As many of you know, over the last year, I’ve been writing a book outlining the specific details of how exactly I went from being tens of thousands of dollars in debt and working at a job that caused me to miss my family and made me long for the career I wanted to doing exactly what I wanted to do: writing, spending a ton of time with my children, and living without the anvil of debt hanging around my neck.

That book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams, is now largely finished (I’m in the process of checking over the galleys to make sure that it’s ready to go) and will be available in bookstores on June 28, 2010!

Here’s the “back of the book” blurb:

The Simple Dollar can change your life.

Trent Hamm found himself drowning in consumer debt, working in a job he couldn’t stand… and figured out how to escape that debt and build the fulfilling career he’d always dreamt about, all at the same time.

Hamm shared his experiences at TheSimpleDollar.com–and built it into one of America’s top personal finance websites. Now, The Simple Dollar is a book: packed with practical tips, tools, and lessons you can use to transform your life, too.

This isn’t just “another” personal finance book: it’s profoundly motivating, empowering, practical, and 100% grounded in today’s American realities. Trent Hamm will show you how to rewrite the rules, creating healthier relationships with money… and with your loved ones, too. With his help, you can get out of debt, start moving forward, and build the strong personal community that offers true happiness–no matter what happens to the economy.

· Escape the plastic prison, and stop running to stand still
5 simple steps to eliminate credit card debt… and 5 more to start moving forward

· Shift your life’s balance towards more positive, stronger relationships
Learn how to put the golden rule to work for you

· Discover the power of goals in a random world
Then, learn how to overcome inertia, and transform goals into reality

· Navigate the treacherous boundaries between love and money
Move towards deeper communication, greater honesty, and more courage

So what’s it really about? Here are five things you need to know.

1. The book is divided up into nineteen short chapters, each one focused on a specific topic. The chapters are ordered in something of a progression, with a longer chapter on getting rid of your debt coming earlier in the book and other chapters on topics such as redesigning your life to meet your values (like, for example, walking away from a very steady job to become self-employed and a more focused parent, which is what I did) coming later.

2. Each chapter finishes with five specific action points to take with you to follow up in your own life on the ideas presented in the chapter. That way, you’re not left with a sense of “That’s cool, but it doesn’t really apply to anything I could do.” Trust me, most of the chapters will end with something you can do to improve your state.

3. The chapters have a lot of personal anecdotes. I talk a lot about the things I tackled in my own life, how they worked, and how some of them didn’t work. Although I wouldn’t call this book a memoir by any means, there are certainly some strong elements of using my own life to illustrate some of the things I’m talking about.

4. I did a lot of interviews of different people for this book. By “people,” I don’t mean personal finance gurus and the like. Most of the people I interviewed for this book are readers of The Simple Dollar, real people who made mistakes and figured out their own way to overcome them.

5. This book doesn’t just re-hash the same old personal finance ideas. I draw from things as disparate as Nicholas Taleb’s book The Black Swan, the philosophy of Jeremy Bentham and John Stuart Mill, and research papers in cognitive psychology, but I sought to tie them together into something that matters in your day-to-day life.

It’s a cool book. I’m very proud of it and I can’t wait for it to come out!

The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams is currently available for preorder:
Preorder it at Amazon.com
Preorder it from Barnes & Noble

Over the past year, I’ve been experimenting a lot with my personal website, TrentHamm.com. Should it just be a puff piece that promotes me? Should I have some long essays or short stories on there?

What I eventually realized, though, is that the thing I enjoy doing the most is simply sharing interesting links on all kinds of stuff – sports, science, politics, personal growth, religion, books, and so on – and then adding my own comments. I realized this because I often find that putting together these weekly roundups is my favorite post I do on The Simple Dollar all week, because it gives me an excuse to read what others are writing and add a bit of my own thoughts.

So, if you go to TrentHamm.com now, that’s exactly what you’ll find. You’ll find little bits of stuff – mostly links to things that interest me, but also quotes that inspire me and other things here and there, including updates on my life. In fact, that’ll probably be the first place I say anything when our upcoming baby arrives sometime later this month.

Check it out. I hope you’ll visit it every once in a while.

Beware of the Expensive-Gym-Membership Effect This is something of a video-ized version of this older post. I tend to agree that buying something in itself won’t make your life any better – it can only serve to heighten something you already enjoy. If it doesn’t do that, then it’s almost always a waste of money. (@ happiness project)

21 Best Pieces of Money Advice This is a really solid, though-provoking, diverse list of ideas. (@ cnn money via free money finance)

Letting Go to Succeed In order to truly succeed at life, there are a lot of things that a person has to let go of. Past failures. Self-doubt. The list goes on and on. (@ pick the brain)

How to Design Your Circle of Friends I’m a big believer in the idea of choosing friends that bring out the best in who you are rather than bringing out the worst. Such friends will always help you walk the path to a better life. (@ dumb little man)

Would You Rather Receive a Refund or Owe More Taxes? I would far, far rather owe more taxes (as long as there were no extra penalties for doing so) than to receive a refund. Owing more taxes means I kept more money in my own savings throughout the year, whereas receiving a refund means I gave a free loan to Uncle Sam. (@ consumerism commentary)

Recently, I took a serious look at our non-stick skillet, the one we use to cook sticky things like eggs. While it was still very usable, I found that in one place a bit of Teflon was beginning to peel away. I immediately tossed the pan into the trash.

A few weeks ago, I replaced a perfectly good filter on our car – or at least it seemed like a perfectly good filter. I looked it over, tossed it in the trash, and installed a new one.

In these two cases – and countless other similar ones – I went against what I often talk about. Instead of using some things until they’re used up, there are many things that I simply replace on a regular schedule or at the first sign of wear. There are several intertwined reasons for this.

Image by Ryochi Tanaka and shared under the CC 2.0 Attribution license.

I follow maintenance schedules on expensive things. Our automobiles are one example of this. Our hot water heater is another (I drain it every six months to help with scale buildup, as suggested in the manual). Sometimes, following the maintenance schedules mean tossing out things that seem to be completely functional. Air filters. Brake pads. Water. Fluids. They seem just fine, but often the problems are small enough that we can’t see them with the naked eye. Mineral buildup. Small cracks and structural breakdowns. Internal changes that can’t be seen on the surface.

Of course, not replacing such seemingly “good” parts might work for a while. The problem comes in the long term: if you’ve failed at your maintenance, the large item will often suffer a devastating breakdown, seriously ramping up your costs.

In other words, small maintenance costs now help prevent big repair costs later on.

Image by Fotoos van Robin and shared under the CC 2.0 Attribution Share Alike license.

I also replace things that might be harmful to myself and to others. This is where things like the Teflon pan come into consideration. While a bit of a Teflon peel might not necessarily mean immediate danger, it does mean that the bonding between the Teflon and the metal of the pan is starting to wear out. This means the Teflon will begin to come off in pieces and inevitably wind up in your food and Teflon is a toxic material.

This is the same logic by which I often replace electric devices that are shorting and so forth. Although the issue might be repairable, it’s an indication that more serious problems may be at work and those problems, if realized, pose a legitimate danger to those around me.

If I’m not absolutely sure I can repair an item in such a way that it will become completely safe for my family to use, I have no qualms about upgrading a damaged item.

Image by A Geek Mom and shared under the CC 2.0 Attribution license.

Don’t get me wrong – I’m a huge advocate for reusing and recycling things. I (somewhat infamously) wear my socks until they’re falling apart. I’m constantly checking out Goodwill stores and salvaging all kinds of things.

However, I also know the limits of reuse. When reusing an item too often can result in an expensive disaster or when it might result in harm to the people I care about, I back off. In fact, I tend to use the opposite approach – I stick fiercely to maintenance schedules and the like.

For me, it’s all about value, and the best way to maximize the value of a large purchase is to maintain it. The best way to maximize the safety and health of my family is to sometimes let go and replace an item a bit earlier than I might otherwise do.

The end result? I save a lot of money and protect the things important to me at the same time.

The single biggest advantage I’ve had in my life is that I’ve largely been surrounded by supportive people. My wife, my parents, my closest friends – all of them have always been incredibly positive towards everything I’ve ever chosen to do.

My mind continually goes back to the period in my life where I was trying to convince myself to make the leap into being a full-time writer. Rather than saying it’s something I couldn’t do or shouldn’t do, all of them encouraged me to do it when I decided the time was right.

Yes, they offered me input. Some of it was definitely constructive criticism. Yet I always knew that whatever I ended up choosing, they would be supportive and offer me any help they could even if they didn’t think the decision was the right one.

That made all the difference in the world in my decision to become a writer and a much more present father.

Photo by Daniel E. Bruce. Licensed under CC 2.0 Attribution Generic.

Supportive People in Your Life

The supportive people in your life often make all the difference between success and failure.

They tell you that you can do it rather than telling you that you can't. Yes, sometimes we do attempt things that are simply beyond our reach, but we can never succeed if we never try, and we never try if we're constantly told that we can't do it. A supportive person tells you that you can do it, not that you can't.

They encourage you to stretch yourself beyond where you think you can go. A truly supportive person can be aggressive and pushing, like a great coach. They encourage you to step beyond what you think you can do and push yourself even further than that.

They point you upwards when things look down. They don't abandon you when you fail. Instead, they stick by you and tell you that things will shape up.

They encourage the better aspects of who you are. Either by example or by advice, they encourage the more positive aspects of your talents and your personality. The more you use them, the more prevalent they become as a natural part of who you are and how you behave.

They make you feel good about who you are. No one is perfect and it's easy to get caught up in the negatives, especially when the people around you regularly point them out. Instead, look for the people who point out the positives and make you feel better about the person you naturally are.

They don't expect you to be someone else to please them. If people are truly supportive, you don't have to put on an act just to please them. You can be yourself and your natural positives simply come to the forefront.

You need to seek out the supportive people in your life and work on those relationships. Make an effort to spend more time around the people that make you feel good about yourself and what you're doing and give you a sense that you can do it, whatever it is that you're trying to accomplish.

If you're trying to adopt new habits, seek out people who already have those habits ingrained in their life and will help you with theirs. If they are truly supportive, they won't care that you make mistakes (aside from merely wanting to help you past them). That type of attitude from the people around you makes everything possible.

Photo by McKay Savage. Licensed under CC 2.0 Attribution Generic.

Minimize the Unsupportive People.

On the flip side of the coin is the unsupportive people. They're the people in your life who you have to put on an act for. They're the people who make you feel less happy about who you are and what you're capable of. They're the people who encourage your worst traits.

One of the most powerful moves you can make is to minimize the presence of such negative people in your life. For some people, this may mean moving away from a lot of the relationships in their life or away from relationships that they view as being deeply important.

Unless you're personally responsible for that person (you're a parent or a guardian), there is no relationship you shouldn't back away from if that relationship is introducing negativity into your life.

Seek out a new set of activities. Break your routine. Instead of going out with the same set of negative people, go to a community activity. Call up an old friend you haven't seen in a long time. Try something completely new.

You don't have to define yourself by the negative people around you. There's a world full of people out there and quite a lot of them are positive, well-meaning people. Spend your energy seeking them out and building relationships with them and leave the negative people in the dust.

Photo by the U.S. Army. Licensed under CC 2.0 Attribution Generic.

Be Supportive
Yes, it's powerful to seek out supportive people and reduce your connection with unsupportive people, but you can have a profound influence on the supportiveness of those around you by simply being supportive of others.

Avoid negativity towards others. It's easy sometimes to just say something negative towards someone who has made some form of a mistake, but such negative comments have both a negative effect on the person you say it to (often more than you realize) as well as a negative effect on you, reinforcing your own behavior as a negative person and an impression that bystanders gain of you as a negative person.

Look for something positive to say. On the other hand, saying something positive about someone else (or doing something positive with your time) has the opposite effect. It lifts the person you reach out to and also lifts (in a subtler way) the bystanders.

The positivity and negativity you give out comes back to you. If you're negative, the people around you see you as being negative. You bring out negative behavior in others and you mutually bring each other down.

On the other hand, if you're positve, the people around you see you as being positive. It brings out their positive behavior and they strive to bring you up.

It seems so simple, but it's often so hard. Be positive towards others and seek out positive people and you'll suddenly find that the world lifts you up instead of holding you down.

This summer, my wife and I and our three children – a four year old, a two year old, and a baby – are going on at least three different family trips. One will be to downstate Illinois, another will be to northeast Iowa and southwest Wisconsin, and the third will be to northern Minnesota. That doesn’t include multiple graduations we’re going to attend in May, either.

How are we going to do this while simultaneously keeping our sanity (yes, you try traveling for several hours in a vehicle with a four year old, a two year old, and an infant) and keeping our wallets in good shape? Here are seven methods we’re using to provide great experiences for our family while also keeping our finances in mind.

Keep in mind why we’re doing this
Why would we want to travel with a car full of small children? For some people, there may be no rational answer to this question at all. For us, though, there are several reasons.

First and foremost, we want the children to see different places and people. The geography where we live is very flat; this summer, they’re going to visit some very hilly areas. There are no large lakes here, but this summer we’re going to visit Lake Superior. We’re also going to go to areas with at least some cultural differences from home. On top of that, we also want to spend a lot of time outside, as fresh air is one of the best things you can give a child or give yourself.

Those are the reasons we’re traveling. Those reasons have nothing to do with seeing some mind-blowing sites or going to spectacular events. We know why we’re doing this and we let those reasons lead the whole vacation. As long as we follow that lead, we don’t need to pour money on other activities or sojourns.

Stay with family and friends
On each of these trips, either in the middle of a travel leg or near our destination, we’ll be staying with family or with friends.

This provides both a social purpose (seeing people we care about) and a financial purpose (free lodging for a night or two). Usually, in exchange for this, we often will buy dinner when we’re there (or prepare it). We also allow any family and friends who are in our area to stay at our home for free.

This is an exchange that does nothing but build relationships and help out everyone involved.

Camp out
At least once this summer (perhaps twice), we will be camping out for multiple days. Yes, with a baby. We did it with just one baby and we did it with both a toddler and a baby, so I don’t think it’ll be a problem doing it again with two young children and a baby.

In fact, there’s one big advantage to camping: unless there’s a storm, when everyone falls asleep, everyone sleeps really deeply. I actually tend to sleep better when we’re camping because there are no night-time interruptions or other such things.

On top of that, camping can be incredibly inexpensive. We often request camping gear for gift-giving occasions, which makes camping nearly free. Usually, all we pay for is the spot to camp on – $10 to $20 a night unless we find a free option. Our supplies are usually inexpensive, too, especially if we collect or make our own while we’re there. It provides exercise, tons of fresh air, and some wonderful time in the great outdoors with the people I care about most.

Plan for the road trips
Road trips can be a very expensive part of traveling (as can flying, but I’m just simply not going to attempt that with three children under five). Between the gas, the maintenance costs, and the expensive food and beverages along the way, it can really add up.

That’s why I do some advance planning. The goal is to prevent stops, because stops are expensive.

First, I make sure there are plenty of beverages and snacks packed, probably more than we need. I usually pack sandwiches and vegetables and fruits so that we can have a full picnic meal on the road. I also prepare a big bag full of things to do for the children on the trip.

Second, we stop mostly at rest stops and everyone is required to go to the restroom when we stop. This reduces the temptation to spend money on overpriced stuff when we stop and it also reduces the overall number of stops. Another advantage is that many rest stops (particularly in Iowa) have areas for running around in the grass and picnicking, both of which happen on trips.

Use alternative housing
Hostels. College dorms. YMCA lodging. Housesitting. These are all great options for saving money on lodging when you arrive if you’d prefer not to camp. We are actually going to do some housesitting this summer for one of our trips.

Find out what types of alternative housing are available at your destination. This can be done with just a bit of effective internet searching. Reviews of the housing (available on many travel websites) can help you avoid unexpected problems.

Utilize free activities when we’re there
Vacation doesn’t have to be about jumping from high-priced activity to high-priced activity. Most of the best memories from the vacations I’ve taken in my life come from the free things we did: climbing a hillside in Edinburgh, putting my feet in the ocean northwest of Seattle, seeking out petroglyphs on foot in rural Arizona.

Yes, if there’s something your heart is set on that you really want to see that costs money, do it. However, use travel guides that help you identify the free things in the area and use those to fill up your activity schedule. Spend some time doing simple things, like walking in the woods or resting on the beach or building a great campfire.

Be resourceful
Before you go, tell your social network where you’re intending to go and ask if they have any tips or suggestions about traveling there. You might just be shocked at what your receive in return.

Be resourceful when you’re there as well. Don’t buy firewood if you can find it yourself. Don’t buy campfire roasting sticks – use a knife and make them from branches. Don’t buy beverages – carry an empty container and fill up at water fountains. Just by taking a few little steps to avoid buying things, you can save money left and right on your trip without reducing your enjoyment of it one iota.

Good luck!

I spent a good chunk of yesterday attempting to teach my children (four and two years old) the fundamentals of golf. The results were interesting.

The younger one, my daughter, thought the best way to get the ball in the hole was to pick up the ball and put it in the hole.

The older one would swing every time with as much power as his little body could muster and would either miss entirely or knock the ball quite far, often much further than the hole.

Maybe they need one on one lessons.

I am searching for an excel spreadsheet template, or similar product, that will produce an combined amortization for several “parents plus” student loans. We have a total of five such individual loans, and we make a single payment monthly to Dept of Ed. that is applied over the several loans. They each have different Int rates, and staggered starting dates, as we have not consolidated the loans related to our youngest, who has one more year of college remaining. I would like to start snowballing (as Dave Ramsey would put it) these loans, and would like to chart the best candidates for prepaying principal, if that is possible.

I have looked at MS at Home, Templates, page and asked this question on a forums page, but did not see anytype of response.
- Sandy

If you’re looking for just a debt reduction calculator, I’d look at the spreadsheet available from Vertex42, a site that just makes lots of Excel templates. I downloaded it and it seems at least close to what you’re looking for.

If you’re doing that, though, it’s vital that you also prepare an overall budget so that you have some idea of what you can realistically afford to put towards the snowball. The best free spreadsheet for that (by far) is Charlie Park’s PearBudget spreadsheet, which is really good.

Excel really can do many of the tasks that you might want to use Quicken or other software for if you don’t mind manually filling in the data.

It’s older parents with dementia. When older people start with dementia they can’t handle their finances like they used to (or maybe worse than they used to). They often will hide it too. I have personally seen this in some friends and also in our own family. They will run up huge credit card debt which they think they can pay but can’t. The credit card companies will then take advantage of them by calling and demanding huge payments by intimidating them. Then, often, they don’t even remember authorizing payments and can’t make it until next payday. They let sorry family members and friends take advantage of them (with “loans”) because of their generous nature or because, in their mind, they still have that unlimited income. Sometimes a family member will move in with them “to help them out” when they are actually helping themselves to their income and free-loading. If would advise any responsible child of an older adult to keep their eyes open for clues that this could be happening. It’s hard to get the parent to admit it and a pure nightmare to get it cleaned up.
- Cindy

This is absolutely true. I witnessed this in my own family within the last few years, as my grandmother began to slip into dementia a bit during her final year or two of life.

She began making lots of strange choices, spending money in very strange ways, and often failing to make ends meet at the end of the month after having no problem whatsoever doing so for decades beforehand. It caused untold problems.

The best thing to do to prevent this is to talk about it now, before dementia ever even has a chance to begin. Plan for this with your parents. Come up with a power of attorney arrangement that allows you to protect your parents from themselves when the time comes.

Please would you let your readers know how you’re progressing with your Rubik’s cube challenge. I was really intrigued when you first mentioned this in The Simple Dollar.
- James

I can do most of the solving of a Rubik’s Cube very quickly. I can solve a single face in about twenty to thirty seconds and line up the adjacent rows with about another ten. After that, I get really, really slow for some reason.

The thing is that I haven’t really mastered (or figured out) about half of the solution, but I’m really fast at the other half. I’m not really sure why this is, other than I need to practice a lot more mostly at the second half of the solution.

I practice with it on occasion even now.

What are your thoughts on pre-paying a mortgage if the person does not plan on owning the house for very long?

What I would love your help with is calculating how much I could save in interest vs. how much I could earn by investing at a reasonable rate of return (either way, assuming $100/month for 5 years). There are lots of amortization calculators online but they all seem to show savings over the life of the loan, not a shorter period. I am struggling with how to calculate this.
- Andrea

If you put extra money into your mortgage, you’re essentially buying an investment that says “I return 6.375% a year (or maybe less, depending on your tax situation) but I am very illiquid.” In other words, it’s a solid, steady return, but in exchange for that, you don’t have the opportunity to get that money out very easily.

As a short term investment (five years would be short term), the stock market is akin to gambling. It’s truly impossible to estimate how much your five year return would be in a broad-based stock investment. It might be 0%. It might be 15% per year.

If you’re looking for a very stable investment over that time frame, your mortgage is probably your best bet. Other highly stable investments don’t return as well as your mortgage does right now.

My husband took a buy-out/retirement offer from his work, after 33 years of service. He’s 51 and has wanted to retire for about 25 years now. (semi joking)

He is loving his life right now and really has no desire to find a job. Is it possible to pay into SS on your own? We live quite well off his pension and have ample money to contribute to SS. I can’t seem to find this info anywhere!
- Kelli

For your husband’s situation, the comment that he has to keep working in order to receive Social Security benefits likely isn’t true. You need to check out the annual document you receive from the Social Security Administration to make sure, but it’s likely that if he has been working full time for 33 years, he’s accumulated more than enough work credit to earn his full benefit when he retires.

You might want to read through this great Social Security primer from CNN Money for more information on that.

If he doesn’t want to work and doesn’t have a financial need to work, working just to pay more into Social Security isn’t really necessary.

I’ve begun the search for a used car somewhere in the range of $7-12K. One problem that I feel I will encounter is how to pay for the car. I fear that I may not be able to get a loan with a decent rate, or at all, because of the fact that my debt is very high, even though I’ve never missed a payment, I wouldn’t have a co-signer, and my FT employment history is very short at only 4 months. Do you have any suggestions for finding a decent loan with a decent rate for someone fresh out of school?
- Andre

My first suggestion would be to get a co-signer. I had a co-signer on the first vehicle I ever purchased (thanks, mom and dad!); without it, my student loan situation (and likely my burgeoning credit card debt) would have made such a loan a complete non-starter.

If you don’t have anyone who can co-sign the loan with you, your best avenue is to just keep building your credit in a positive direction right now. Keep making your loan payments on time (each time you do this and your debt goes down a little, that’s a positive). You should also make sure you’re seeking out a full time position in terms of employment, both for the higher income and for the stability.

I don’t know exactly what your credit looks like, but you may be eligible for a car loan now. You might want to check your credit report from the government and then use a FICO score estimator just to see where you’re at.

I am in my early twenties, and for some time now I’ve been dating this man and things look promising. What worries me about him is that he has a “spender” mentality- he’s had his parents’ financial support for most of his life (and his mom’s pampering), and his idea of “holding back” is not spending who knows how much on collector comics, etc. His paycheck is small. He’s listened to me about reducing his spending (eating out once every week and a half is an accomplishment), but the root of the problem seems to be that he likes to own stuff- something I can’t wrap my mind around. It is not enough to watch a movie, for example, but the more fancy the purchase is the happier he is (HD, blue ray, etc.) In a few months he is enlisting in the armed forces, something I hope helps. Regardless of how this relationship turns out, what can I do to help him overcome this destructive mentality?
- Katherine

Very rarely can someone else force a person to change their behavior or mindset. The need to change has to come from within.

Maturity might be part of the answer. He might also need to hit financial bottom at some point, or have his pampering cut off from his parents. Something has to change for his mind to change and if he’s able to survive doing what he does now, he really doesn’t have that motivation.

The military might help with this, but it also might not make one bit of difference. It depends on how his mind processes what he picks up there.

The best thing you can do is keep your finances separate for as long as possible and don’t bail him out of trouble. Yes, it’s a “sink or swim” mentality, but if you give him a life raft, he’ll think he can keep on “swimming” the way he always has.

I knew that I had some old debt sitting in collections but I had been ignoring them, focusing instead on the current debt I’ve had. I recently pulled my credit report so I could focus on paying down these debts and was shocked at what I found. I owe over $6,000 to one hospital for medical expenses from when one of my daughters’ was a month old, and $2,500 to the medical group and hospital system we are a part of.

Do you have any advice on what to do with all this medical debt?
- Jacqueline

I’m going to assume that you’re committed to paying these debts off instead of just trying to dodge them.

The first thing you need to do is go through your records and figure out what all of these debts actually are. Make sure that they’re legitimate and not based on identity theft or other mistakes.

Once you’ve done that, call up Medi-Cal and find out if the debt consolidation still applies. My guess is that it does not if they’ve sold off the debt to someone else, but I’m not entirely sure what the situation is based on this question.

After that, you’re probably using the right approach in just paying off each of these debts as you can afford to.

Good luck. This is going to just take some time and patience to resolve.

I’m in my late 20′s and currently between jobs. I have no debt, no big financial responsibilities, and $75K in savings. I’m also in a long distance relationship with my boyfriend of 3 years. He lives in Europe. We are trying to be together, but it is very hard.

Is this worth it?
- Ginger

If you have $75K sitting in the bank, there’s no question what you should do: go. Go there, get a low-paying job for a year, and just spend that time figuring out if he is the one for you.

If you are in a situation where there is a life-altering decision in front of you and you have at least some economic stability, you should always take the road less traveled.

If you don’t, you’ll regret it for the rest of your years, and that’s not something that’s worth holding in your head.

A background on me: 28 years old, no wife, no kids, great stable job. I now only have two pieces of debt: a mortgage with a $165K balance @ 5.25%, and a $21K student loan that still has about 15 years left, but it has an interest rate of only 2.13%. I now have about $7K in my emergency fund, good for around two months of expenses. I’ve also got about $16K in a brokerage account. I currently contribute about 9% of my $90K base salary to a 401(K) and my company throws on an additional 3%, and I also contribute another 4% to a Roth 401(k). On top of my base salary I get an additional $30K to $35K a year in cash and stock bonuses.

As of right now I have a little over a grand left to spend each month after all of my expenses. My question for you is, what should I do with it? Should I bump my emergency fund up a couple months? Pay down my mortgage? Increase the money I put in my 401K or my brokerage account? Surely I shouldn’t pay off the 2.13% student loan, right? Any help would be greatly appreciated!
- Nick

Again, this is all about goals. Where do you want to be in five or ten years? Your answer to that question changes what you should do here.

Do you want to switch careers or go back to school in five years? If that’s the case, you want to hammer your debts hard, as reducing your monthly expenses is the best thing you can do for that, and bolster your cash emergency fund quicker.

Do you hope to be considering marriage and children? If that’s the case, cash savings or even investing would probably be the best thing to do.

Do you hope to be earning as much as possible and be shooting for retirement as early as you can? I’d have every dime possible jammed into retirement accounts and what you can’t jam into there jammed into brokerage accounts.

It’s all about your goals. Where do you want to be in five years? Figure that out first.

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 interest.

I’ve always found the idea of investing in stocks for dividends to be an intriguing one. In a very simplistic way, that means you buy stocks in individual companies that are very stable and have paid strong dividends for a long time. Usually, you care little about the ups and downs of the value of the stock because your primary focus is in the dividend checks you receive as a stockholder.

Yes, The Little Book of Big Dividends is a new entry in the now quite long “Little Books” series from Wiley, each of which focuses intensely on a specific investing topic, writing about it in simple terms which everyone can understand. This entry is written by Charles B. Carlson, the editor of the DRIP Investor and long-time advocate of dividend investing.

Since I’ve had an interest in dividend investing for a long time, I looked forward to reading this book with a healthy dose of excitement. Does it live up to the potential or does it just stretch what I wrote in the first paragraph out for two hundred pages? Let’s dig in.

One | The Check Is in the Mail
The book opens with a clear explanation of what dividends are (small pieces of profits of a company given out to shareholders) as well as some common traits that companies that offer dividends have in common. Typically, they’re large, stable, and have a predicted future of stability. That, of course, means that they’re not growth companies (usually). It also discusses the most common way to compare dividends offered by a company, which is yield (annual dividends divided by the price of the stock).

Two | Super Size Me, without the Heartburn
Of course, investing is not without risk, and dividend investing is no different. Quite often, yield is a great proxy for risk – if you see a company with an enormous yield, there’s probably some serious risk involved. Healthy companies balance a dividend with investment in themselves, so if they’re dumping out tons of money to shareholders, there may be something fishy going on that’s not good for long term health. The best way to mitigate this risk is to avoid small companies paying any sort of exceptional dividend.

Three | If Einstein Was a Dividend Investor
In other words, a big part of dividend investing is looking at the total return potential, not just the dividend potantial. A company paying great dividends now that dies in three years is still a bad investment. How can you make sure that a given dividend-paying company is actually legitimate and worthwhile? The first place to look is in their financial numbers. Do they actually have a lot of money in the bank? Can they actually afford to pay out those dividends?

Four | The World Is Your Oyster
Here, Carlson makes the astute point that it’s worthwhile to look internationally for stocks that pay good dividends, because quite often the large companies in other nations are very steady dividend payers, just like those in the US. In fact, doing this can help diversify a portfolio of dividend-rich investments, making sure that you’re not too heavily invested in a certain sector.

Five | It Pays to Be Direct
Rather than investing through a broker, the best way to invest in a good dividend-paying stock is directly with the company. A few options are discussed here, but the most compelling one is known as a DRIP. Basically, it’s a program offered by some companies that allows people to buy stock directly from those companies with no fees. The dividends earned in those plans are directly reinvested into more stock in that company until you’re ready to sell it. It’s convenient, low cost, and very easy to manage.

Six | Postcards from the Hedge
One catch in all of this: if a company is paying exactly the same amount as their dividend for years and years, the investment gets worse. Why? Inflation. As years go by, a dollar is worth less and less, so if the same amount is paid out each year as a dividend, the company is actually continually reducing their dividend. Ideally, you want stocks that pay a dividend that keeps pace with inflation.

Seven | Lifeguard on Duty
Some people eventually reach a point where they live off of their dividends. If you plan to do this, keep a few things in mind. First, diversify. You don’t want to be completely left out in the dark if your company fails. Second, try to make sure that the dividend payment dates from the various investments you have are spread out, as it will make money management easier. Finally, avoid selling unless you have to, as selling reduces your dividend income level in future years.

Eight | Juice Your Portfolio without Striking Out
There are other options for investment that pay dividends besides stocks. MLPs are partnerships that invest in various assets. REITs are real estate trusts. These (and a few others) allow you to invest in things besides corporations and still earn dividends. These can be very useful in adding some diversity to your investment portfolio without sacrificing the steady income of dividends.

Nine | When DRIPs Become Floods
The neat thing about dividend reinvestment is that it can turn your dividend investing into a flood of money over time. Let’s say you buy some stock and agree to reinvest the dividends in more stock whenever it’s paid. You also agree to buy more stock regularly out of your pocket. It’s a good company, so the dividend payment goes up over time. Right there, you have three avenues for growth, and they can all build on each other.

Ten | If You Build It, Dividends Will Come
Just like any other investment, it’s well worth your while to develop a diversified portfolio when you’re buying dividend-bearing stocks. You should also buy bonds (which pay out regularly as well) as another component of your portfolio, and you certainly should diversify the stocks you own. The more stable it becomes, the longer it will support you safely and successfully.

Is The Little Book of Big Dividends Worth Reading?
If you’re unfamiliar with dividend investing, The Little Book of Big Dividends is really a good read. It’s tight, informative, and easy to understand.

Of course, on the other hand, if you know the basics of how dividends work and know what a DRIP is, you might not get too much out of this one. It doesn’t break any really new ground.

As for me, this book was very much worthwhile. It gave me the kick in the pants I needed to look into dividend investing. My wife and I are strongly considering trying out two different DRIPs and this book gave me the impetus to dig a little deeper.

Mark writes in:

I’ve been reading The Simple Dollar for a year or so and I’ve found it really inspirational. My problem is that I can’t get past the “inspirational” part.

Several times, I’ve started to try to implement your tips. I’ll make grocery lists and try out lots of free activities and give up my morning coffee and start watching less television and reading more. What I find, though, after a week or so is that I just get frustrated with all of it and I quit all of it and go back to doing exactly what I was doing before. How do you start changing if you can’t even tackle a handful of simple changes like this?

In order for change in your personal life to succeed, you need several elements. From what I can tell from your description here, Mark, you’re missing several of them.

First and foremost, you need a goal. Why are you doing this? Where do you want to be in five years? Will you be out of debt? What will you do with debt freedom? Will you have a family? A home? A better career?

Don’t spend your time worrying about specific money-saving tactics right now. Spend a week or so really thinking about your future and what you really want from it. Where do you want to be in a year? In five years? In ten years? What do you aspire to?

Flesh these goals out. Add lots of detail to them so that you can really get a sense of what it might take to get there.

Most importantly, write them down. Record these goals somewhere, along with all of the details you come up with.

Think of it this way: if you’re not working towards something better than where you’re at right now, why make sacrifices at all?

Once you have that goal in mind, you need a plan. What exactly needs to be done to get to the goal (or goals) that you’ve set for yourself?

One big part of this is often a debt repayment plan. A debt repayment plan basically organizes and orders your debts to maximize the effectiveness of your debt payments.

You might also want to come up with an educational plan or an exercise plan or a plan for improving yourself in some other fashion, whatever that might be.

Make the plan realistic. Never forget that the perfect is the enemy of the good. Your plan should be one that’s easily achievable, even if it means putting off your goal for a little bit longer. It should also allow you to go beyond the plan if you so choose on any given day.

Once you’ve done that, do a lot of “one and done” financial changes. Fill your spare time with these things. Install a programmable thermostat. Air seal your home. Clean out your closets and sell off the stuff that you don’t use that has value. Trim down your DVD collection.

Spend your spare energy doing these things for a few days. Better yet, as you do them, calculate the results. How much will they reduce your energy bill? When you sell off that stuff and throw the cash straight into your debt repayment plan, how muh is that plan accelerated? Do you pay things off a few months faster now?

This is the first taste of success, and it’s usually an inspiring one. You’ve got goals and plans for getting there. You’ve done something that directly helps your plan along and it wasn’t all that hard, either. You’ve reached some success.

Once you’ve done this, now’s the time to start with the behavior changes. However, I’m going to suggest that you not just do a bunch at once. Instead, pick out one change and focus on maintaining only that one change for thirty days. If you decide to switch to “office coffee” instead of stops at the coffee shop, do that, but don’t force other changes.

Again, figure up how much you’re saving from that one behavior change and roll that savings into one of your plans for the future. If you’ve simply made a change that saves $10 over the course of a month, that’s just fine – add $10 more to your next debt payment or put $10 into a savings account.

Take it slow. Every step you take is a real improvement, and it’s far better than taking thirty steps at once, stumbling, falling down, and rolling back down the hill.

Good luck.