My new book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams, is now available in bookstores (I just saw it at a Barnes and Noble in the Des Moines, Iowa area and at the Borders in Ames, Iowa)! You can also buy it right now at Amazon.com or order it from Barnes and Noble.

I’ve already shared a big collection of reader stories from people who have already read the book and made positive changes in their lives because of it.

Now I want to add a little bit more value to those people who have already purchased the book – and those who are on the fence about it.

If you buy the book before July 14, I’ll give you all of the Simple Dollar downloadables… free.

You’ll get 31 Days to Fix Your Finances, The One Hour Project, Twenty Big Ideas, and Building a Better Blog all for free. Each one of them is like a small book, delivered electronically for you to print and do with what you please.

Even more, I’ll also send you my upcoming fifth downloadable, tentatively titled The Simple Dollar Cookbook, for free. Like the others, it’s an electronic book, but this one will include dozens of the best recipes from The Simple Dollar with pictures, formatted so that you can easily print out any individual recipe you wish from the book.

All you have to do is send a picture of your receipt from buying The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams to simpledollarbookdeal@gmail.com before July 14. If you bought it from a web retailer, just forward the email receipt they gave you (you can edit out personal info if you wish).

So, if you’ve already bought the book, just send along the receipt (if you’ve lost it, just take a picture of yourself holding the book and tell me where you purchased it). If you’ve not picked it up yet, now’s a good time to do so.

Once I’ve received all of the emails and checked them all, I’ll start sending out the e-books back to the address that sent me the receipt. (This may take a week or two, depending on how many people take me up on this offer.) When the cookbook is released, I’ll email that one separately (I’m hoping to finish it in September after the Summer Meal Series has finished).

This is mostly just a perk for loyal readers of The Simple Dollar who have picked up the book, too. You guys are awesome.

A fellow blogger wrote to me asking me how I go about choosing the articles I include in my weekly roundup each week.

What I basically do is read a lot of blogs and news sites throughout the week (including ones that bloggers send to me) and bookmark articles that made me think. I save these in a folder marked “next week’s roundup.”

Then, when I go to assemble the roundup, I dig through that folder. There are usually 30 to 40 articles in there. What I usually do is read through that list and look for the ones that still make me react to them. If I don’t remember what the article was about by glancing at the headline, it’s not going to make it. If I remember the article but just shrug my shoulders, it’s not going to make it.

This usually trims it to ten or so. I then eliminate site duplicates – so I’m not linking to the same site twice in the same week, even if there are two great articles there – and just put up the rest, which usually ends up numbering between about five and about eight articles.

I usually save one or two articles a week for future roundups so that I can put together a set of interesting links for any weeks when I’m traveling or up to something else.

And now, here are the articles that made the cut over the past week.

How to Handle a Telephone Interview I don’t like telephone communication because I can’t see the face of the person I’m talking to, which gives a lot of cues as to what that person is thinking. Thus, these are pretty good tips (from my eyes). (@ freelance switch)

How to Simplify When You Love Your Stuff The key really is to make sure your stuff is in line with one of your core values in life and to make sure you have time to actually use or value that stuff. (@ zen habits)

Do You Know Your Daily Salary? Use it to Better Understand Your Money This is very similar in concept to a true hourly wage (your income per hour after you take out all of the expenses required to work there and receive that income, like taxes and clothing and travel and meals eaten out). For me, the true hourly wage was a real shocker and a great way to put my spending in a real context. (@ pt money)

Are CDs Obsolete? CDs should be evaluated as being roughly equal to savings bonds and savings accounts. If you can get a better interest rate elsewhere, don’t buy a CD. (@ my dollar plan)

What Should You Buy Used? What Should You Buy New? I agree more or less with this list, but I think each person should think seriously about whether or not an item they use could be purchased used at a much lower price. (@ get rich slowly)

This is the eleventh entry in a fourteen part series discussing the time management classic Getting Things Done by David Allen. New entries in this series will appear on Tuesday afternoons and Friday mornings through July 16.

Allen concludes the book with three short chapters discussing the power of various aspects of the GTD system. This first one focuses on how powerful the collection habit really is.

As Allen states it on page 225:

When people with whom you interact notice that without fail you receive, process, and organize in an airtight manner the exchanges and agreements they have with you, they begin to trust you in a unique way. Such is the power of capturing placeholders for anything that is incomplete and unprocessed in your life. It noticeably enhances your mental well-being and improves the quality of your communications and relationships, both personally and professionally.

In other words, if your system is reliable, you become reliable, and if you become reliable, you’ll become more confident of your abilities, other people will notice your increased reliability, and you’ll become more valuable in everything you do.

I’ve noticed this phenomenon in my own life. Whenever I am operating my system really efficiently, I seem to do a great job of managing all of the stuff on my plate and others do notice this. I tend to see the results of it in the form of better articles on The Simple Dollar and elsewhere, which attracts readers. I get more notes about how today’s article was really good. I tend to build relationships in my life in a positive manner because I’m on top of the feeding and growth that they need.

What makes that happen? In the end, it’s simply the fact that I’m collecting everything that’s incomplete in my life and doing something with all of that stuff. Even if the system isn’t going perfectly for a while, I’m still making sure that all of the open-ended things are either being closed or are moving forward.

That builds trust. That builds self-confidence – and confidence from others. It builds a feeling of control over your life instead of a sense that things are just spinning out of control.

Those are things that constantly help you throughout your career and personal life, not just in terms of building relationships, but in terms of the quality work that you’re able to produce.

One interesting part of sitting down and doing a full collection of all of the unfinished stuff in one’s life – and I certainly went through this myself – is all of the negative feelings it generates along the way. From page 226:

If you’re like most peoplw ho go through the full collection process, you probably felt some form of anxiety. Descriptive terms like “overwhelmed,” “panic,” “frustration,” “fatigue,” and “disgust” tend to come up when I ask seminar participants to describe their emotions in going through a minor version of the procedure. And is there anything you think you’ve procrastinated on in that stack? If so, you have guilt automatically associated with it – “I could have, should have, ought to have (before now) done this.”

This is normal. Almost every functional adult has a big pile of unfinished stuff hanging around in their life. Even highly organized adults do.

Where do these negative feelings come from? Allen has a great explanation on page 227:

But what are all of those things in your in-basket? Aggreements you’ve made with yourself. Your negative feelings are simply the result of breaking those agreements – they’re the symptoms of disintegrated self-trust. If you tell yourself to draft a strategic plan, when you don’t do it, you’ll feel bad. Tell yourself to get organized, and if you fail to, welcome to guilt and frustration. Resolve to spend more time with your kids and don’t – voila! anxious and overwhelmed.

This sums up so well why dumping everything in your inbox can be a downer, but processing it can be such an incredible positive feeling and release.

When you put all of that stuff in your inbox, you see all of the agreements you’ve broken with yourself, which is a major downer.

On the flip side, though, once you have all of those promises sitting there and you actually go through the process of dealing with all of them, it feels incredibly good. Why? You’re finally living up to all of those promises you made for yourself and all of the bad feelings you have associated with yourself and all of those promises are just swept away.

I find that when I start to get behind, I really get deeply upset with myself when I collect everything together. These moments are probably the most negative ones in my life because I criticize myself harshly when I see such a pile of unfinished stuff.

Yet, with every item I process, I feel better. Each item I collect and then deal with goes from being a broken promise (a negative) to a fulfilled one (a positive). It also often reaffirms a positive reputation with others, because quite often that fulfilled promise benefits others in some way.

What usually happens is that it feels so good to start running through these processes that I almost become addicted to it. I burn through my inbox, processing all of it, then I tend to stick to the system furiously for a while, coasting on all of the good feelings.

In fact, the only time I tend to fall behind with it is during times of extreme crisis or extreme time management situations where I have more things going on than my calendar can hold. It is in those situations that stuff starts slipping through the cracks and the system starts to fall apart.

A recent example of this was in the second quarter of 2010, where we had our third child, final book edits were due, my father became seriously injured, and my book was released in a period of about seven weeks or so. Add into that a ten day trip right in the middle and I simply found myself slipping behind.

That’s why going through this book and the whole GTD process starting on June 1 was a huge lift to me. I went through the collection and processing myself as I wrote these pieces and it was a huge personal lift.

I really can’t recommend this enough. Put aside a day – preferably two, make it a weekend – where you just collect everything you need to get done. That should take about a third to a half of a day. Then, spend the rest of that time processing it. Do the simple things. Come up with plans for the bigger things. Trash the things you really don’t want to deal with.

It’ll be incredibly cathartic. You’ll come out of that timeframe with a much more positive feeling about your career, your life, and your relationships.

In fact, I’ll bet you’ll label it as one of the best things you’ve done in your adult life.

On Friday, we’ll talk about the power of the next action.

One of the biggest ways to leak money is to spend your time in money-dense ways. The easiest way to explain it is to just show you a bunch of examples.

Spending eight hours at Disney World with the requisite food, drink, and souvenir purchases costs about $200. The cost per hour of this event is $25 per hour. This is a very money dense activity.

Spending eight hours reading a book you checked out from the library costs nothing at all. The cost here is $0 per hour.

Watching a DVD at home that you borrowed from a friend costs perhaps $0.20 in electricity ($0.08 per hour).

On the other hand, going out to a movie for two and a half hours costs you $10 for the ticket ($4 per hour) or, if you buy drinks and popcorn, $18 for the trip (about $7.50 per hour).

You can do this for virtually any activity with which you might spend your leisure time. From shopping for clothes to playing a video game, all such leisure activities have a cost per hour, and the lower you can make that cost per hour, the better off you’ll be.

But how can you actually use this idea?

What I did a while back is simply make a giant list of all of my favorite leisure activities. Taking a walk. Playing a board game. Reading a book. Playing a video game. Playing basketball. Playing with my kids. Working in the garden. Going to movies. Going to bookstores. Going to the library. The list was quite long.

Then, I figured up the approximate cost per hour of engaging in those activities.

Going to the movies was pretty expensive, as was going to the bookstore (because I rarely leave it without a book in hand). Playing a board game or a video game were usually pretty cheap, as the cost of each is prorated down because of the many times I’ve played each one ($1 per hour or, often, much less than that, and even that’s merely recovering a sunk cost). Other activities, like taking a walk or playing at the rec, were effectively free. Gardening arguably earns a little bit for each hour invested in it.

What happened was that when I had brainstormed this huge list of activities and actually figured out what they cost per hour, I began to spend more of my time on the lower cost activities (like taking a walk or yard work or reading a book or playing games) and less of my time on the more expensive things for the time invested (like going to movies).

It wasn’t even a conscious choice, really. Just by raising my awareness of the implicit cost of engaging in various activities I enjoy, I began to migrate towards the ones that drained my wallet at a slower rate.

Naturally, my entertainment and hobby budgets have dropped over the last year or so at no cost to my enjoyment of life at all. I just simply improved my awareness of the real cost of many of the things I enjoy and started making my choices of how to spend my scant free time from a more enlightened perspective.

Connie writes in with a great question whose answer got far too long for the Mailbag:

My biggest problem with money is that I lie to myself. I keep telling myself everything is going good and at first it is. Then I start slowly falling back into old habits but I keep telling myself everything is good. Eventually, everything is worse than before but I still keep saying everything is good, and then I’ve racked up thousands of dollars on the credit cards again. I don’t know what to do anymore.

I think that lying to ourselves is something we all do to some extent. Most people tend to believe they’re above average in most categories, which indicates some degree of self-delusion among practically everyone out there.

A little bit of self-delusion is very good, actually. It gives us self-confidence, something we need to have to overcome difficult situations. We can tell ourselves we can do something just a bit beyond our skill and talent level and thus by pushing ourselves to doing it, we’re able to achieve something that was previously just beyond us.

Yet, as Connie points out, self-delusion can sometimes be a very, very dangerous thing. It can push us into making some terrible mistakes under the guise of “everything being fine.” It can cause us to undermine our own progress and goals. It can sneak us into ever-greater problems, like an endless sink into debt or obesity or career mediocrity.

My biggest current problem with self-delusion is with my weight. I’m not gaining any – that’s not the problem – but I often delude myself into thinking I’m doing very well at losing weight when I’m actually treading water or losing it very slowly.

In the past, however, I’ve been able to battle self-delusion in many different areas: my career, my personal hobbies, and my time management abilities immediately come to mind.

Here are four techniques I’ve found that really work for cutting through self-delusion.

Make yourself directly accountable to others
This is the top strategy I’ve found. You’ve simply got to make yourself accountable to others in your life. Lay out your situation to them. Explain where you’re at and where you’d like to be.

Most importantly, you’ve got to report regularly to them on how you’re doing with your goal.

The added pressure of reporting your progress to someone you trust goes a long way towards keeping you on the right path. Plus, a trusted person can often give you feedback, positive support, and assistance at the very times you need it most.

You can do this face to face. You can do it on Twitter or on a blog or on Facebook. Just do it.

Keep the reason why you’re doing this front and center all the time
Why are you trying to save money? Why are you trying to get out of debt? Why are you trying to lose weight? Why are you trying to make whatever change it is in your life that you’re trying to make?

What you’re looking for here are extrinsic motivations. Are you trying to lose weight and get in better shape for your kids? Are you trying to save up for your dream house?

Whatever that reason is, put reminders of it everywhere. Use an image editing program and literally put a statement reminding you of your goal on top of a picture of whatever your motivator is. Then print off fifty copies of it and put it everywhere – on your desk, on your rear view mirror, on your bedside table, on your bathroom mirror, wrapped around your credit card, everywhere.

Use a clearly-defined measurement as your metric for success
Never, ever trust a general “sentiment” of success. If your idea of success is that it “feels” like you’re doing well, then it becomes very, very easy to delude yourself into a false picture of success.

Instead, try finding a specific way to track your success in a specific area. Keep track of your net worth every week or month. Track your weight every day.

It’s really hard to lie to yourself when the number so easily reveals the truth of the matter.

Drastically change your routine
Many people tend to fall back into bad habits because they don’t change their overall life routine. They try to quit smoking, for example, but their life routine involves holding something in their hands and going outside regularly for smoke breaks. They try to quit overeating, but their metabolism is wired to constant snacking and overeating. They try to quit overspending, but their life routines constantly put them in places where they overspend.

One effective way to buck all of this is to go for a radical change of scenery. Make a major life change while traveling, for example. Give up smoking while visiting your sister for two weeks. Give up overeating while on a series of business trips. Give up shopping while picking up another time-consuming hobby.

When you’re out of your normal environment and context, it becomes much easier to break bad habits and adopt new ones.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Help an unlucky friend?
2. Are rent-to-own homes worthwhile?
3. Maximizing value of college
4. Post-graduation options for teachers
5. Secured loan or credit card?
6. Used swimsuits
7. Student loan debt priority
8. Best use of windfall?
9. Keeping old utility statements
10. Goals for 2010

For many Americans, today is a holiday, the third day of a long weekend, where people can relax after staying up late into the night watching fireworks.

For us, the fireworks were actually watched on the third and the fourth was relaxing. Today? I’m working about a 3/4 day with some time off in the afternoon to have friends over.

Of course, working today (when no one is around) makes it easier to take several days off later this month to go to Chicago, see a Cubs game, take my children to the Field Museum, and so on.

I was wondering if you have any advice for the friends of a person who went bankrupt to save the house (medical bills, foreclosure, ongoing health concerns, and $9/hr job) who want to help but are not sure HOW to help?
- Victoria

Don’t loan money unless you expect it not to be repaid (in which case, it’s a gift). That’s something that constantly damages relationships and friendships and just simply isn’t worth it.

The best thing you can do is help this person with day to day life. Invite this person over for meals at your home. Go to his/her home and prepare some meals that they can keep in the freezer. Help them with any tasks they seem to have a hard time keeping up with.

Just as important, let that person vent at you some. It can be very cathartic to vent. Listen to his/her problems and offer any suggestions you can provide – but focus on the listening part of it.

In other words, be the best friend you can possibly be.

My wife and are moving back home and looking for a new house. We are probably going to rent first until we can get a decent down payment saved to purchase a home. My question is about rent to own or land contract type homes – are these a good option? They sound alright on paper, but I have this nagging feeling these types of things don’t work out as planned. What are the major downsides to these deals?
- Matthew

Things don’t work out as planned usually when the owner of the home passes away. The house is given to someone else as part of the estate resolution and they often have no reason at all to fulfill the terms of the arrangement, meaning you’re out the money you paid (you essentially just paid rent for the last few years, in other words).

Your best bet to protect yourself is to have every possible contingency taken care of in the contract. You should specify a date and a price when you can buy the home, how much of your monthly payment goes towards the down payment, and ideally the home itself should be in some sort of trust that will survive the life of the owner of the home without destroying your arrangement.

If the owner balks at these types of things, I would be extremely wary of signing on the dotted line.

I don’t know where you were at in your life in college or what you would do in hindsight, but that’s exactly what I would like to know: what tips, suggestions, or ideas would you have for college students in handling their finances (or lack there of), loans, ways to make money on the side, or any other things you wish you would have known back when? If I missed an article where you have already discussed this, my apologies, I haven’t gone through everything on your site, it can be quite daunting sometimes.
- Kevin

The best thing a college student can do to put themselves in a good place after college is to live as cheaply as they possibly can. Live cheap without shame. The biggest mistake many college students make – myself included – is to live high on the hog on the back of student loans that offer an excessively large living stipend. You should focus to minimize that stipend.

Live in an overcrowded apartment so the rent is dirt cheap – after all, you’ll mostly just be sleeping there. Hit every free meal you possibly can on campus. Hit every piece of free entertainment the campus provides for you (and at a large school, there’s a lot of it if you look around for it).

The next most important thing you can do is to focus your energy as best you can on setting up your post-college life. That doesn’t strictly mean grades. It means building relationships with people in your career path. It means finding experiences that will glow on a resume. It means figuring out who you are and what your true talents and passions are. In other words, don’t waste a dime of that money you’re spending.

Kevin also had a follow-up question worth addressing…

On a more personal note, I am going to be a high school teacher. I realize that it is a profession that generally doesn’t make a lot of money, but that is my passion and I believe I can follow basic finance principles such as the ones you have outlined in various articles on your site to achieve my own goals. Even so, with the limited salary I will have starting out, how would I go about managing saving money, being thrifty, and investing early at the same time? I know I am looking quite a bit into the future, but I have a girlfriend(becoming a math teacher) who I will soon be engaged to that has the same desire to start a family not long after we graduate. Understanding that I will be swamped with school loans, buying or renting a house, kids, and other firsts as a new couple, what would our financial priorities be at that point, and how would they gradually change?
- Kevin

The first thing I’d do is see whether or not there are opportunities for getting your loans repaid by working in disadvantaged schools. Many states offer loan repayments to teachers willing to teach in disadvantaged districts. See if you can get into such a program and use it hard for the first five years or so.

Your first focus should be on building a cash emergency fund so that the inevitable disasters don’t completely drown you. Get in a pattern right off the bat of having some of your income siphoned out of your checking account and into other things – your emergency fund at the start and your house savings a bit later. That way, you’re learning how to make ends meet on less than you’re bringing in, which is the best financially healthy habit a person can build.

As for investing, just focus on retirement investing for now. You’re going to have so many needs over the next five years that any additional “investing” would be pretty short sighted. Just focus on contributing plenty to retirement, spending less than you bring home, and socking away some for the bevy of expenses you’ll have a few years after graduating.

Which would be better for helping build my husband and I’s credit? My parents gave us some money ($3000) to help my husband and I get a credit history, though we also need to money for some house repairs. Which would be the better option in this case, to use it to get a secured loan or a secured credit card? Thanks!
- Sarah

A secured loan means you’re putting down some sort of collateral on the loan. I’m going to assume from this that you’re referring to your house and you’re wondering whether a home equity loan would work better for improving your credit than a secured credit card. Another option would be to buy bonds (or stock) with this money, then use that as collateral for the loan.

Both options (secured loan or secured credit card) would raise your credit. It really, really depends on your specific situation as to which will improve your credit the most. You should sit down with someone who can look at your credit report and help you figure out which avenue will help.

The first place I would start is with my local credit union. Pay them a visit and see what sort of secured loan options they have available. If they have good options (meaning you can get such a loan at a reasonable rate, like under 8%), I’d go that route.

What are your thoughts on buying used swimsuits? Swimsuits are usually pricey, and the other day in a thrift store I saw that they had a whole rack of nice looking swimsuits for about $5 to $7 each. I love the thought of saving all that money, but it just feels gross. Do you know if it’s safe to wear a used swimsuit in terms of disease/medical issues? I did a quick Google search, but only saw hits of people ranting about how gross it is. What are your thoughts?
- Hayley

I wouldn’t do it, mostly because undergarments and swimming suits are the items that wear the quickest from reuse and if you’re buying it used, it’s likely experienced some wear already and just won’t last all that long.

I understand why many people would consider such use unhygenic, but I don’t think that’s really that much of a concern if you clean the item properly. I would likely wash such an item a few times with bleach or other strong cleaners to ensure that it’s completely clean before use.

That being said, it just wouldn’t be worth it to me. I have two pairs of swim trunks I bought new at early fall sales for about $2 each. I have no reason to own anything else.

I just graduated this Spring with a Bachelors degree in Business Administration. I got a job making $42,000/year and currently have $11,500 built up in an ING savings account. I’m currently living at home, single, and have no real need for much of an emergency fund and have just about no monthly expenses. I currently have $4,500 in an unsubsidized federal loan at a fixed rate of 6.8% and $802 in interest and $6,700 in a Wells Fargo student loan at a variable 3.25% and $700 in interest . My question is what should I do now? Use almost all of the money I have now to payoff as much as I can? Build an emergency fund first? Just pay off the loan at 6.8% and invest and pay the minimum on the other? Thoughts?
- Corey

I think your ING savings is plenty adequate for an emergency fund given your situation.

There are advantages and disadvantages to the options available to you. I think it’s pretty much the best option to pay off the 6.8% loan as soon as you can. I would probably strip the ING account of all but two months’ of living expenses and get rid of that higher interest loan.

The advantage of paying off the lower interest loan is cash flow. It would leave you with fewer required bills each month, which makes other lifestyle choices – a job switch, a move across the country, etc. – that much easier. On the other hand, if you’re not planning on doing anything different for a long while, you can probably do better than 3.25% with that money over a longer time scale.

The real answer depends on what you’ve got going on in your life. Are things about to change? If so, get rid of that second loan.

Last year I was in a serious car accident which left me with a permanent injury. I am about to settle with the other driver’s insurance company for a sum in the neighborhood of $100k. I currently owe $70k on a home valued at $100k. And I have a child who will be going to college in 2 years. I plan to use a portion of the money to supplement her college savings rather than taking out student loans. But I am also wondering if it would be wise to put a good portion of it towards paying off my mortgage. Owning my house free and clear at the age of 38 sure would be nice. But I’m not sure it’s the best move, given the current housing market. What if I pay off my mortgage and then my home continues to decline in value? Would I be better off investing the money in a diversified stock/mutual fund portfolio? I could really use some advice.
- Jen

Are you planning to move anytime soon? If not, don’t waste a second thought on the housing market.

Another question: are you planning on helping pay for your child’s college education? If you are, don’t put the money you’d use for that into stocks, as they’re very unstable over the short term (less than 10-15 years).

If I were you, I would pay off the mortgage. As I mentioned above, it’ll definitely help with your monthly cash flow, as you will no longer have that mortgage bill each month. That might be very important depending on how you want to help your child with college.

You recently wrote about eliminating clutter…I hate clutter and have a follow up question.
How long do you need to keep paid utility receipts? I have boxes of receipts. For that matter what paid bill receipts should one keep on file if any in this age of digital records? Thanks for your thoughts…I would like to reduce paper clutter in my home!
- Mary

I usually keep paper utility statements for a year.

However, I’ve been moving to electronic statements for a lot of this stuff, and that stuff can essentially be stored forever. If your financial institution allows you to download statements from them, get into a routine of doing that and saving them. Then, if you still have paper statements, don’t worry about keeping them around.

I look forward to the near future when this is all done electronically, actually.

Now that we’re halfway through the year, I was wondering if you could give us a progress report on your goals for 2010.
- Maria

Resolution #1 was lose 40 pounds. I’m currently down about 14 pounds from the start of the year. I was down about 30 at one point, but I gained some back due to a stressful period at the end of my wife’s pregnancy and during the final edits of my book, taking me close to where I started. My focus is mostly on improving my diet.

Resolution #2 was to pay cash for a replacement for my truck, which I did in March by buying a 2004 Honda Pilot in cash off of Craigslist. We’re extremely happy with it.

Resolution #3 was to learn to play the piano. I started taking weekly lessons from a local teacher in January and the lessons have gone really well. I feel like I’m moving along at a steady pace and, more importantly, I think my ability to read the music and hear it in my head has come along greatly. I’m not as adept at the actual playing as I might want to be, but that will come with practice. I can play some simple two and three-chord songs – nothing too spectacular yet. My biggest challenge is finding the time to practice. We don’t own a piano, so I have to leave the house to practice (I sometimes practice on a keyboard, but I don’t like it very well), which doesn’t happen as often as I’d like. I’m thinking of buying an electronic piano at some point in the future, because this really feels like something I want to do for the rest of my life.

Resolution #4 was reducing my entertainment and hobby spending by 50%, which has been really, really successful. I’ve succeeded at this thanks mostly to lots of trading of books, games, and other things. I’m at about 40% of my pace from 2009.

So, the only resolution that needs a little extra focus is the weight one, which I think is headed in a good direction. I’d also like to find an electronic piano to really make my piano resolution go into high gear.

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.

The Four Pillars of Investing, an earlier book by William Bernstein, was one of my favorite books I’ve ever read on investment topics. It was intellectually challenging, offered great investment advice, and stuck to reasonably conservative investment plans – in other words, it did not tell you to put all of your money in stocks and/or real estate.

I wasn’t even aware that Bernstein had a new investment book out, but when I was scanning the personal finance shelves at my local bookstore, the vague tongue-in-cheekness of one book’s full title caught my attention: The Investor’s Mainfesto: Preparing for Prosperity, Armageddon, and Everything in Between. My immediate reaction was that someone else was tired of the constant onslaught of books predicting a financial apocalypse and that actual good financial planning involved preparing for a full range of potential long term outcomes.

When I saw that the author was William Bernstein, I was immediately intrigued.

Is it anywhere close to as worthwhile a read as the excellent The Four Pillars of Investing? Or does it just photocopy information available elsewhere? Let’s dig in and find out.

1 – A Brief History of Financial Time
Whenever you invest money, you’re investing it in one of two forms: loans (including bonds and savings accounts) and equity (partnership or ownership or stocks). In the eyes of the law, the former has more legal standing and importance than the latter, thus bonds and savings accounts will always have less risk than stocks or business partnerships. When a nation goes through a period of great political upheaval, both loans and equity can significantly drop in value and the possibility exists that neither will recover (though, as said before, loans have more legal protection).

This is essentially the reason why conservative investments are encouraged during periods of economic turmoil. When economic turmoil happens, the less protected positions (stocks) are often abandoned for the more protected positions (bonds, cash savings, etc.). During prosperity, the reverse happens – people move their money back into the less protected positions because the potential returns are much greater, especially in times of economic growth when companies and partnerships are making lots of money.

2 – The Nature of the Beast
You don’t know the day you’re going to need to cash in your portfolio. You also don’t know what’s going to happen next in the stock market or in the broader economy either. If it’s good news in the future, stocks and business partnerships will outgain bonds and other conservative investments. If it’s bad news in the future, bonds and other conservative investments will beat stocks and bonds handily.

The only way to prepare for the future, then, is to balance the two. “Expected returns” are mostly just best guesses, so your best bet is to simply design your portfolio to minimize the chances of you dying poor. Balance. Don’t time the market or focus on individual stock picks unless you have psychic abilities.

3 – The Nature of the Portfolio
Many people go way over the top when it comes to portfolios. It really doesn’t help to be overly complicated with your portfolio, because the fees and effort involved in making a complicated portfolio rarely add up to any sort of significant premium over a simple portfolio.

Bernstein suggests simply having a domestic total stock market fund, a foreign total stock market fund, and a bond fund as your entire portfolio. You can adjust the percentages as you like, but an equal split is fine, as is a 40 (bond)/30/30 split.

4 – The Enemy in the Mirror
Many people fall into the trap of oversimplifying the stock market, which is usually a mistake. There are many, many factors constantly at work in the stock market, from big institutional investors and human error to the general economy and the specific businesses within it. As humans, we tend to oversimplify stuff all the time in order to make the complicated comprehensible.

Your best move is, almost always, to just stick with large index funds. That way, you’re not trying to make bets on various companies or on various specific aspects of the stock market. You’re instead betting on capitalism as a whole and human ingenuity.

5 – Muggers and Worse
The more “complex” an investment product, the more laden with fees and expenses it likely is and the harder a salesman will try to sell it to you. Of course, such “complex” products often end in disaster, too (see 2008).

If you don’t understand an investment, don’t invest in it. For example, if you can’t explain how a derivative works, don’t buy it and don’t let any of your investment advisors do so, either. Stick with what you know, even if you’re missing out on some salesman-created glowing promise of outsized returns.

6 – Building Your Portfolio
It’s okay to lose money in stocks as long as everything is declining. What’s worrisome is when you’re losing money while the rest of the market is holding steady or growing. That’s the danger of not buying broadly – you’re trusting someone else’s judgment of a situation so complex that no one fully understands it.

Bernstein walks through various portfolios – some complex and some very simple – and talks about the ins and outs of each. To put it bluntly, the simple ones almost always win. Why? They’re not laden with extra fees and they just hold everything very broadly. The complex ones win on occasion, but the broad ones usually win over the long haul.

7 – The Name of the Game
The book closes with a very short chapter that essentially says that the real challenge for an individual investor is to decide the percentages. What percentage stocks? What percentage bonds? That’s really the question, because it sums up the true risk we’re willing to take on.

Is The Investor’s Mainfesto Worth Reading?
This book is basically a simpler, easier-to-read version of his excellent The Four Pillars of Investing. I would be much more likely to drop a copy of The Investor’s Mainfesto on someone than the other, simply because this one is much more readable and approachable.

The Four Pillars of Investing is a deeper book, don’t get me wrong, but The Investor’s Mainfesto covers most of the same principles with a lot more straightforwardness and clarity without losing Bernstein’s written eloquence.

It’s well worth reading, particularly if you’re just starting to think about investing on your own. In fact, it’s one of the best all-around beginning books on investing I’ve ever read.

Let’s celebrate the signing of the Declaration of Independence by celebrating some of America’s founding father’s thoughts on personal finance.

An investment in knowledge always pays the best interest.
- Benjamin Franklin

One thing that I feel is never wasted is money and time spent on purposeful education. If you’re genuinely engaged in learning about a topic and growing as a person, the time and money spent learning and growing is among the most valuable you can spend. It increases your body of knowledge, allows you to understand and solve problems of a new variety, and gives you new skills to share with the world (and with potential employers).

There are two educations. One should teach us how to make a living and the other how to live.
- John Adams

At the same time, if you do nothing but learning and do not share it, you’re missing out on the flip side of life. Learning is a lifelong journey, but it’s one taken hand in hand with making our way in the world with the tools we have right now.

We must make our election between economy and liberty or profusion and servitude.
- Thomas Jefferson

In other words, we have a choice between financial independence and financial dependence. If we spend less, we are in control of our own money. We don’t owe others. We have the freedom to change our employment if we so wish. If we spend outside of our means, we are no longer in control of our money. We owe others and we don’t have the freedom to change our employment other than to chase the dollar regardless of how oppressive or soul-sucking the work is. What do you choose?

We cannot make events. Our business is wisely to improve them.
- Samuel Adams

Life happens. Good events happen. Bad events happen. We can’t foresee most of them. The people who achieve their dreams are the ones that hop on board with the good events (and have the resources to do so) and are also able to roll through the bad events. How do you do that? You do that by not spending everything you earn and keeping some of those earnings for yourself, to deal with the bad and take advantage of the good.

That which we obtain too easily, we esteem too lightly.
- Thomas Paine

Often, the most valuable things in our lives are the things that seem like they’re constantly there. Our homes. Our families. Our closest friends. That’s where the real value is. What’s genuinely more important to you: your best friend or whatever material item you dream about owning?

Associate yourself with men of good quality if you esteem your own reputation. It is better be alone than in bad company.
- George Washington

You are impacted over and over again by the people you associate with. Their opinions and attitudes and reputations rub off on you. If you want to fail, surround yourself with negative people with a history of failure. If you want to succeed, surround yourself with people committed to succeeding.

Commercial shackles are generally unjust, oppressive, and impolitic.
- James Madison

Debt is a very painful game to play. The word “shackles” is actually pretty descrpitive, as is the word “oppressive.” You’re stuck when you’re in debt. You can’t make the choices you might want to make in your life – switching jobs, being a stay at home parent, starting your own business. Debt eats those opportunities – and for what?

In the general course of human nature, A power over a man’s subsistence amounts to a power over his will.
- Alexander Hamilton

If you allow yourself to be in a position where you don’t have any money in reserve for yourself, you’re completely at the mercy of the people who pay you. You will jump when they say jump. You’ll work neverending hours and subject yourself to countless unenjoyable events. Why? You’ve given your employers all of the power.

The greatest ability in business is to get along with others and to influence their actions.
- John Hancock

The ability to communicate with others, state your positions, and convince others to go along with you is one that will serve you well for success no matter what path in life you choose.