should be spread across lots of different companies, including international ones, big ones, and small ones. Your bond investments should largely be in government bonds, but should be diversified there as well. For rebalancing, each year you should move money between the stocks and bonds to restore the overall 50-50 balance described earlier.

8 | Ignoring Wall Street
Don’t spend your time worrying about what Wall Street is saying. They’re often worried about the short term – the next few years – while you’re not really that concerned about it at all. You’re worried about the long term, something rarely discussed on CNBC. Don’t let it worry you.

9 | The Disability Insurance Ratio
Farrell recommends getting coverage equal to 60% of your income, which will roughly amount to your current income after taxes. This payoff will largely replace your current take-home, which means your current standard of living won’t be significantly altered by a disability.

10 | The Life Insurance Ratio
Your life insurance should be a term policy that pays out 12 times your salary minus your capital-to-income ratio (discussed earlier). So, for example, if you make $70,000 a year, your total of your capital and your life insurance benefit should be $840,000 per year.

This, of course, means that as you save more, you should need less life insurance. Thus, a twenty or thirty year term policy might not have to be renewed at all once the term ends.

11 | The Long-Term Care Insurance Ratio
You should start looking into long-term care insurance in your mid-fifties, not before. Before that, the risk is so low as to not be worth the cost. After that, your risk goes up enough that the cost might be prohibitive. This chapter is easily the most complicated in the book, but it also has a fairly small target audience (people in their fifties).

12 | Health Insurance
Farrell’s argument here is that health insurance is going through major reform and thus the best thing you can do to insure yourself the lowest cost on health insurance is to simply focus on yourself. Keep fit. Eat well. Doing these things will keep your health insurance costs lower and extend your healthy lifespan.

13 | Getting Professional Help
If all of this is too complicated, Farrell advises seeking a professional financial advisor. The factors you should look for are competence and training, ethics, and independence. Beyond that, I recommend seeking a fee-based advisor who doesn’t have a financial stake in pushing you towards certain investments. Farrell offers a few warning signs of a bad advisor, particularly one who promises over-the-top returns or anything like that.

Is Your Money Ratios Worth Reading?
Your Money Ratios succeeds in setting up a handful of numerical “rules” for people to simply follow – and if they follow them, they will find themselves in a reasonably good financial spot. In places, the book does a good job of explaining the “why” behind the ratio and the numbers are largely based on good principles (though I think the predictions about future returns are a bit strong).

If you like numbers but are pretty uncertain as to exactly how to calculate what you’ll need for retirement and for other purposes, Your Money Ratios is an excellent book for you to read.

As I’ve mentioned several times over the years, I carry a pocket notebook and a pen with me wherever I go. Whenever I have any sort of an idea or discover any piece of information I might want to use or reflect on later, I don’t hesitate to pull out that notebook and jot it down.

I can’t even tell you the number of times this notebook has really come in handy in my life. It’s been a life saver for keeping ideas for The Simple Dollar, recording gift ideas, jotting down books I might want to read later, noting some contact information, writing down some sale prices… the list goes on and on. In fact, I once made a list of ways a pocket notebook can save you money.

Although I’ve discussed the notebook in several different contexts before, I’ve never really explained how I do it in detail. So here goes.

I simply keep a small pocket notebook in my pocket at all times. Most of the time, I use one of those small Mead notebooks with the spiral at the top. Sometimes, family members or friends will get me a small Moleskine notebook (or something similar) and I’ll use that – I certainly like it better, but when you’re comparing a notebook I can get for a quarter versus one that will cost several dollars (and considering I’ll blow through it in a month), there is no real comparison.

I also keep a reliable pen in my pocket. I prefer my long-used space pen, which has never failed on me or leaked in my pocket. I received it for a gift, so I wouldn’t encourage someone to run out and spend $30-40 on a pen, but I will say it’s the best pen I’ve ever used.

It’s a bad idea to try to keep bits of information in your head. Whenever I discover a new idea or a new piece of information, I attempt to get it written down in that notebook as quickly as possible. If I try to keep it in my head, two things happen. First, I spend some of my brain power trying to keep that piece of information in my memory, meaning my focus on other things is less. Second, I sometimes still forget that piece of information.

I write ideas and information down as soon as possible. As soon as I discover something worth recalling later, I jot it down. I’ll even pull out the notebook during conversations if need be, telling the other person that they’ve just given me a great idea (they usually view that as a compliment).

I don’t organize these jottings at all. I don’t worry about organization of the stuff I jot down. I just get it down on paper as quickly as possible.

I separate jottings with a slash or a page break. When I finish an idea, I put a big slash underneath it. Then, the next time I open my notebook, I start the next idea under that slash – if there’s room. If not, I just flip to the next page.

Once a day – or more often – I review all of the jottings and deal with them. I usually do this at my computer. I’ll transfer dates to my calendar. I’ll transfer contact information to my address book. I’ll look up information if need be. I’ll add things to my to-do list.

If a jotting is dealt with, I cross it out. As soon as I’ve dealt with a piece of information, putting it in its appropriate place, I cross out that jotting in my notebook. It has now served its purpose, and crossing it out makes it easier to find the jottings that I haven’t yet processed.

If all jottings on a page are dealt with, I tear out the page. Again, this gives me fewer pages to deal with later on. Most of the time, I only need to open my notebook and leaf through a page or two to find the next blank page. If I’m using a nice notebook, like a Moleskine, I’ll use the bookmark string to hold my place instead of tearing out pages.

The end result of all of this? I get ideas out of my head as fast as possible. The system I use is very reliable, too – I tried using electronic solutions for this, but if a battery went too low, I was simply out of luck. Not a problem with pen and paper.

This notebook saves me money and helps me earn more on a daily basis. What more can you ask for?

Shanna writes in:

You’ve written before about how Netflix is a good deal if you’re an avid movie watcher and Gamefly is a good deal if you’re an avid video game player. You’re an avid reader. Have you ever looked at BookSwim?

I have, and I’ve gone back and forth on whether or not to use the service.

BookSwim basically functions like Netflix for books. You can check out some number of books at a time (depending on the plan you use). They mail the books to you with a postage-paid return mailer (a bag) and you can hold onto them as long as you want. When you’re done with a book, drop it in a bag and drop the bag in the mail – a few days later, you’ll get the next one on your list. Simple as pie, and exactly like Netflix.

The plans have various costs. The “five books at a time” plan, for example, costs $29.95 a month, about the same cost as buying a new hardback and a new paperback from Amazon. This would probably be the level that would match my reading.

So why haven’t I signed up? There are several factors I consider when I look at any such entertainment rental service.

Will I actually use it enough? I read – on average – three books a week. I’m pretty sure that I would use this service quite a lot if I were a member.

However, my reading needs are, at this point, largely met by the two book services I use – the library and PaperBackSwap.

Is there a free (or lower cost) alternative that provides the same service? The obvious answer here is the library. It’s absolutely free, and much like BookSwim, I can just log on to my library’s website and “order” books. The big difference is that my library puts books on hold for me and, when they arrive, they put them in a rack at the library. I have to go there and pick them up.

Another disadvantage of the library is late fees. While the first three weeks of a book rental are free, everything after that accrues fines – and those fines build up quite rapidly. I’ve forgotten to return a couple children’s books before and by the time they sent me a notice, I had racked up more than $20 in fines.

So, the library’s advantage is that I have free access. The disadvantages are that I have to go pick up the books, I often have to wait on new releases, and I sometimes accrue late fees. Is that worth $30 a month?

Would such an expense fit into my budget? If I did choose to sign up, the cost of the service would come out of the amount I allow myself to spend freely each month. More likely, my wife and I would both use the service and “split” the rentals and cost between us, as she’s as avid a reader as I am.

The real question, then, is whether the service provides enough positive benefits over what I can get for free to make it worth $30 a month.

For me, so far at least, the answer is no.

I have never not had access to a book that makes me excited to read it. It might not be the latest best-seller, of course, but it’s always something that I’m really happy to have on my bedside table.

To me, that’s the make-or-break deal. I don’t need to have the latest and greatest to fill my reading desires. I merely need to have something that excites me to pick it up, and that might be a fifteen year old novel from my favorite author or a biography of someone I’m intrigued by. New isn’t really part of the equation – and on the rare occasions when it is, I don’t mind waiting a month or two to pick it up.

After all, I have plenty to read.

So, as tempting as it might be to subscribe and get a steady flow of new releases, it doesn’t really hit the sweet spot of what I love about reading – at least not enough to warrant another $30 a month expense.

However, I would not be surprised at all to see this given to me as a gift subscription in the future at some point, as it screams “perfect gift for Trent.”

If you’re thinking about a rental service, ask yourself whether that service really hits your sweet spot, or whether you’re covered by other things you have access to in your life. It might just save you some money.

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 (March 14 – March 20, 2009)
Is a Frugality Tip That Saves You a Quarter a Waste of Time? Some Notes on Economies of Scale A frugality tip that saves you a quarter twice a day is a tip that saves you $180 a year. That’s a car payment.

My Real Net Worth It can’t really be measured in dollars and cents because there is so much of life that doesn’t have a price tag.

Self-Reliance The more able you are to solve the day-to-day problems of life on your own, the more likely you are to be able to deal with anything that life throws at you. Basic life skills help you time and time gain.

14 Tactics for Getting Ahead At Work – No Matter What Your Job Is All jobs rely on a few key factors for success, mostly revolving around communication skills. Here’s how to use these factors to your advantage.

Teaching a Three Year Old How to Save It’s important to make money questions and concepts consistent for all children, no matter how young or old they might be. The lessons about saving can start very young.

Two Years Ago (March 14 – March 20, 2008)
Deliberate Practice and Personal Finance I’m a huge fan of deliberate practice for improving yourself in any skill, and personal finance is definitely a group of skills – self-control being just the start.

No Regrets I don’t dwell on my mistakes. They happen. I need to learn from them and move on, attempting to apply those lessons in my life today.

Cloth Diapering: A Real-World Analysis We cloth-diapered our first two children, and we’re already completely ready to go with the third one. Cloth diapers are cleaned, folded, and ready for application.

Seven Steps to Finding What You’re Truly Passionate About Some people, unfortunately, never find what it is that they’re truly passionate about. They’re never exposed to it or are steered away from it by strong external influences. Here’s how to find it.

The Workstation Debate: Needs, Wants, and Making a Rational Purchase Here are some of my thought processes about buying a new computer mostly for work purposes. It took me a long time to actually move forward, though.

Three Years Ago (March 14 – March 20, 2007)
I’m Debt Free and I Have a Six Month Emergency Fund – What Now? What do you do when you’ve done all of the starter steps? Now’s the time to start setting big, audacious goals.

How To Handle Guests That Abuse Their Welcome – And Your Wallet Here’s how I deal with the “Cousin Eddie” types.

Graduating In May? Seven Money Things To Do During Your Last Semester If you’re approaching your final semester in school, here are some things to think about.

Want To Maximize Your Career? Here Are The Ten People You Need To Know At Work Most workplaces are filled with people that provide a lot of value if you connect well with them. Here are some of the usual suspects, along with tips on how to build that connection.

How To Start A Simple Garden – Even In An Apartment You don’t need a whole lot of space to start a container garden. Here’s how.

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!