Every other Sunday, The Simple Dollar reviews a personal finance book.

Procrastination by Jane Burka and Lenora Yuen focuses on the challenging issue of procrastination. Why do we put off important, challenging work?

For me, procrastination is a “sometimes” issue. I tend to not put off work so much as to choose among things to do based on which one seems the most enjoyable to do at the moment. This often means that “un-fun” tasks languish longer than they should while more enjoyable tasks (this, for me, usually means the raw task of writing) find their way to the forefront.

Some of my friends are terrible procrastinators, finding “time” to play video games and other leisurely activities instead of taking care of business. In the end, though, it’s not all that different than my own procrastination.

Is there a solution to all of this? Does Procrastination have any answers? Let’s find out.

1 | Procrastination: Nuisance or Nemesis?
Life is hard. The authors argue that procrastination is a shield that we create that protects us against the hard things in life over the short term, but when the items become too strong for the shield to protect against them, they explode all over us with truly disastrous consequences. This “shield” takes a lot of different forms and the authors provide a list of them, with items like “I must avoid being challenged” and “I must be perfect” and “I can’t afford to let go.” Some of the statements listed really hit home for me.

2 | Fear of Failure: The Procrastinator on Trial
Some of us procrastinate out of a fear of failing, a sense that we’re not up to the task at hand. We believe that we’re not going to be able to succeed, so actually attempting the task is futile. The thing is very few tasks put in front of us are above and beyond our skill level. We’re usually able to handle all of it, from challenging work tasks to tough school assignments. The key is to start chipping away at the difficult problem, doing the pieces that we can easily extract and do, until we’re left with pieces that don’t seem all that hard.

3 | Fear of Success: Hello Procrastination, Goodbye Success
Others procrastinate out of fear of actually succeeding. They might get promoted to a job that they don’t actually want. They might receive unwanted attention. The best way to avoid that is a certain level of mediocrity. The thing is that such attention and “rewards” from success do not have to be the result. Simply talking to those around you about these issues can usually cut through them like a hot knife through butter.

4 | The Procrastinator in Combat: Fear of Losing the Battle
This type of procrastination often revolves around some form of the idea “if others are strong, then I must be weak and I will inevitably lose.” Thus, procrastination is simply a method of extending the battle to postpone the loss. In truth, though, concluding the battle, even if you “lose,” is often a win. You end up stronger and often in another battle that you’re capable of winning instead of the dread of prolonging the inevitable.

5 | The Comfort Zone: Fear of Separation and Fear of Intimacy
Here, we just want to maintain the status quo. Changing how things are seems painful, so we procrastinate because during the procrastination, our lives appear unchanged. The truth of the matter is that as soon as the decision is available at all, our life is already changed. We have the consequences of either side of the decision on our lap. All procrastination does is frustrate those around us – it doesn’t actually free us from the decision.

6 | Do You Know What Time (It) Is?
Some people simply have difficulty keeping track of time. They are poor estimators of how long a task will take and how much time they have between now and the due date to complete it. This misjudgment often results in being pushed up hard against deadlines, not because they’re putting it off, but because they misjudged the time investment.

7 | Current Neuroscience: The Big Ideas
This chapter is easily the one that will become outdated the fastest in the book, as it is kind of a “what’s hot in current neuroscience that might be related to procrastination” section. Some of this will prove true and useful. Other pieces will not. It’s interesting reading, but far from a game changer.

8 | Procrastination and Your Brain
Somewhere in the process of procrastination, your mind perceives danger and your body reacts to that perception in some way. We feel fear – or at least a sense that we should avert danger. Procrastination is just the “flight” part of a “fight or flight” reaction to perceived danger.

9 | How You Came to Be a Procrastinator
Most people become procrastinators because they found that the “flight” reaction was easier for them at an earlier stage in their life than the “fight” reaction. Think of grade school homework that could easily be done later, or avoiding a personal conflict in the hallways of junior high. If “flight” works, it becomes natural. Of course, later on, the “fight” reaction is usually much more successful, but we’re used to the “flight” reaction.

10 | Looking Ahead to Success
The key, then, is training ourselves to use the “fight” reaction more often – in other words, when we are faced with something that we would naturally procrastinate against, we have to train ourselves to actively and naturaly take it on instead. Doing this makes us more proactive.

11 | Taking Stock: A Procrastination Inventory
What do you procrastinate on? What are the benefits and costs of procrastinating? What are the benefits and costs of not procrastinating? The idea is to simply lay out the case for each of your procrastinations and look at them consciously and clearly. Is it really a net benefit to procrastinate? Usually, it’s not.

12 | Setting and Achieving Goals
What do you want to achieve? Going through the process of determining your goals, coming up with plans for achieving them, and starting through the steps of those plans is key. It puts things in perspective and helps you define a clear pathway to the things you want. Goal setting is all about clarity.

13 | Learning How to Tell Time
Yes, this means learning to keep a schedule and a planner. I think for most people that are involved in a demanding field (and/or have a demanding personal life), maintaining a calendar is a vital part of success. Part of this, of course, is penciling in plenty of time to take care of the big tasks you need to accomplish.

14 | Learning to Say Yes and No
Say yes to other people. Say no to time wasters and information overload. Say yes to those who want to support you. Say no to those who want to belittle you. Say yes to spending your time finishing tasks. Say no to spending all of your time in virtual worlds.

15 | Using Your Body to Reduce Procrastination
Keeping your body in reasonable shape is also a big key to solving procrastination because it raises your energy level and your ability to focus. Eat a better diet. Put aside some time to exercise. This seems counterintuitive – “How can I find time to do this when I’m already so overloaded I have to procrastinate?” – but I constantly find that my productivity per hour is way, way up if I’m eating well and am getting regular exercise.

16 | Tips for Procrastinators with ADD and Executive Dysfunction
The solution, as always, is to break it down. Break decisions down into the smallest chunks possible. Break tasks down into small, manageable chunks that you can do within your attention span. It takes additional time to do this, but it makes otherwise unamangeable tasks quite manageable.

17 | Neither Here nor There: Procrastination and the Cross-Cultural Experience
Many people fall into procrastination during times of culture shock – going to college or moving to a new country. The best way to get past this is to establish relationships and to dig into the culture of the new situation. That might include learning a new language or participating in activities you might otherwise avoid.

18 | Living and Working with Procrastinators
The best way to deal with other procrastinators is to subtly help them overcome their procrastination. Break their tasks down into bite-sized chunks when you make requests of them. Don’t ask for a five hour task – ask for a five minute task, followed by another, and another. Later, you can show the big thing they accomplished and show them how to break it down themselves.

Is Procrastination Worth Reading?
Procrastination is perhaps the single best collection of advice on, well, procrastination that I’ve yet read. It really covers the causes of procrastination extremely well – I don’t know how a procrastinator couldn’t read the first section of the book and not have something painfully hit home.

What really works, though, is how the diagnosis (the first part) is tied so well to some of the solutions (mostly, the second part). It’s that connection that really makes the book work – you see yourself in the pages, then you connect that image of yourself to a fairly straightforward solution.

If you have issues with procrastination, Procrastination is well worth reading.

It’s amazing how much money can be saved by making one simple change in your life. I ran the numbers on several changes (using the behavior of the average American) and was shocked at the financial savings of a single simple change.

Drink water instead of soda.
Average annual savings: $152
Facts: Tap water is essentially free. The average American consumes 216 liters of soda per year, or 7,300 ounces. You can purchase a twelve pack of twelve ounce cans for $3, typically, so the cost is $3 per 144 ounces. This adds up to an annual cost of $152.

Carpool with another driver two days a week (driving once and riding once).
Average annual savings: $868.60
Facts: The average commute is 16 miles one way, giving a round trip of 32 miles. The average maintenance cost per mile on an American car is 52.2 cents. Thus, the cost of a single commute is $16.70, including fuel, depreciation, and all maintenance costs, and thus riding with someone else once a week (and letting them ride with you once a week) saves 52 commutes, a total savings of $868.60.

Install a programmable thermostat and set it to turn off your heating or cooling at night.
Average annual savings: $248
Facts: Using the assumptions in the EnergyStar programmable thermostat calculator for a typical American home with typical energy costs ($0.11 per kilowatt hour) and assuming only nighttime use, a programmable thermostat reduces the energy bill by $248 per year.

Wait one more week before getting a haircut.
Average annual savings: $63.90
Facts: The average haircut costs $45. The average time between haircuts is five and a half weeks, or 39 days. Thus, an average person gets 9.35 haircuts per year. Waiting just seven days longer reduces that count to 7.93 annual cuts, or 1.42 fewer cuts per year, a savings of $63.90.

Eat leftovers for supper one night a week.
Average annual savings: $334.14
Facts: The average cost for a moderate meal plan for a family of four in the United States is $771.10. That’s 120 meals, giving an average meal cost of $6.43 (averaging home meals, restaurant meals, etc.). Assuming a leftover meal to be free, a year’s worth of weekly leftover meals saves $334.14.

Just one simple switch and you save a surprising amount of money. If you take the money saved each month (1/12th of the average annual savings) and sweep that money directly (and automatically) into savings or into an extra loan payment, simple lifestyle choices can have a profound impact on your financial life. That’s the key, of course – using the money you save in a responsible fashion.

So, if you were truly the average American and did each of the five switches listed above, you would save $138.89 per month. Have these switches become the new normal in your life and set up an automatic savings plan to sweep $140 a month into a savings account that earns 2%. Give it five years and you have $8,830 in savings. These five little changes will buy you a pretty nice car in five years.

That’s a pretty big thumb in the nose to those who ignore frugality tips.

Let’s say you go to a restaurant somewhat regularly and each time you go, you spend about $10 on your meal. One day, rather than receiving a bill, you’re simply directed to a box on your table that said “pay what you want for this meal.”

How much would you put in?

Would you put in anything at all? Would you put in the usual $10? Would you put in less than that? More? Does it depend on the specific circumstances in your own life at the moment?

What is that meal worth to you?

The interesting part is that this is really all about negotiation. When a restaurant puts a price on the menu, they’re telling you what value they expect for the meal. You can either accept that value or simply go elsewhere.

Now, let’s say you prepare a meal at home. You choose what meal you want to make. You also choose what ingredients you want to use and how much labor you want to put into it. The end result? You pay a much more reasonable price for your meal.

The lesson here is simple. The more you do it yourself, the better the bargains are and the more your spending is in line with what you value.

The same principle holds true with, well, almost everything. Take The Simple Dollar, for instance. Almost all of the people who read The Simple Dollar pay nothing for the articles posted here – I make income from the site indirectly through sidebar ads and other writing opportunities brought on by what’s posted here.

But if I place a “Donate” button here…

… almost no one will click on it (yes, a few of you will, and yes, a few of you are awesome). Why? It’s a better bargain not to donate if you can already get it for free.

This is because of the same principle listed above. A blog like The Simple Dollar is a great value in seeking personal finance advice. Because readers “did it themselves” and sought out multiple sources of information, they found that a free subscription to The Simple Dollar provided more bang for the time and money investment than a subscription to an expensive personal finance magazine.

(Of course, I could change that value structure by charging for it, and some of you might continue to see the price as a good bargain for you, but many of you would not. Or I could write a book with new material not given away for free and some of you will choose to purchase it to accompany the site – again, a different alignment of value for your dollar and for your time.)

So what’s the point? The more you “do it yourself” and seek out lots of solutions to your needs in life, the better value you’ll find. If you just stop with the first option – say, a restaurant or a DVD series purchased off of an infomercial – you’re probably not finding the best value. Keep searching. Make a meal at home. Visit the library. Read some blogs.

If something is important to you, keep seeking value and you’ll find it. It’s a journey that constantly rewards you with better and better value for your dollar and for your hour. Good luck.

Many newer readers of The Simple Dollar haven’t been exposed to the hundreds of great articles in the archives of the site, so this is a weekly series that highlights the five best posts from one year ago this week, two years ago this week, and three years ago this week. I call it … the Time Machine.

One Year Ago (May 16 – May 22, 2009)
Video: How to Make Your Own Laundry Detergent I happily use this all the time on my own clothes.

10 Resources for Finding Free and Cheap Things to Do This Summer Our summer schedule is already loaded with things like community festivals and municipal concerts. Who needs to pay for really good entertainment?

The Power of Transferrable Skills – And Six Areas to Work On I actually riff on this topic for a few pages in my upcoming book. Transferable skills are invaluable elements for any successful career.

Some Thoughts on Angel Food Ministries I did a bit of “investigative reporting” into Angel Food Ministries here and came up with some serious unresolved questions.

How to Make a Quadruple Batch of a Tasty Casserole Easily, Quickly, and Cheaply I use a comfort food from my childhood as an example here, but the principle works for virtually any casserole you might want to use.

Two Years Ago (May 16 – May 22, 2008)
Make Your Own Kind of Music I’m still carrying through on the advice from this post as I move forward with my own piano playing skills.

Frugality and the Impression of Poverty You don’t appear poor by what you wear. You appear poor by how you act.

Some Notes on Our Experience with Skype – And Why It Will Work for Some and Not for Others I use Skype for my business line and I absolutely love it. It perfectly meets my needs for a ridiculously low price.

PearBudget: An Effective Way to Dip Your Toes into Budgeting This is the best free budgeting spreadsheet out there. Pick it up if you know how to use Excel and want to get control over your money.

The Essential Bookshelf: The Only Eight Books I’ve Kept (After Hundreds of Reviews) I’ve kept a few more since then, but these really are great books.

Three Years Ago (May 16 – May 22, 2007)
Ethanol Blends: Are They Worth It In Your Tank? It’s actually pretty much a wash in most states where there’s an “ethanol discount” on the gas. You lose gas mileage – that makes up for the “savings.”

The Value of Networking and Friendship As time goes on, my thoughts on the value of these things goes up and up.

Figuring Out Exactly How Much Your Time Is Worth I think people value their time in a very fluid fashion… they’re much more likely to spend their time doing something that saves money if it’s also fun.

Calculating Net Worth: What Should One Do With Their Primary Residence? We don’t count ours, which means we still have a negative net worth when, by many other accounts, our net worth would be well into the positive realm.

Did You Receive An Unexpected Windfall? Here’s Where To Put The Money Keep it away from you while you come up with a plan. A lot of money without a plan winds up in someone else’s hands.

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!

Monica writes:

My biggest “financial leak” is charities. I constantly see people in need and I feel deeply guilty if I don’t help them, especially since I know I have plenty of financial resources with which to help them. The result is that I end up with less money than I expected and it’s hard to make ends meet. I still feel guilty, though. What do you suggest?

Giving to others is a great thing. Giving to the right charities can have a profound positive effect on many lives and it can also make you feel really good about yourself and the positive impact you have on the world. If you have the financial resources to give, I strongly encourage you to do so.

However, I don’t feel guilty about charities that I don’t give to. There are more good causes out there than I can possibly give my money to. Because of that, I know that I have to decide between various causes.

For us, that’s an important decision. We use a few criteria to determine what charities to give to.

The only charities we give significant money to are either ones where I directly sit on the executive board, immediate family members are deeply involved with, or we’ve been able to strongly certify how their money is spent. If one of those three are not true, we don’t give them money.

If a charity attempts to use a sense of guilt as a reason to convince me to give right now, I don’t like it, to the point that I resent the charity and actively do not give to them.

For one, if they’re using such tactics, they’re investing a lot of money and energy into marketing, not into helping the people they’re trying to help. If I feel guilt in response to a charitable plea, I know it’s marketing at work above all else.

My dollar to a charity very rarely goes 100% to a cause. Every charity has overhead in terms of hiring people to handle the donations, handle the taxes, and handle the distribution. However, but I want the vast majority of it to go to the cause I’m supporting. I also prefer to decide on my own what causes are most deserving of my money without guilt-based marketing pleas. Whenever I see a sob story, both of those principles are violated. When I reflect on it, I usually wind up irritated at that charity, actually.

Our solution is a charity budget. Once a year, we sit down and evaluate what causes we want to give to far away from guilt-based charity advertisement. We use sources like Charity Navigator to help us determine what charities will actually do with our donations and we make a pretty firm decision about our giving.

Whenever I see pleas for charitable giving, I simply remind myself that (1) this is marketing at work and (2) we’ve already given a substantial amount this year and have already decided what to spend the rest on. These two facts knock down any focus group designed charity marketing that we see.

Don’t feel guilty about charities you can’t afford to give to. Know what you can afford and plan it in advance. Recognize that the heart pangs you feel are just the result of marketing intended to make you feel that way. Walk away and make your decision with an unclouded mind.

Good luck.

Else stood this stone a fragment and defaced,
with lucent body from the shoulders falling,
too short, not gleaming like a lion’s fell;
nor would this star have shaken the shackles off,
bursting with light, until there is no place
that does not see you. You must change your life.
- Rainer Maria Rilke, Torso of an Archaic Apollo, translated by C. F. MacIntyre

Every once in a while, something happens in your life that completely changes the rules of what is possible. It makes you rethink your direction in life and all of the things you’re doing.

Sometimes, it can be something as simple as viewing a piece of art (as Rilke describes above). It might be the death of a family member or a serious illness of your own. It might simply be a thought that leaves you gobsmacked. It might be the arrival of a child or the arrival of the love of your life. It might be a passage in a book. It might be something like my own epiphany.

Those are the most important moments of your life. Those moments convince you to change everything: your spending, your health choices, your career, where you live, what you’re doing with your time. They inspire you far more than anything else to make genuine changes in your life.

Most people don’t seek out those moments. They just go through their lives and, every once in a while, such a moment just falls on their lap.

Seek out those moments. Almost always, they push you on to a better path in life, one that leads to more happiness, more money, a better career, and better relationships.

Here are some ways to integrate such moments into your life.

Read. Read some more. Read things far outside what you would normally read. Read poetry. Read some challenging nonfiction – or some challenging fiction. Every once in a while, a book will completely change how you see the world and can often change your subsequent behavior. (A great example of this in my own life is my life-changing experience with Getting Things Done).

Try to engage in something new every week. Or, better yet, more often than that. Visit a new place in your community that you’ve never visited. Try out a new activity that you can do at home – knitting or gardening or any number of things. Expose yourself to these things – it may uncover new passions or teach you new things about yourself.

Start a conversation with someone new every day. When we’re locked into a routine, we talk to the same people every day and only have minor interactions with people outside of that routine. Shake it up a bit. Have a genuine conversation with someone new every day. The best way to do it is always to ask someone about themselves – people are always happy to talk about themselves. You might find the beginnings of a new valuable friendship.

Do things solely for the benefit of others. Volunteer to work for a charity. Spend half an hour helping out an elderly person that you know. Do it without expecting anything in return. What happens when you do this? You feel better about yourself. Others feel better about you. The world becomes a better place.

Make your life as fertile as you can for those life-changing moments and you’ll find that they happen more often, motivating you to great things.

I’m going to go a little bit off of the beaten path here and talk about something not directly related to personal finance, but something that has a strong indirect relationship: piracy of intellectual property.

A week barely goes by when a person writes to me asking for some sort of justification for their piracy of music, computer software, or other electronic materials. I usually don’t give it to them because I feel pretty strongly that piracy is wrong and that content creators (and all of the people that help that process along) deserve to be paid for that work.

However, I also believe that the biggest reason piracy thrives online is that most of the time it’s easier to just pirate a song or a piece of software than it is to pay for it.

Case in point: recently, the “Humble Indie Bundle,” a wonderful collection of computer games, was made available for a stunningly low price online. You could simply pay whatever you wished for it with the minimum price of one cent. You could also direct any portion of that price to charity.

What happened? There were people actively pirating the “Humble Indie Bundle.” Rather than giving a single cent to a charity to download it legitimately, they chose to simply steal the software.

Why? It’s easier.

That’s my explanation anyway.

In order to download the software legitimately, you had to fill out forms. You had to decide how much you wanted to pay the developers. You had to decide how much you wanted to give to the charity. You also had to have some sort of method for actually paying for it, whether it be a credit card number or a PayPal account or something else.

And that’s the problem. Some people aren’t comfortable sharing their credit card information with a random website or with Paypal, and I don’t blame them. I have much more concern with giving a dollar to a website for something that I do with giving a dollar bill to a street vendor. That dollar bill doesn’t have my personal information attached to it and it doesn’t make it possible for that vendor to swipe my identity. I also don’t have to put forth the effort to take out a credit card, type in the sixteen digit number, the expiration date, the code on the back, or any of that other stuff.

That’s a lot of effort for making a purchase. It makes me reconsider purchases all the time, both from an effort standpoint and from a personal information standpoint.

Piracy is a real problem. Software piracy alone cost $51 billion last year, and that doesn’t include a dime of the piracy of music or movies or books.

From my perspective, a lot of that loss would vanish if downloading a song or a movie or a piece of software was as easy as pirating it. If one could simply purchase such things with just a few mouse clicks without sharing personal information (beyond perhaps a single place), much of the reason for piracy would go away.

Most pirates don’t believe that the content creators deserve nothing for their efforts. Instead, they believe that content sellers often make it difficult and privacy-invading to purchase such content. I agree with that sentiment strongly, even if I don’t agree with their action in response to it. Instead, I usually just don’t buy, which also hurts the content creators.

Online piracy will always have supporters until buying electronic items becomes as easy as giving a $5 bill to a hot dog vendor. It’s not there yet.

How can we get there? A standardization of online currency would be a big first step. Since no one trusts a corporation to do it, I think the best operator of this would be a non-profit that keeps the costs as low as possible instead of trying to turn a buck on it. A U.S. Online Mint, perhaps, where you could convert real currency to virtual currency and back, perhaps at your local bank, and then spend it as easily as cash.

This type of thing would be a revolution in how we use money.

Over the last few weeks, I’ve been sweating over a lot of the little details of my upcoming book. What will the cover look like exactly? What will the text be on the folds? What will the acknowledgements look like? What about a dedication (it wound up being dedicated to my high school English teacher, by the way)?

It’s time consuming – and fun – to watch as these details come together, transforming a long Microsoft Word document that I sweated over for countless hours into a final product appearing on bookstore shelves.

I’m 24, college grad, working a corporate job. I put 15% into my work 401k with a 7% match. I put 15% direct deposit into my ING savings. My only debt is 5K on my Honda accord (5.7%) 2006 with 40K miles so it will last me a while. I have over 10K saved up to more than cover my emergencies. Should I pay off the car loan? I think it won’t save me a ton (3.5 years left for such a small loan), but I’m only earning 1.1% in ING and don’t have any plans within 3 years to really need that money. Or should I start a share builder account (I read a lot about no or low-load broad index funds and would probably pick one or two and set up a recurring payment) or Roth IRA and start contributing to that?
- Logan

First of all, you’re doing a great job saving 15% of your take home. That’s a fantastic start to financial success, even if you just stick it in a glass jar and bury it in your back yard.

One thing I would make sure, above all, is that you keep at least a couple months’ worth of your spending in that ING account. It needs to be easily available in the event that you lose a job or have another major crisis. You don’t want to have to tap long term investments in these situations, so you’re better off losing a bit of investment income to gain that stability.

Once you’re past that, you have to ask yourself what you’re saving for. What’s the goal here? I can’t answer that for you – that comes from inside of you.

If I went back to my pre-married early professional years and looked at your situation, I would pay off the car first. Instead of banking that 15% into ING Direct, I’d put that money into an extra payment on the car loan, paying it off early. Look at it ias an investment that returns 5.7% guaranteed after taxes, which is pretty solid.

Once the car is paid off, I’d look at where my life was. Do you want a new career? Are you looking towards marriage? Let those types of questions lead your investment plans.

My question to you is why don’t you own rental property? I know that you reviewed Rich Dad, Poor Dad, but I never hear you talk about owning rental property. Do you think it is not an excellent source of “passive” income? I would love to know your thoughts!
- Jeremy

I think there are benefits and drawbacks to having a rental property. It certainly can be a source of steady income, but there are enough drawbacks that I usually don’t recommend it to people.

For starters, it can be wrought with headaches. You can either handle all of the property management yourself, which potentially increases your income but eats up your time, or you can hire a property manager, which decreases your income significantly but also (might) reduce your time investment.

In either case, you’re exchanging headaches and time for money – or the potential to make money.

Rentals tend to do better in strong housing markets. Right now, there aren’t a lot of strong housing markets out there. In a weak market, rentals are often competing in a race to the bottom, meaning that rental owners make less than they would in a hot housing market. Like many other books written in the era, Rich Dad assumes that housing markets will always be going bonkers. As we learned, that’s not true.

You can make money from owning rentals, but if you have the capital to swing that way, there are lower risk and more straightforward ways to spend your money and time, in my opinion.

I am in the military and I am currently debating on my retirement options. I am putting money into both my TSP and a Roth IRA. I have no debt and I’m putting about $300 each into both accounts and I’ve accumulated about $6000 in my TSP and $8500 in the IRA. My question is that I got promoted and I’m trying to decide where I should put the extra money before I get tempted to spend it. I have the TSP money allocated for the 2040 target fund and my IRA is towards the Cornerstone Strategy Fund at USAA. Any advice would be greatly appreciated.
- Joseph

Since we’re not exactly blessed with the gift to see the future, it’s basically impossible to say that one option is better than the other.

The best option, obviously, is to start putting it in one or the other immediately. Don’t be indecisive and wait. Waiting even a month can wipe out the difference between the two accounts, even if you choose wrong.

If I were you, I’d probably max out the Roth IRA first and if you still have some left over, put the rest into the TSP. My reasons why are detailed in my answer to the next question.

I know how you feel in general about Roth IRAs. I’m curious what you think the chances are that withdrawals from a Roth IRA after 59.5 years of age WILL be taxed in the future? I know that the tax code now states that withdrawals aren’t taxed, but that same law doesn’t guarantee that in 40 years. I’m 27 years old and given the state of our national debt and the amount of money invested in Roth IRAs, I can’t imagine the government letting go of all that potential tax revenue. I also think that since people with Roth IRAs are a minority; they’ll be an easy target in 40 years for tax revenue because they won’t have the political clout to stop laws that dis-advantage them. Thoughts?
- Craig

My strong belief is that currently invested Roth IRA money is a sacred cow and it will be left alone. If the government wants to start tapping more income from such individual retirement accounts, they’ll just end further investments in the accounts with a law that says “After 20XX, you won’t be able to put more into your Roth and you won’t be able to start one, either.” There would be far too much backlash against altering already-existing Roth investments – politicians wouldn’t risk it.

The real question about Roths is whether or not they’re a better place to put your money than a 401(k). I argue they are for three reasons.

First, since you fully control the Roth, you have much more power over where your money goes. In a 401(k) or 403(b) or TSP, you have to put your cash into whatever plans your employer makes available to you, no matter how poor the optinos are.

Second, the tax rates are currently at historical lows. Check out this chart. Even during the supposedly great Reagan years, the top tax rate was 50%. There were periods where the top tax rate bumped into the 90% range. Given the debt you mention, these rates have nowhere to go but up.

Third, most people – particularly younger people – are in a lower tax bracket now than they will be at retirement age. I’m almost positive my tax bracket will be higher in retirement than it is now.

Add all of this up and a Roth IRA seems like a clear choice.

Apparently banksimple.net is a new kind of “social” bank.

I wanted to know what you thought of this.
- David

From what I understand of their business model, it’s a bank that doesn’t intend to make money by charging you fees. Instead, they intend to make money by connecting you to services offered by other businesses. Their website talks about continually adding “competitive banking services,” which likely means easy access to brokers, different savings account models (likely backed by other banks who pay them referral fees), and so on.

It’s too early to say how this will work. It has the potential to be very useful. It also has the potential to cause you to be constantly bombarded by “offers” you don’t really want. They have to find the right balance to maximize their profit (meaning the most offers they can put in without alienating customers).

As of yet, there is no compelling reason to switch banks, at least for me. I haven’t been charged a fee in years and I’ve never had even the slightest problem with customer service with ING Direct.

Help me out with a great cheap graduation present.
- Brian

The best gift comes from knowing the graduate well and giving them something that actually meets their needs. If that doesn’t work, I usually tell people to give cash.

I think the reason a lot of people don’t want to do this is that they don’t want to look cheap by giving only $10, but they’re happy giving a gift that might somewhat appear to be more expensive while only costing $10.

The problem there is that if you don’t know the graduate, you’re going to be giving a gift that they probably don’t want or need.

Thus, my encouragement is to either give a thoughtful gift to a graduate you know or simply slip a $10 or a $20 into a card. They’ll appreciate it more.

Briefly, I purchased two items of clothing from a store website using the
store’s credit card last September. Because I had moved since I last used
the card I updated the shipping address and assumed that this also updated
the billing address while I completed the online order. The garments arrived
with no problem, but a bill never followed. So, this past February I
received a call from a collections agency, which has never happened to me
before as I pay off all balances at the end of every billing cycle. I paid
the bill and the fees and made sure the account was closed all in that
initial call. In April, my husband was shopping for a refi on our house and
saw the effect this had on my credit score, low 700s. Thus, I am disputing
the charges because I never received a paperbill or email notice, so I
assumed that I had paid with my general use card.

My question is, is there anything I can do to improve my credit score while
I am waiting to hear from CitiBank Credit Bureau Dispute Dept? Since both
letters I have sent to the address provided, by two different customer
service reps on two different occasions, have been returned to me I am
looking for other ways to improve this situation.
- Leanne

There’s not much you can do to improve your score at this point other than resolve the current complaint. Your score is already in the low 700s even with the complaint, which means that you’ll either still be getting prime rates or just slightly subprime rates.

My suggestion would simply be to wait it out. You’re already doing everything right, it sounds like. Make sure your debt levels are low and avoid carrying a balance on your credit card. Don’t try opening up new lines of credit for a little while.

I actually think your letter is indicative of a much bigger problem – the power credit scores have over so much of one’s financial life. That a score based on a formula that isn’t known to the public can have that much impact is really, really shady and it needs some sunshine on it. Good luck with that, though – the credit agencies and the banks would fight such changes tooth and nail.

Last year my older brother moved back to India from Qatar. My brother, who has been diagnosed with bipolar disorder, has a wife and a son, but he’s made some terrible decisions: he quit a great job in Qatar because he fell in love with a younger woman, eloped with her to Thailand, then was forced to return to his family when the money ran out. When they moved to India, he pretty much squandered all his savings away renting a fancy apartment, buying all sorts of stuff, because he was confident he would find a job soon. He did find one that was not very well paying, but months later he quit saying they were not paying him on time.

It breaks my heart to think of him living on the streets– there are no support groups there for alcoholics or for the homeless, like we have here. But it is also really difficult for me– given our shaky jobs situation– to keep sending him money I desperately need to save to secure my own family’s future. There is no one in India I can ask for help, or to keep an eye on him. I’ve even been trying to search for jobs for him back in India, without luck so far.
- Vai

I don’t think financial support is the way you should be helping him at this point. You can write him letters, call him on the phone, help him find work, and the like, but your responsiblity is to your own immediate family, not to a brother who is continually repeating a cycle of poor choices.

IF you continue to help him, he won’t bother to help himself. He is fully capable of finding work – he is healthy and of reasonably sound mind. He chooses not to help himself and sending cash with no strings attached enables those choices.

Offer him help, but only in a form that leads him to helping himself. Gifts of cash don’t do that.

I am struggling with revolving debt and can’t control expenditures. Here’s a glimpse of my money. I bring in typically 1200-1350 (after taxes) every two weeks. My rent is $925. Car payment and insurance is $540. $500/mo in student loans (several with rates ranging from 3% to 7%). 4 credits cards with interesting in the low 20′s% with a total balance of $8400. And a consolidated credit card with a balance of $8600 with a blend of 3%-6% of interest (Some of this money belongs to my parents, but I am paying for it because they have a “Parent loan” for me that they pay for) Finally utilities bills total around $200/mo.

This is very frustrating to me because my friends and family are constantly looking to me for financial advice (bachelors in Finance and worked as a financial adviser for a little while) yet I can’t fix my own problems. At 25yrs old I should be enjoying myself and having fun with friends and family, not just hiding away because I cant afford to go out.
- Julian

My alarm bells go off when I see “my rent is $925.” There has to be a way to lower that number. Seek out a roommate or two. Move to a smaller apartment. Do both.

People often balk at this because of a need to “keep up appearances.” Keeping up appearances bankrupts people, leaving them with wage garnishments and broken relationships.

Yes, there’s no problem with “enjoying myself and having fun with friends and family,” but when your rent bill is 35% of your take home and your car payment and insurance gobbles another 20%, you’re not in a position to do that. Your income doesn’t support that kind of lifestyle, so start by adjusting the big things so you can enjoy the little things.

The series finale of Lost is on Sunday. We need your predictions.
- Carrie

I think the “climax” (the “defeat” of fake Locke) will happen about halfway through the episode.

I predict that Jack eventually decides to not be Jacob any more and rounds up some new “candidates,” and among those candidates will be Ji Yeon (Jin and Sun’s daughter) and Aaron.

I also think that Locke will walk again.

No idea about anything else.

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.