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

The entire argument of Seth Godin’s book Linchpin is that there are no longer any great jobs where someone tells you what to do. That’s not to say there aren’t great jobs out there – there are many – but they now require the ability to basically blaze your own path, creating things and building connections that are indispensable to those around you. That person, in Godin’s terminology, is a linchpin.

I think, to a degree, this general argument is spot on. We live in a globalized world where most jobs can be shipped anywhere, from Mexico to Indonesia. Jobs in which people are merely following instructions all day are among the easiest to ship and the few that remain in America aren’t going to be strongly financially rewarding. Success comes from making yourself essential to the operation – and simply following orders, even if you do it well, keeps you firmly in the “replaceable cog” camp.

How do you stand out? What kinds of choices can you make to turn yourself into someone indispensable? Let’s dig in and see what the book has to say.

The New World of Work
Most jobs where you simply follow instructions and do a faceless job demean the real value you provide. They’re faceless jobs, but you’re not a faceless person. You’re not merely a cog in the machine of capitalism – but your job might be. The biggest difference between a follow-the-instructions job and a linchpin is that a linchpin creates his or her own value, whereas an instruction follower doesn’t add any value beyond a specified task that’s completed. A linchpin works in ways that improves those around him or her, while an instruction-follower simply follows the tasks at hand. I like to think of it this way: what’s the difference between a mediocre administrative assistant and the best administrative assistant you can imagine? That’s roughly the difference between a person who is a linchpin and a person who is not.

Thinking About Your Choice
The choice that’s on your plate is simple: do you keep merely following instructions and counting the days until Friday or do you look for ways to make yourself transcend those roles and become a linchpin? This is an urgent question, because a global marketplace makes the instruction-follower role more dispensable than ever. Some people are content to fill the role of instruction-follower – and that’s fine. However, the career opportunities for such people are simply shrinking – that’s a fact of life.

Indoctrination: How We Got Here
Most of what we learn in school serves one purpose – to make you an effective person at filling an instruction-follower job. Schools do not encourage creative thinking (which is an invaluable part of being a linchpin) – instead, they encourage lots of rote memorization and repetitive tasks which are scored on standardized tests. It’s a pretty neat trick to make school funding tied to these standardized tests, isn’t it?

Becoming the Linchpin
Every workplace has a few people that are simply indispensable. They take very challenging situations and make them work. They seem to solve tons and tons of problems. They’re the ones everyone goes to when there are crises. Those people are the indispensable ones – if you’re not one of them, you’re a lot more dispensable than they are. The question really is whether or not you’re willing to work to become one of those indispensable folks.

Is It Possible to Do Hard Work in a Cubicle?
Being a linchpin means a lot of hard work. The biggest part of it is being willing to give all of what you have to doing a great job. This does not mean just filling your hours with whatever task you’re assigned. It means bringing all of your passion, your ideas, and your creativity to the table whenever you work. It means taking on the hard problems that might scare you a little bit (or more than a little bit).

The Resistance
Our brains typically work in resistance to those kinds of tasks – we’re biologically wired to look out purely for number one. We avoid risk. We avoid anything that might be perceived as a threat. We avoid generosity. However, all of these things – risk, taking on threats, generosity – are key parts of being a linchpin. We have to work hard to overcome these resistances in order to become something greater.

The Powerful Culture of Gifts
Giving of yourself to others opens countless doors. Our brains often expect immediate reciprocity – if we give something, we want something in return and soon. The world rarely works that way. Our generosity – going above and beyond the expectations of others – builds a strong reputation for us, one that secures our work and builds positive relationships and interactions for us in ways we often never directly see. Quid pro quos rarely work – but building a strong reputation for great work and generosity certainly does.

There Is No Map
How do you do this? Unfortunately, there is no road map – and that’s a big part of the difficulty of it. You have to seek out the challenges in your own situation and take them on head first. You have to seek ways to up the quality of whatever it is you’re doing. In other words, you have to go off the instruction sheet – and that’s the real challenge.

Making the Choice
Linchpin value is created by what you choose to do, not by what you’re born with. Anyone can become a linchpin – it’s not an inborn trait, it’s a sequence of choices to step beyond the instructions and do things that improve everyone around you. It’s a scary choice, but it’s still a choice, one that offers a lot of rewards if you’re willing to take the leap.

The Culture of Connection
In order to succeed as a linchpin, you have to build a lot of connections with the people around you. Indispensable work is work that’s connected to the work that others do. You build on their work and they thrive on the work you’ve done. A big part of this is personality and attitude and a big first step is to recognize that negativity towards others will never, ever get you to being a linchpin. Positive relationships are the ones upon which you can build great things.

The Seven Abilities of the Linchpin
Here are the seven abilities, in a nutshell, from page 218:

1. Providing a unique interface between members of the organization
2. Delivering unique creativity
3. Managing a situation or organization of great complexity
4. Leading customers
5. Inspiring staff
6. Providing deep domain knowledge
7. Possessing a unique talent

Linchpins provide at least one of the things on this list and often provide more than one. It’s key to remember that these things are there to provide value to the people around you and make their work better, because in doing so you make yourself indispensable.

When It Doesn’t Work
If you’re trying to be a linchpin and it isn’t working, blind persistence is usually not the way to go. The value of a linchpin isn’t in repeating things that aren’t clicking or working. Instead, they constantly seek out new approaches and ideas and try them, instead. No one has a 100% success rate with their endeavors and ideas, but it is the successful ones that provide so much that they more than make up for the failed attempts.

Is Linchpin Worth Reading?
If I were to hand a recent graduate or a twentysomething a book on modern careers and how to succed in them today, I’m pretty sure that Linchpin would be the first book that I would grab.

The ideas in this book are reflected in virtually every workplace I’ve ever been a part of, from entry-level work to highly technical work. The people that stepped up to help others and solve problems were the ones that were indispensable, while the others merely hoped to hold onto their jobs. I also noticed that the people who stepped up to the challenge tended to be a lot more positive about their job, whereas the people who were dispensable were negative about their job and the people around them.

There are a lot of great ideas about the modern workplace in this book. If you’re struggling in your career, Linchpin is probably well worth a read.

Jennifer writes in:

Yesterday, I received a notice from [my credit card company] that my credit limit had been lowered from $10,000 to $4,000 on my primary credit card. I was immediately worried that my credit had been damaged by identity theft, so I checked it on annualcreditreport.com and there was nothing there at all. I’ve always paid all of my bills on time and my life has been pretty much normal and unchanged for a long time. Why would they make this change? I’m not concerned about reaching my credit limit, but that reduction in my limit does alter my debt-to-credit ratio, which could negatively impact my credit rating.

Jennifer describes a pretty typical scenario today. A credit card company sends a letter out of nowhere, for no obvious reason, announcing a significant drop in one’s credit limit.

One big effect that such a drop has is that it alters your debt-to-credit ratio, as Jennifer mentions. Simply put, your debt-to-credit ratio tells what percentage of your credit limit across all of your credit cards you’re actually using. So, let’s say Jennifer had a $3,000 balance on her $10,000 card – that’s a 30% debt-to-credit ratio. When the company drops her credit limit, she then had a $3,000 balance on a $4,000 card – that’s a 75% debt-to-credit ratio. The higher your debt-to-credit ratio, the more negative impact it has on your credit score.

This type of behavior seems alien, particularly after a decade where credit card issuers would commonly raise credit limits without you even asking. What gives?

The reality of the credit card industry has changed. For one, the econmic downturn has seen a large spike in the number of people who have simply defaulted on their credit card bills, not bothering to pay them. For another, the Credit Cardholders’ Bill of Right Act recently became the law of the land, restricting some of the business practices of the credit card companies.

Credit limits are not a right. Another issue is that many people, particularly after the last decade of rampant growth in credit limits, view their limits as something of a right and when credit card companies reduce those limits, their rights are somehow being infringed. In truth, that’s not the case at all – your cardholder agreement makes it very clear that your credit limit and your interest rate can be changed at any time.

So how do they decide when to lower your limit?

They watch what you buy via data mining. Every time you make a credit card purchase, the credit card issuer’s computers store a record of that purchase (you’ll see such information on your bill). Obviously, this is a wealth of information, one that they can use to figure out all sorts of things, such as where you live (so that if you suddenly make a rash of purchases elsewhere, they can throw a block on the card).

They draw conclusions based on what you buy. Another thing that they do is watch what you buy. They look at the places you normally shop and draw conclusions based on that.

Let’s say Jennifer normally shops for clothing at, say, Banana Republic (I don’t know this, I’m just creating a hypothetical example). Based on this, the credit card company would conclude that she fits the profile of an average Banana Republic customer, meaning she has a fair amount of discretionary income.

Now, let’s say Jennifer is suddenly a bit worried about the economy. She and her husband decide to curb their spending and she starts doing things like buying soap at the dollar store with her credit card.

When the credit card company analyzes the data, looking for spending changes that might affect credit limits, they’ll observe from their data that Jennifer is spending a lot less at the Banana Republic and a lot more at the dollar store. That means she’s got a different spending profile – one that signifies the potential for financial trouble.

They act in accordance to those conclusions. Given their recent problems with people defaulting on credit card debt, they take pre-emptive action and reduce her credit limit.

To Jennifer, this seems sudden and unfair – and for good reason. She’s likely not in any true financial trouble at all and is simply choosing to be a bit thrifty in these uncertain times.

What can you do to protect yourself? The truth is that Jennifer should avoid being in any kind of position where such a credit limit change has any impact at all on her. In other words, don’t be reliant on that piece of plastic. Use it as a tool instead of as something you need to have.

One big way to do that is to never carry a balance on your card. If a bill comes at the end of the month, pay it off. If you’re thinking of making a purchase where you wouldn’t be able to do that, you can’t afford that purchase. Wait a few months and save up the cash.

This not only keeps your debt-to-credit ratio pretty low, but it also leaves you out of any sort of “danger” from the credit card company adjusting your limits or your interest rates. More importantly, though, it prevents you from building up a significant amount of debt on the card, which can be very, very difficult to pay off.

Use your credit cards wisely and changes like what happened to Jennifer will have little or no impact on your life.

As I’ve mentioned many times before, my wife and I shop at Sam’s Club. It’s really the only warehouse club available to us easily (there are no BJ’s around here and the only Costco is on the far side of Des Moines, almost an hour away) and it serves a lot of our needs.

I’ve been shopping there for several years and I’ve found several little techniques that really maximize your value in shopping there. You really can do much better on some items by utilizing a warehouse store, but you’ve got to follow a good plan. Here’s how.

1. Take a look before you sign up. Before you walk in the door and sign up for a membership, visit the store and look at the prices and the selection to make up your own mind. Warehouse clubs often offer one-day memberships, either in the newspaper or at the desk there. Give them a call and find out before you go.

If you can’t get in using these methods, ask around your social network to see if anyone’s a member, then ask if you can visit the store with them. This method is even better because you can make purchases when visiting with a full member, whereas with the short-term memberships, there’s a 10% markup on prices.

2. Split a membership. Find a close friend and split a membership with them. Just go to the store, sign up for a membership, put your friend down as the other card, and get membership cards for both of you. This will cost you each half the normal price of an annual membership, getting you in the door for a year for just $20.

You usually have to sign up at the same time, but warehouses are completely fine with you and your co-member having different last names, different addresses, and different phone numbers.

3. Bulk-buy in cooperation with friends. Hesitant to buy a giant mountain of toilet paper? Talk to a friend of yours and agree to split the cost of that mountain. This way, your cost per roll on that toilet paper is very low, but you also don’t have to deal with the storage of that much toilet paper.

There are lots of items you can purchase this way, from paper towels and fruit juice to diapers and bagels.

4. Only buy stuff you know you’ll use up. One of the big temptations at a warehouse club is to convince yourself that you’ll use a huge amount of something that’s perishable, whether it’s salad greens or fresh fruits. You see the price per pound, recognize that it’s much lower than it is at other stores, and talk yourself into it.

Don’t.

Ignore the cost per pound. Instead, you have to focus on the amount you’ll actually use before having to chuck the rest – and that’s a tricky thing. I usually figure on the very low end. On occasion, it’s still a value even if more than half winds up in the compost bin, but most of the time, it’s not really a bargain.

5. Make a price book. Along those same lines, in order to maximize the value you get from a warehouse club, you have to have some sort of a price book.

A price book simply means that you have a list of prices of many of the common things you buy at various stores that you shop at. Maybe you just have the prices from your favorite grocery store on it. In any case, you simply take that list with you to the warehouse club and use that as a basis for comparison. So, an entry in the price book might be “3 rolls of Bounty – $3.33″ and then you can use that to figure out whether twelve rolls of Bounty for $11 is actually a bargain (it is).

6. Use a shopping list. Another important factor is to know what you actually need before you go. Thus, before you go, make a shopping list. Write down all of the things you actually need, then hit the warehouse club before you visit the grocery store.

Doing this not only helps to ensure that you get all the stuff you actually need, but sticking to that list goes a long way towards curbing impulse buys, since you’re so focused on the grocery list instead of wandering down the aisles.

7. Look at gas prices. Most warehouse clubs offer gas prices that are lower than other gas stations in the area. This savings varies a lot – in some areas it can be as much as a dime per gallon and in other areas it’s only a penny or two. Our area seems to vary between about two cents per gallon and five cents per gallon.

Thus, whenever I have an opportunity, I fill up at Sam’s Club. If I fill up there once a month, putting 20 gallons in my tank and saving five cents a gallon, that saves $12 a year. If my wife does the same, filling up there three times a month and putting 12 gallons in the tank, that saves $21.60. All told, we save $33.60 from the gas alone.

Two other areas where the savings were surprising for me were liquor (beer, wine, and hard liquor) and big-ticket electronics, like laptops and televisions. Their prices were very, very strong on these items.

8. Take note of the other benefits. Most warehouse clubs offer other benefits beyond the cheap household stuff and the gas benefits. Take a careful look at the pamphlets that the club provides and see if any match your needs.

For example, Sam’s Club offers a discount on car prices with certain cooperating dealerships. Thus, I can take that extra info into account when we make a car purchase and it might reveal a better car deal for me. That’s a potential significant savings.

9. “Gap” your membership. When your membership is about to expire, go to the club and stock up on all of the nonperishables you buy there – shampoo, toilet paper, soap, and so forth. Then allow your membership to expire for several months as you use your backlog of items. When you start to run out of your backlog, go in and renew your membership.

Let’s say that you fall into a twelve months on, six months off pattern. Over the course of six years, you would reduce your membership buys to four, saving you $80 over that period.

10. Get your impulses in check. This is perhaps the most useful tip for warehouse club shopping. You have to get your impulses in check before you go. If you don’t, the benefits of the club will go away for you.

What do I mean? It’s easy to see items at a warehouse club that you might use, and the price per unit is often very low. It becomes really tempting to throw it into your cart. However, if those buys are impulsive, not only is it something you wouldn’t have otherwise bought, it’s also something bought in an excessive quantity. That’s a recipe for throwing your money away.

We save a lot of money each year by shopping at Sam’s Club.

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 28 – March 6, 2009)
The Cost of the Psychology of New When I re-read this post, I was reminded of an email I received from a reader recently who didn’t like PaperBackSwap because she couldn’t get all of the newest releases on it. I pretty much never buy a new release in book form – I use the library for those. I don’t buy books unless I’m sure I’ll reread them multiple times. The cult of the new is expensive.

Depression Cooking I loved these videos – they were the best thing I’ve seen on YouTube, perhaps ever.

Personal Finance and 1,000 True Fans Planting the seeds of powerful relationships might cost you a little bit now, but it’ll reap huge rewards later on.

A Step-By-Step Guide to Building a Big, Healthy Emergency Fund Emergency funds are a vital tool for personal finance success, but many people have difficulty getting started with one. Here’s a guide to doing just that.

Do You Want to Be Rich? Being rich is not my goal (trust me, if it were, The Simple Dollar would be quite a bit different). Is it your goal?

Two Years Ago (February 28 – March 6, 2008)
The Stock Market Is Way Down This Year… Here’s Another Way To Think About It I look at stocks being down as an opportunity. The companies themselves haven’t changed a bit, but their cost is lower. That’s called a sale.

“Freegans,” Dumpster Diving, and the Limits of Frugality We all have some personal lines that we won’t cross. Yes, for me, dumpster diving to save money on food is one of them.

Financial Planning for Self-Employment: What’s Different? The biggest challenge with self-employment is that your income is very irregular. You don’t get that steady paycheck week in and week out and you have to plan accordingly.

Learning the Right Lessons from Your Mistakes When you make a mistake, it’s worth your time to step back and think deeply about why you make it. If you don’t, it’s easy to draw the wrong conclusion.

Six Ways to Break Free of the “Purge and Splurge” Cycle This type of cycle happens in anything that requires self-discipline, from spending control to dieting control. Here are some techniques to control it.

Three Years Ago (February 28 – March 6, 2007)
Personal Productivity and Personal Finance: Ten Techniques I Use To Juggle This Blog, My Money, My Work, and My Life I wrote this when I was simultaneously working a full time job, creating The Simple Dollar in my spare time, and juggling other personal needs as well.

An Average Day: Ten Tweaks I Made To My Daily Routine To Start Saving Money These little tweaks can help a lot when it comes to putting yourself in the right mindset at the start of the day.

PaperBackSwap: An Effective Way To Save Money On Books I can’t even tell you how much I’ve used PaperBackSwap over the last few years to save money on my voracious reading habit.

Ben Stein And I Explain Why I Just Bought Stocks Today, Even With Stocks Down 5% In The Last Week Similar to the above post, if you buy stocks when they’re down 5%, you’re essentially buying them when they’re on sale. The company itself hasn’t changed, just the sticker price has.

How Much Money Does Breastfeeding Really Save? It saves quite a bit, really, according to our real-world math.

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!

Earlier today, I did a lengthy interview with Dean Voelker on his Improving Your Financial Health radio show. Dean’s very much into preparation, so I actually wound up doing a substantial amount of prep work for the interview.

Since I had accumulated such a pile of notes for the interview in advance and Dean asked so many worthwhile questions, I made something of a transcript of the interview and am sharing it with you.

Tell us about your background.
I grew up in rural Illinois. My parents didn’t have much money and, sometimes, they struggled to make ends meet. I learned a lot about frugality from them, but I didn’t learn as much about pure money management skills. I attended Iowa State University and graduated with a degree in the hard sciences, after which I spent about six years working in various jobs in research fields. Recently, I’ve been a full time writer.

How long have you been writing The Simple Dollar?
I started writing the blog that would become The Simple Dollar in October 2006. I launched The Simple Dollar publicly in November 2006.

How did you decide to do that?
In April 2006, I experienced a personal and professional meltdown of sorts. I had always dreamed of being a writer, but it felt as if my dreams for doing that were slipping away in the flow of my professional life. I was unhappy with some aspects of my current job. To make things worse, we were in dire financial straits, with a large pile of consumer debt over our heads.

I decided that things had to change. After a while, I began to see that a lot of people my age were going through similar crises – a “quarter life crisis,” if you will. They were finding themselves in serious financial problems and sometimes were deeply questioning the path they had chosen in life. However, most people my age were very reluctant to actually talk about these problems with anyone outside of their immediate family and maybe a very, very close friend or two.

I started The Simple Dollar because I felt that this was a conversation that people needed to have. I felt that by sharing my story and my experiences, both in the positive sense and in terms of my own failings, I would open people up to think about their finances and career more and talk about it, whether by sending me emails or comments or by talking to people in their own lives.

Where did the name ‘Simple Dollar” come from?
One night shortly before the launch of the site, I just brainstormed a long list of names. I crossed some of them off that I didn’t like and my wife took a turn at the list, too. Eventually, The Simple Dollar is the name that stuck out.

Looking back, I’m glad I didn’t choose a name like “Trent’s Financial Failings.”

About how much time do you spend on this per week?
On The Simple Dollar alone, I probably spend fifteen hours purely writing and composing posts. I spend another five to ten researching posts and doing reading related to it. I probably spend another ten hours on site management, approving comments, and answering emails – but, frankly, I have more emails and comments and other things like that than I can cover in ten hours, so I sometimes have to pick and choose.

I spend additional time on other writing projects, such as my upcoming book.

Where do you get most of your information?
Books. I’m a voracious reader. I read, on average, three books a week, of which one is usually something geared towards personal finance or careers.

What are your “14 Money Rules”?
My 14 Money Rules is simply a list of what I think are the true core values and ideas of what I talk about on The Simple Dollar. I keep these rules posted on every page on the site, in the right hand bar. The 14 Money Rules are:
1. Spend Less Than You Earn.
2. Don’t Over-Think Your Investments.
3. Stop Wasting Time.
4. Eliminate (and Avoid) High-Interest Debt.
5. Talk About Money (And Be Honest).
6. Stop Trying to Impress Other People.
7. Watch Your Progress (But Make It Fun).
8. Take Care of Your Things.
9. Do It Yourself.
10. Plan Ahead Every Time You Spend.
11. Find and Work Toward Your True Passions.
12. Build Real Friendships and Relationships.
13. Improve Yourself Every Chance You Get.
14. Give Without Strings or Regrets.

Which ‘Rules’ generate the most discussion?
Doing it yourself tends to generate the most discussion. Many people argue that it’s better to pay someone else to do something for you if you’re earning more than that person’s hourly wage. My argument against that is twofold: first, you only earn more than that person’s wage if you’re earning more post-tax and you actually spend the time you’ve hired someone in gainful employment. Two, and perhaps more importantly, doing things yourself teaches you things and makes you more resourceful. Almost every skill you have in life has value – if nothing else, it can help you build relationships with others. If you know how to fix a toilet, for instance, you can share that skill with a new friend or acquaintance in an effort to forge a stronger bond.

Tell us about your free E-Book “Everything You Ever Wanted To Know About Personal Finance On Just One Page.”
A long time ago, I wrote a very popular post entitled “Everything You Ever Really Needed to Know About Personal Finance on the Back of Five Business Cards“. After posting it, several people contacted me and suggested that I try to turn it into a book of some sort.

Over the next several months, I tossed the idea around and eventually developed it into a fifty page short book, intending to use it to shop around to various book publishers. I incorporated a lot of original writing, pieces of various Simple Dollar posts, and lots of other interesting elements.

At some point, I just decided that it would be a very worthwhile move – in terms of helping people with their finances and encouraging people to think about it and talk about it – to simply give the short book away, which is exactly what I did.

What are your thoughts on the new credit card regulations which just went into effect this week?
I think, on the surface, they protect consumers. However, the credit card companies are businesses that are out there with the purpose of making money. If you close one door on them, they’ll open another.

I think we’re in a period where they’re going to try different methods of earning money, since some of their previous methods have now had the door shut on them (such as young card holders). What form will that take? Whatever it is, the end consumers will be the ones paying for it. It might be the return of annual fees. It might be higher interest rates. It might be something entirely new, like a minimun number of uses required per month. Only time will tell.

You also have some downloadable books. What can you tell us about that?
The “downloadable books” on The Simple Dollar are simply collections of older posts on a common theme. I’d write a series of posts on a certain topic – say, building a blogging business – and then I collected all of the posts together, edited them a bit so that they made sense as one long document, and turned them into a downloadable PDF. Since the posts are available for free anyway, I have a minimal charge on these donwloadabe books – they cost two dollars a piece. Some people buy them because it’s convenient for the purpose of printing them out for a trip or something like that; others buy them simply as a way to support the site.

The Simple Dollar has some great open discussions which readers participate in. How were you able to come up with 25 Gadgets That Save Money?
One big thing I like to do when writing an article is look for things that have something interesting in common, sometimes in an unusual or unexpected way. In that case, I simply collected a list of items that can actually save you money, including paying for themselves, over a long period of time.

The idea started from looking at programmable thermostats. If you buy one of those and set it so that your furnace doesn’t run when you’re not at home or when you’re asleep – or the same thing with the air conditioning during the summer – your energy bill savings will add up to much more than the cost of the thermostat after a few years.

A few of the items in the article were a bit extreme, such as a wind turbine, and I think most of the discussion came from those items. You can, indeed, save money with the purchase of a wind turbine, but it takes quite a while.

I loved the McDonald’s article! You compare a McDonald’s double cheesburger to making a cheesburger at home. What did you learn?
If you take all of the short term costs into account – time and money, in other words – the two roughly balance out. The homemade burger is slightly more expensive, but it’s also more tasty. Of course, I did add a lot of toppings to the homemade burger that weren’t on the double cheeseburger from McDonald’s, such as lettuce and such, but it wouldn’t be a homemade burger if I didn’t.

If you’re making just a single burger for yourself, then there’s a decent argument that McDonald’s provides a better value in the short term. If you’re making several burgers, the homemade ones are much less expensive. The real advantage of fast food is the convenience – it’s not really all that cheap, as you get lower quality food than what you can make at home for a similar price.

How long did it take to gather your research?
It took a surprising amount of time. I had to plan out what I intended to do – make a burger and compare it to the McDonald’s one. I had to shop for the ingredients for the homemade burger. I had to visit McDonald’s to get the double cheeseburger. I had to make the actual burger at home. I also spent time documenting all of this with pictures and time recordings as well. I spent on the order of six hours on the post.

Have you seen the documentary film “Super Size Me”? (2004 by Morgan Spurlock)
I think that movie touches on what would be my real concern with eating fast food – it’s unhealthy. It causes you to gain weight. The high amount of salt in the food can cause high blood pressure. It can definitely leave you feeling lethargic. It’s not exactly good for your heart.

Thus, the long term costs of that double cheeseburger is quite a bit more than the ninety nine cents you paid at the drive-thru. You’ll have health care costs and lost productivity costs as well.

I see the “Rich Dad, Poor Dad” books and seminars by Robert Kiyosaki everywhere. What should people know about him and these books?
I am not a fan of Robert Kiyosaki’s work. For starters, he severely underestimates risk in nearly everything he discusses. He paints a picture that makes it seem as easy as a run down to the courthouse steps to make thousands of dollars. It’s no different than any other “get rich quick” scheme – there are opportunities out there, but it takes a lot of hard work to find them and there’s a lot of risk for failure along the way.

The biggest problem, though, is the utter disdain he has for people who make the choice not to do things the “Rich Dad” way. He actually refers to people who work at a job and make an honest wage as “hamsters,” right in print in the book.

He’s right in that a steady job will not make many people wildly rich. A 401(k) will not make a person wildly rich. What it will do, however, is make a person secure, both in the sense of not having to worry about the future and in the sense that their future life won’t have financial need. That’s the goal that a lot of people have in their life, and achieving that goal revolves around low-risk choices. Kiyosaki ignores risk and calls such people “hamsters.” I don’t really have much respect for that attitude. Different people value different things in life, and an awful lot of people value steadiness and security – that doesn’t make them “hamsters,” it makes them the backbone of America.

Have you met anyone who said that his advice really worked for them?
I’ve never met people face to face who have said positive things about Rich Dad, Poor Dad. I’ve read many positive comments from Simple Dollar commenters about the book, but it’s often hard to tell whether the people are legitimate or whether they’re people who have paid thousands of dollars for a seminar and want to feel as though they’ve made a good decision.

You also wrote an article about buyng your car – 2009 Toyota Prius. What were some of the main reasons you bought it?
We bought the car for two reasons: fuel efficiency and reliability. My wife commutes almost forty miles one way to work about three days a week, plus all of our family lives about four hours away from where we live and we visit them regularly. Thus, we rack up a lot of miles on our cars.

We sat down and ran the numbers several times on a multitude of cars available, both new and used. We took the Consumer Reports reliability data on makes and models into it, and we also calculated fuel costs up to 200,000 miles on the car’s odometer assuming gas prices at $2 a gallon and at $3 a gallon. We simply couldn’t find a better deal than the Prius that we purchased, even after a multi-month hunt. We found ones that exceeded it on total cost of ownership questions – the cost of buying the car, getting it road-worthy, and paying for fuel up to 200,000 miles – but they all had reliability concerns.

What types of concerns have you had with recent news about Toyota?
Every large manufacturer is going to eventually have some sort of product problem that warrants a recall or a fix. You simply cannot test everything – you just have to do as much due diligence as you can and ship the product.

The current Toyota issue is a tricky one because it’s apparently very hard to replicate. I’ve read on messageboards where one person claims to have caused the problem by doing some specific thing, then another person can’t replicate it.

The real question is how Toyota deals with all of this over the next six months. They have to absolutely make it right by their customers, but we won’t know the full story for a while yet.

I know you are not an advisor, but what are your thoughts on municipal bonds?
I think they’re good choices for people in a high tax bracket who want something pretty safe that has returns that aren’t a big tax burden. Municipal bonds definitely have a place in a larger portfolio. However, I’m not sure that they’re the best choice for beginning investors who are often not in a really high tax bracket and would often be better off chasing larger returns with a bigger risk.

There is a lot of information out there. What is ONE THING someone listening today should do if they are having financial difficulty?
Talk about it. Don’t be ashamed of having financial difficulty. There are many, many people out there going through similar problems to what you’re going through. If you feel you can’t talk to your friends about it, go online and look for others sharing your problems.

Knowing that there are people out there who share your concerns and are willing to offer you helpful words and helpful advice can make an enormous difference when it looks as though the chips are down.

Over the last few days, I’ve had several interactions with readers who are heavily concerned about the healthiness of their food and other chemical items they bring into their home. In general, these people subscribe to the “five ingredients or less” school of eating, meaning they don’t bring home any food item that has more than five ingredients in it. They tend to prepare most meals starting with raw foods. They also tend to use vinegar, homemade soap, and baking soda for most of their household cleaning tasks.

In other words, they are heavily focused on minimizing the number of preservatives, toxins, and other chemicals that come into their home.

The question on their minds is what can they do to save money while also subscribing to these values? My answer is kind of a surprising one.

The convenient part with this approach to modern life is that some things are in fact cheaper. Using vinegar and baking soda for most cleaning challenges is a great way to save some cash. During peak growing seasons, eating mostly raw foods can be a big money saver – trust me, during the peak of sweet corn season in Iowa, it can be very inexpensive to eat.

However, most things are much more expensive with this approach. Fresh foods out of season can be very expensive. There’s also a major time cost, as you’ll be doing lots of food preparation work yourself that would go far beyond what other people would do (like making pasta out of flour and eggs, for example, instead of popping open a box to boil it), as well as some preparation work for home cleaning supplies.

By choosing this kind of approach, you’re inherently adding not only to your family’s food and home care costs, you’re also investing a significant amount of time in keeping it up. Since food and home care are pieces of a family budget that everyone has, by making this kind of choice, you largely cut yourself off from money-saving and time-saving tips in that area.

Here’s the thing, though. If protecting your family in these areas is one of the key values in your life, that’s completely fine.

Most people really only have the time, passion, and resources in their lives to really follow through on a small number of key values in their lives. For me, those key values are my family and reading/writing. In some way, virtually everything else I do with my time and my money is in line with one of those two values.

If you’ve made the choice to live that sort of healthy, chemical-free lifestyle because it’s a central value in your life, that means that you’re devoting some significant amount of time and energy to it. You’re more careful with your shopping. You’re more careful with your food preparation. You’re more careful with your household cleaning. That eats up attention and time, but that’s absolutely an awesome use of your time and energy if it’s something that you truly value.

The key thing is to recognize that it is eating a significant amount of your time and energy and that energy and time have to come from somewhere. If you’re spending your time on these things because that’s what you value, it means you’re not spending time and energy on other things.

Maybe you have a huge DVD collection, but you don’t find yourself watching movies any more because you’ve moved on to new values.
Maybe you have a beautiful car, but you don’t get the same rise out of driving it that you once did.
Maybe you have some exercise equipment in the garage that’s just gathering dust.

If you’re living a life in line with where your values are now and not where your values were ten years ago, then it’s perfectly fine to not have the time and energy for those old things. Instead, you should focus on converting what you can of that old value into your newer values. Sell off your DVD collection. Downgrade your car. Have a yard sale. Cancel your memberships. Get rid of your cell phone.

What I see, time and time again, is that people have a short-term passion for something, invest money and energy into it, then grow tired of it and move on, but they don’t let go of the vestiges of that passion. They keep paying the bill for something they don’t use any more. Things sit around and gather dust and fill up a closet.

What are those things in your life? What passions have you moved on from, but still hold onto the material elements of?

Wouldn’t your life feel more complete if you cleaned out your attic, sold that stuff, and invested it into the things you value today?

On the conference call I had last night with Vicki Robin, one of the listeners (I believe his name was Crispin) brought up an interesting topic of conversation. In a world where globalization is a fact and many jobs can easily be moved anywhere in the world thanks to the power of the internet and the information economy, we’re gradually going to see a global marketplace. In other words, all of the nations of the world will gradually see their average standard of living even out, as many of the workers are competing for jobs with everyone else in the world.

My belief is that, for the most part, the standards of living everywhere else in the world will rise rapidly to meet the standard of living in the United States. However, I also feel that our standard of living here will probably never grow at the same rate as it did in the twentieth century. In short, I think our growth rate will be much lower than that of the rest of the world and may in fact be a slow reduction over a long period of time.

I don’t really think it’s anything to panic about, though. This decline has been happening already for a long time, starting in roughly 1970. Real wages – meaning the amount that people get paid when you get rid of inflation – have essentially remained unchanged since then.

The real change in our financial lives has been the big increase in costs. There are countless services we have today that many of us consider essential – and that we pay for every month like clockwork – that simply didn’t exist thirty five years ago. Cell phones. Home computers. VCRs and DVD players. The energy required to run all of these devices. Internet access. Non-extortionary long distance telephone access. The vast majority of Americans consider these expenses a requirement – and they didn’t exist in 1970.

My prediction for the future is that these trends continue. Real wages won’t go up, but our expenses will go up.

So what do we do? As always, there are two key solutions for this – and they’re solutions anyone can follow. Plus, they’ll benefit everyone regardless of whether they believe such change is happening or not. And these two key solutions are summed up in one phrase: spend less and/or earn more.

We can spend less by recognizing that we don’t need every service or tool that comes down the pipe.

On a regular basis, step back from your life and look at how you spend your money. Keep track of all of your spending for a month. Then, sit down and honestly evaluate it. Where are you spending money on things that really don’t add value to your life? Then, cut them hard.

Five years ago, I was a cell phone addict. I never went anywhere without it. I was constantly calling and texting people. Over the last two years, I have essentially weaned myself from cell phone usage. Now, I rarely pick it up and, when my contract expires, I’m going to simply cancel the phone and get a pay-by-the-minute el cheapo phone. Why? I realized I didn’t actually need what it provided. What I wanted was connection to the important people in my life – and cell phones didn’t really provide that. The only actual need it fulfilled in my life was additional security while traveling and, on rare occasion, contacting a friend to make sure we were meeting up at the correct time and place. I can do that for a lot cheaper with a prepaid cell phone, so I’m going to make that switch in the very near future.

On the flip side of that coin, we can earn more by improving our soft skills.

What do I mean by that? Think about it this way. There are two very competent mechanics in your town that charge roughly the same price for the same quality of work. One of them is very gruff with customers, doesn’t explain repairs well, and doesn’t provide documentation or assistance. The other one is very friendly with customers, explains the repairs in common terms, and gives documentation to his customers. Which mechanic will eventually have most of the business?

This is true in any field. Everyone has hard skills that they can provide to the world. We’re all good at something – and some of us are good at several different things. When you have your choice among people who are good at a particular task, you don’t choose because of the hard skills. You choose because of the soft skills. Do they communicate well? Do they listen well? Are they organized? Are they responsive? Do they spend their time improving themselves or improving the community?

Those soft skills and attributes pay off regardless of what the economy is doing – if anything, they pay off better in a down economy. That directly means employment for you. That means raises. That means job opportunities.

If you really focus on these two things regardless of where the economy is right now, you can handle almost anything that the future economic situation will throw at you. You’re prepared for it.

We can all have a brighter future no matter what happens if we spend some time today preparing for it. The future is an opportunity, not a place of fear.

I find that, whenever I get busy with things in my life, the first thing I cut out is the hour or two a day I spend reading. If I do that for a few days, I begin to intensely miss it.

Just yesterday, I was talking to a friend of mine who’s a stellar athlete. He expressed to me the exact same thing about training – if he skips a couple of days due to personal issues, he REALLY misses his daily hours in the gym.

Exercise your body, exercise your mind, I guess.

I’ve always been very financially responsible and rather frugal. I might occasionally allow myself to purchase a bottle of wine at the end of a week or a new book once a month or so, but I’ve never been a spender. I very much believe that I’d rather struggle (not that my husband and I really struggle) now and relax when I’m older.

I had such a tight string on my wallet for long it felt good to just buy stuff for the first couple of months. But now I’m afraid I’m going to fall into some kind of spending spiral. I would like to find a balance between incredibly frugal and lightening up a little bit. I don’t know what tomorrow is going to bring I don’t want to live entirely in the future any more. I need to enjoy the life I’m living now too. Do you have any advice?
- Dana

I edited Dana’s question a bit to eliminate some of the more personal elements, which weren’t really relevant to the issue at hand but might be embarrassing if someone she knew were to read the question.

I don’t see anything to be concerned about in your email, Dana. As long as the things you’re spending your money on in the now are things that are genuinely important to you, there’s no problem with spending money today.

Of course, you should always keep a few basic principles in mind. Even if you’re spending more than before, you should still strive to spend less than you earn – keep that as a firm cap. You should also reflect on the things you’ve spent money on to make sure that they’re bringing you genuine happiness.

From your email, you’re clearly already doing the reflecting, and it seems as though you’re spending less than you earn. All that’s happening is that your values are shifting a bit due to changes in your life – and that’s completely normal, even healthy.

We have $5800 in a money market account for savings. After a recent look at that account, I noticed that it’s returning 0.5%. Obviously, I want to improve that rate of return. I’ve contemplated a CD ladder, but CD rates at my credit union are well below the return I get on my checking account (with very simple stipulations to meet) that gets me 3%. Is there any reason to not move this money into my checking account? We have another $4000 in savings in the checking account currently and don’t have a problem with keeping the mental separation of savings vs. spending money being in the same account.
- Joseph

The entire purpose of a CD – and thus a CD ladder – is to earn rates that exceed what you can get in your checking or savings account in exchange for losing some liquidity (i.e., you can’t just remove money from a CD at will without paying a penalty).

If you’re earning more in your checking account or savings account than you can earn with a CD, then you shouldn’t have that money in a CD. It’s earning less (a negative) and you have less access to it (a negative), with no corresponding positives.

You’re doing things right.

I have been reading a while and looked around a lot on the “should I cash out my 401k to pay off debt?” question. I’m still stuck as to whether I should or should not. I have reduced my expenses, stopped using cards, have a $1,000 safety fund/savings, but still have $18,851 in credit card debt. I am not depositing in to my 403b now so i can use that to pay down debt, but at this rate, it looks like 5 years for all of it. I have a 401K from an old job valued at about $11,380 right now. I was thinking about waiting till it’s at about $12k, that way, after tax and penalty, I would have enough to pay off one card, $7791 at 19.99% ! and then snowball the other card payments from highest interest down and that would take overall two years (or less depending on refunds etc that could be applied). I’m in a better paying job now and employer is putting a tiny amount in to 403b even though i am not contributing right now. I am 32 yo, have a condo and car payment, and once credit card debt is paid off (about 500 a month), i could put a lot into savings, start an IRA, and resume 403b contributions. I guess I just want to see some more rapid progress on paying off this debt, but am I betting my future by cashing out the 401k?
- Christopher

If I were you, I would not touch the 401(k) and I would also start contributing more to the 403(b), even if it adds some time to the debt payoff.

Why? You can never get those contributions back into your retirement plan. If you take that money out of your 401(k), you have permanently hindered your retirement. The only way to approximate it is to contribute quite a lot extra to your 403(b), but that would be even later, after your debts are gone, so it would require a lot of contributions.

In fact, I would contribute to my 403(b) up to the top of the employer’s match, starting right now. Again, you can’t ever get this contribution opportunity back – it’s free money that your employer is handing you that you’re turning down right now.

Yes, your credit card debt might take a little longer, but a 20% loss on your credit card interest rate is well worth a 100% gain on your 403(b) contributions from the match.

My husband and I are trying to decide when we should start a family, he is 28 and I am 27. One of us plans to stay home with the baby so we need to be able to live off of one income. I am a registered nurse and he is a Commercial Truck driver with a class A. The issue is we have debt and need to fix our house up, our current plan we would have this done in 2 1/2 years, 3 1/2 and we could have no mortgage. We are starting to feel this is too long to wait to try to start a family. Total income 2009 $90,000, debt: CC $4500 9.8%, car $14,000 7.8%, student loan $24,000 5.5%, Mort. $42,000 6%, about $15,000 needed in home repairs. In 2009 we paid off $12,000 in CC debt and put $5,000 into our home. We both do 6% of our income to 401K, emergency savings is $2000, and I am furthering my education and we are paying cash for it. I am starting to feel that we are overly preparing to have a family. Any thoughts?
- Lindsay

I think you should move forward with your family plans when you’re sure you can make it financially after having the child. For you, this means not only adding the child costs to the equation, but it also means one of you staying home with the child.

You should spend some time planning out exactly what will happen in that case. You mention that you’re getting further education (to be a nurse practitioner, I’m guessing?) – if you’re going to be the one that stays home with the child, cut that expense right now.

It’s also worth noting that even when you decide to go forward with trying to have a child, that child won’t arrive in a stork tomorrow. Even if you conceive almost immediately, you still will have most of a year before you lose one or the other of your incomes.

My suggestion? Right now, make up a very detailed plan for how you will do things after the child is born. How much income will you have? Will you be able to cover the bills? Who will stay at home with the child? How many years will that person stay at home? Some of these questions may alter what you’re doing with your money and time right now – if you’re staying at home, for example, you may not want to invest a lot of money into furthering your education at the moment.

If it looks like you could make it with the way things are right now, then I’d start trying to conceive. If it doesn’t look possible, I’d wait a bit longer, then re-evaluate.

There’s a lot of conflicting information out there and I’m curious what you would do. When I go on vacation I often rent a car and never know what to do about insurance. I don’t own a car at home and therefore don’t have any auto insurance policy for myself. I have the option of getting non-owners auto insurance from my insurance provider for $20/month but, based on the explanation of the coverage, my understanding is that all that covers is medical and damage liability if I hit someone else. I do have a visa that could presumably provide collision and damage insurance beforehand but doesn’t cover liability for another person if I collide with them. However, I’m not ready to pay $240/year so that I have that coverage for the 2x a year I drive a car. What do you suggest I do when I rent a car? Just use my credit card coverage? Get one month of liability coverage (if that’s even an option)? I paid an arm and a leg last time I rented because my parents and boyfriend freaked me out and demanded I get it but from my research they don’t understand what sort of coverage I need either. What would you do in my situation?
- Arlene

Most likely, you won’t be able to buy that policy on a month-by-month basis. Most policies are drawn up to cover six months or a year and your monthly payments are fractions of what you owe for that policy.

My first suggestion would be to look at the insurance offered by the rental companies. Typically, such policies are redundant for people who have auto insurance themselves, but they may not be redundant for you.

I would also take a look at what exactly your credit card offers in terms of coverage. It seems that your card just offers liability coverage, so I would look at the company you typically rent from and get quotes on insurance for the passenger and rental car. This will probably be in the ballpark of $10-15 a day, so this will save you money if you rent only for short periods, but if you rent for two weeks a year, it won’t be much of a savings.

If you have a well-stocked emergency fund, you may want to consider just having liability coverage (as provided by your card) and calling it good enough. After all, if you’re not driving the rental too much, your risk of a major accident is relatively low – and that’s what we’re talking about here, risk.

I have been working as a software developer for around two years. It’s a steady job and pays fairly well and I do enjoy it at times. I find though my concentration span really holds me back from enjoying this more and from progressing in my programming ability. Sometimes I can almost do a full day doing no work. I just can’t keep focus long enough.

I have recently pondered the idea of hypnotherapy but to be honest I’m a little scared of this. Do you have any suggestions to improve my concentration span?
- Ben

I’ve thankfully never really had this problem. In fact, I tend to have the opposite – when I bear down on a task, I can lose all track of time and even reach the point where I literally don’t hear people around me.

Anyway, one of my mentors once suggested a five-prong plan for maintaining concentration. He used the word FOCUS as an acronym for it. I’ve seen variations of it floating around online, but here’s how my mentor defined it.

Five more means that if you’re doing something and feel your focus wandering, always challenge yourself to do five more. Five more pages. Five more minutes of coding. Five more emails. It’s like endurance training for your mind.

Only the thing you’re working on means that you should try to look at the task you’re doing with fresh eyes if you find your mind wandering. Look at what you’re doing and ask yourself if you’re doing it well or why you’re doing it. It often refreshes the task.

Complete the little things now means that if you have a task you’re putting off, start working on it immediately. This helps with concentration because a task that’s been put off is a task that’s weighing on your mind.

Understand the details means that, instead of thinking about the big picture of the project you’re working on, you should try to break it down into the smallest detail you can, then just focus on that detail. It makes the task seem much shorter and manageable, which again helps with concentration.

Silence means that you should cut off interruptions. Unplug your phone. Close your web browser. You can even go so far as to rest your face on your hands and cup your hands around your eyes so that they function as peripheral blinders.

Good luck!

I’ve been reading The Simple Dollar for about a year now and really enjoyed the series you did a while ago on cooking. Quick question, I’ve tried Eggplant several times (never as Eggplant Parmesan) and not had much luck, however I found a recipe for Eggplant Parmesan and wondered if you’ve ever attempted to cook it at home. The particular one I found says to peel the eggplant and I’m wondering if that’s the reason all my other eggplant attempts have failed. Any thoughts?
- Shawna

You didn’t really specify what the problem was with the eggplant. For the most part, the peel makes little difference – it’s mostly a matter of personal preference, like a potato peel (I prefer them, myself). My guess is that the problem is not with the peel, but with the sweating.

Sweating? Try salting the outside of your eggplant about a half an hour before you tend to use it. Just take some table salt and rub it on the outside. When you’re ready to use it, you’ll find that the outside of the plant is now moist with some very salty and bitter water. Rub the water off and slice it.

I don’t know if that’s the solution for your problem, because I’m not entirely clear on what’s wrong with the eggplant when you cook it. I’m just assuming that the problem is bitterness.

It may also be that you simply don’t like eggplant, for which there is no real cure other than just trying it in different ways on an irregular basis.

My husband and I are in our late 20s and don’t yet have any kids but are thinking about it – we’d like to have a baby in the next year, but obviously there are no guarantees on timing. I’m currently making about $45k and my husband $75k; when we have a baby we plan on me staying home, so we’ll be losing that income.

That’s the scoop – thoughts?? Also, input on whether to do traditional IRA vs Roth IRA would be helpful, I think. We’re in a very blessed and pretty fantastic stage of life right now, and really want to take every advantage that we can while we can.
- Marisa

As I mentioned above, the first thing you need to do before considering going ahead with a child is to make a post-baby budget. Spend some time really contemplating how your life will look at that point. Is one of you going to stay home with the child? What will child care costs be like? Do some research and find some real answers here, then figure out what things will look like financially for you. I encourage you to estimate high, because it’s going to cause a lot less problems than estimating low will.

If you make that budget and decide that things look doable but close post-baby, put that $10k into savings for now. It may wind up being a “baby emergency fund” as you find that there are lots and lots of baby expenses you didn’t consider. If you get through 2011 without a child, then contribute to the IRA.

If you make that budget and decide you’re good to go with a fair amount of room to breathe, I’d sink it into the mortgage, mostly to get you below the PMI mark, which will make breathing even easier for you.

In the two years after graduating college, I learned a fantastic lesson about living on credit cards (badidea!) and living without health insurance, and had to go through CCCS to pay off the impressive debt that I accrued– About $20k in credit cards and $10k in medical bills. During this time, I had to sign a agreement with CCCS that I would not use any credit card until my debt was paid off.

Would you recommend that I open a new credit card and pay it off each month? And if so, what advice can you give me about going back into the world of credit?
- Jamie

If you’re truly living paycheck to paycheck, the first thing you need to do is either increase income or cut spending (or, ideally, both). Perhaps you need to change your living situation or your energy consumption or your food consumption (do you constantly eat out?). Maybe you can get a second job. Whatever it is, you need to be spending a bit less than you earn or you’re always in danger of getting into financial trouble when something unexpected happens – and it will happen.

If I were you in this situation, I would get an extremely focused credit card that you use for just one specific purpose so that you’re not tempted to use it outside of that context.

The idea that comes to mind for me is a credit card (Visa or Mastercard) offered through a gas station chain that you frequently use. Sign up for one of those cards, but use it ONLY for gas. The giant gas chain logo on the card should be a strong reminder of that. Then, at the end of the month, pay off the bill in full.

This simple step will allow you to re-establish your credit without opening the floodgates. Just keep that card for one purpose and one purpose alone.

I would not use it for any other purpose – don’t “pay up front for trips” with it or anything like that. Use it simply as a means of improving your credit and maybe reducing your gas costs a bit.

My husband and I own a reasonable home in Pennsylvania, and are hoping to move to Maryland to be closer to my family in the next couple of years. We also just welcomed our first child about 7 months ago. I am a full-time working mom and am growing weary of being away from my home and family 10 hours a day, but my family relies on my income (which is significantly higher than my husband’s: $56k to $38k) and my health insurance.

And (2), would it be a bad idea to rent for a while once we move to Maryland in order to save money? Housing is substantially pricier there, so we were planning to build on family land, but that could take a while since my husband would do much of the building himself, while also working a full-time job.
- Jen

(1) It is not selfish of you to want to stay at home with your child. Having a child is an intensely personal and emotional thing and, for many people, staying at home is something they strongly desire simply because of the emotional attachment and quality of care that they would provide to the child. It’s your child. You love that child. Wanting to care for that child and protect it is completely normal.

(2) It is never a bad idea to rent housing, particularly if you don’t plan to live in the house for seven years or more. It’s the first years of the mortgage that are the most painful ones – most of your mortgage payment goes towards interest and the power of compound growth on your home’s value really hasn’t had time to work yet. If you can find a good deal renting, renting absolutely should be on the table.

As for the building, a close friend of mine did that (and I’ve asked him for a guest post to discuss it). It can work and it can save a lot of money, but you really need some serious passion about carpentry and plumbing and electrical work to make it happen.

Good luck.

Got any questions? Email me or leave a comment and I’ll try to answer it in a future mailbag. Please note, however, that I get many more questions than I can answer in any sort of reasonable mailbag length.