If you’ve read the reader mailbags for a while, you’ve noticed that I often get messages from people who have worked their way into a good financial place and now have some money to invest, often for the first time in their life.

They look around, watch CNBC, read investment advice online and in books, and still aren’t sure exactly what to do. Should they keep the money in cash, or buy a CD from the bank? Should they invest in stocks, and if so, should they buy individual stocks or put money in a mutual fund? What about bonds? What about real estate?

The options seem overwhelming, as do the potential risks and rewards. I’m going to offer a few ideas that I’ve learned over the years that will help anyone that’s just starting to invest.

First of all, there is nothing that will guarantee you a great return. If anyone is guaranteeing you a large return – and by large, I mean more than a couple percentage points higher than what you’re getting in a savings account – be very, very wary. Such investments usually have some sort of giant drawback, like losing all access to your balance for a very long period, hidden and/or extensive costs, or hidden risks that aren’t being directly revealed. Leave such “too good to be true” investments for people who are actually skilled investors – and they probably won’t be investing either.

Instead, most investments beyond a savings account or a CD offer potentially strong gains coupled with risk. That’s just part of the equation. What usually happens is that the better the estimated returns on an investment, the greater the risk.

Let me spell it out for you in detail using a specific example. The Vanguard 500 is a long-established index fund that essentially invests in 500 of the largest publicly traded companies in the United States. If you look at the returns on this fund, you’ll see that (for the quarter ending June 30, 2010) money invested in the fund has earned 14.33% over the previous year. That’s a very nice return.

At the same time, though, money invested in the fund has earned an average of -9.84% the last three years. Yes, each year (on average), an investor has lost almost 10% over the past three. Even over ten years, the average is -1.67%. Over the lifetime of the fund, though (since the mid-1970s), money in the fund has returned an average of 10.10% per year.

So what does that mean for you? It means that over the course of some years, you’ll have a 15% positive return. Other years will have a -30% return. Over some decades, it’ll average out to a nice positive – 10% or so. Over other decades, like the ’00s that had two economic downturns, it’ll average out to a very low positive or even a negative.

Sometimes you can afford that kind of risk. If you’re many, many years from your goal, that kind of risk is fine. If you’re 25 and investing for retirement, you’re going to get enough great years between now and retirement that you’re pretty likely to make up for the losses of the bad years. The key is to just ignore the year-to-year losses and gains and just be patient.

However, if you’re closer to your goal, you can’t afford that kind of risk. If you’re saving for a goal that’s going to happen in five years and you need to have the balance you’ve already saved up, you’re making a big mistake to put it at this kind of risk. You need to keep it safe, even if you’re losing the potential to have a big year.

You also have to look at your debts in comparison. Right now is a great time to pay down debt. Why? The “return” you get from debt repayments is equal to the interest on that debt. So, if you have a debt that’s costing you 8% interest, an early payment on that debt essentially earns a guaranteed 8% return. Why? If your balance is lower (and that’s what an early payment does), the lower balance will generate that much less interest that you’ll have to pay. It’s important to note, of course, that actually acquiring new debt is really, really bad – I’m looking at debts here as water under the bridge and merely a problem to be solved.

Also, you can never, ever have too much money put away for retirement. It is never bad to over-save for retirement, because you can always use that money during the early years of your retirement for whatever things are most important to you knowing that you’re secure for life.

Thus, here would be my very general suggestions for someone with a chunk of money to invest.

The first thing I would do is aim for debt freedom. Why? Paying ahead on debts is probably the best stable investment that people have right now. Get rid of your debts – all of them.

If you’re debt free, I’d sit down and look at my life goals. Are there any big goals that I want to achieve in my life? Am I going to buy a house? Do I want to start a business, or launch a new career? Maybe you’re really happy with how things are right now. If you have a strong overriding goal, keep the money in savings and have it help you reach that goal a lot sooner. Most likely, the goal will be short term enough that you shouldn’t put it into stocks or other risky investments, for the reasons discussed above.

If you don’t have an obvious overriding goal, open up a Roth IRA and put the money in there. A Roth IRA is a simple retirement account that anyone can open – you just sign up for one with an investment house like Vanguard, much like signing up for a savings account at a bank. You put money in the account from your checking account, then tell the investment house how you want the money in the account to be invested. The best option for most investors is a Target Retirement fund that matches your estimated retirement date. You can contribute $5,000 a year to a Roth IRA – if you have more than that, put it in a savings account and make contributions each year.

There are two things that people virtually never regret: freedom from debt and plenty of money saved for retirement. If you have money just sitting around, you’ve got two good things to do with it, right there.

A final tip: read. Pick up a well-regarded book on investing (here’s my pick) and read it at your own pace. Go slow and make sure you understand every sentence. Use Wikipedia and Google to help you understand terms. This is perhaps the best thing you can possibly do with your time as a beginning investor.

One of the biggest things that’s changed in my life since my financial turnaround and subsequent career changes is that I’m constantly involved in a lot more self-evaluation than I used to be. I’m constantly looking at how I do things, looking for ways to improve the quality and value of how I spend my time and energy and money.

Something I’ve noticed quite a lot lately is how much of my life seems to move along with a particular rhythm. I don’t necessarily mean that things are the same day-in and day-out, because they’re not. What I mean is that I go through periods of heightened efficiency and mindfulness. I get ahead on my work. I write lots of posts. I find lots of quality time to spend with my family and for my other hobbies.

How do I fall out of these periods? Usually, it’s a series of unexpected events that triggers a change. One of our kids is sick during the night. I go on a lengthy trip of some kind (more than a few days). Something breaks in our home and I have to repair it. There’s a serious illness or death to someone close to me.

And, boom, the rhythm is interrupted. I feel tired and my mind is cloudy. I have a harder time working. I’m not as mindful of my spending and I make a few awful spending decisions. I get upset with myself – and with others – much easier than before. I’m less productive and less energetic – and it shows in every aspect of my life.

I have a lot of techniques for finding my rhythm again. Usually, it involves spending a couple of days resetting everything. I get my organizing system back in order. I go to bed early a few nights and don’t set the alarm, allowing my body to wake up naturally when it’s rested. I play with my kids a lot. I clean the house. I spend some time with my friends. I directly address any things that are causing ongoing stress, like a relationship that’s not as strong as I’d like it to be.

And, gradually, I get back into the rhythm of things. My productivity and energy go back up. I begin to feel more fulfilled about everything in my life. My spending discipline is stronger than ever. I feel like I’m doing better work in every aspect of my life.

Over the past few weeks, I’ve had some conversations with a lot of people in my own life and several readers about this phenomenon – and I’ve found that most people feel the same way, although they don’t articulate it as well. They have a “rhythm” in their life that they’re sometimes in touch with and sometimes out of touch with. The amount of “rhythm” seems to vary from person to person quite a lot, though – some people seem to find it a bit of a rarity, while others seem to rarely find it.

I will say this much: one universal thing that everyone has said is that the times in their life when they’ve found their rhythm are much richer than times where they’re off of their rhythm.

Obviously, I’d like to move in a direction where I’m in touch with my rhythm more than I used to be. I’ve found several techniques for doing this that really seem to work.

Know some sure signs that your rhythm is out of whack. For me, the biggest signs are that my office is messy, my GTD inbox has a buildup of stuff in it, my “article buffer” (articles I have written in advance) is low or depleted, and that I feel tired in the middle of the day. When I see two of these things, I usually take it as a sign that my rhythm is out of whack.

If you see any sign of falling out of your rhythm, stop and recharge as soon as you can. You might not be able to do it immediately, but you should do it as soon as you can. I find that when I force myself to do things when I’m out of sync, I make many more mistakes and am much slower about things than when I’m in a good rhythm. In other words, the time I spend keeping myself in sync pays great dividends over time.

If you don’t feel that you’ve had your rhythm, or have severe difficulty reclaiming it, get a medical checkup. There are a lot of little things that can hold us back from feeling great and knocking it out of the park. Many of them are very simple – a vitamin deficiency or something like that. I have an underactive (bordering on inactive) thyroid and if I miss out on my daily thyroid medication, I can quickly get out of rhythm.

Certain routine activities help me maintain my rhythm. For me, a daily walk of about three miles, a daily 20 minute meditation session (where I try to empty my mind for a while in the quietest room in the house), and a daily gaming session help me keep in my rhythm. I try really hard to accomplish these things every day. A piano practice session seems to be creeping into the picture here, as well.

If you’re out of rhythm, put off buying decisions. I find that, time and time again, my judgment when it comes to purchasing decisions is out of whack when I’m out of rhythm. If I put the decision off until I’m in a better frame of mind, not only do I end up making a better decision over the long haul, I usually have created some additional incentive to focus on what I need to do to get back in the swing of things.

Good luck!

Naomi is trying to get a good picture of her actual spending and is using a very good process to get there. She’s run into a bit of a snag, though.

I have reached a month of collecting receipts and preparing to organise it all in an Excel spreadsheet. Categorising by what type of expense will not be the difficult part for me, however deciding weather it was a ‘necessary’ spend is. I’m finding too many grey areas. For example; it was necessary to eat lunch but instead of having an at home sandwhich, i grabbed one on the go. Or, i needed some new clothes for work and brought a nicer dress than was necessary. Maybe I am overthinking such a simple exercise a little too much, but I would appreciate any direction you could provide.

This is a classic problem that people run into when they’re first getting a grip on their finances. What exactly constitutes a necessary expense? If you don’t buy the low-end garbage bags and instead buy the ones that Consumer Reports calls a “best buy,” is the difference in cost a necessary expense? If you’re caught in traffic and can’t stop at home for dinner before an evening meeting, so you stop at a fast food restaurant, is that a necessary expense?

I can certainly give you my opinion on a lot of such buying situations, but the truth of the matter is that it’s my opinion. I’d call the garbage bags a necessary expense. I’d call the fast food an unnecessary expense, a cost that results from poor planning. And on and on and on…

Here’s the truth. Every single one of us is going to spend money on something that we view as necessary and that others view as unnecessary. Almost all of us are going to spend at least some money on things that we view as unnecessary upon later reflection.

What matters isn’t that we eliminate all unnecessary spending from our budget. That’s impossible. It’s the equivalent of eating nothing but lettuce for a diet – eventually, you’ll either wither or fail.

What matters is that we get a grip on our unnecessary spending, however we define it.

I usually encourage people to be pretty tight with their definition of what a necessary expense is, because the real value in budgeting is to figure out where all of your unnecessary expenses are going. What areas are you dumping money into that, with some forethought and changes in routines, you could improve?

Here’s an example of what I mean. Let’s say you’ve decided to count lunches eaten out as an unnecessary expense. You make a category in your accounting of your spending called “lunches eaten out.” At the end of a month’s worth of receipts, you look at that total. $250? What?

You can reclaim that $250 (or at least most of it) by simply changing one behavior. Stock your desk with the materials for some lunches on the fly, for one, and then get in the routine of brown-bagging it. If things don’t work out with the brown bagging for a day, you have some food in your desk as a backup. Boom! Suddenly, you’re not dumping that money into eating out all the time.

That’s how budgeting is supposed to work. You group all of your expenses into categories and look for ways to sharply cut some of the areas of unnecessary spending (like the lunches) while also looking for ways to reduce the costs in necessary areas (energy efficiency, for example). It is much easier to identify ways to cut your spending if you’re looking at the exact dollar amounts you’re spending in a specific area and are focused on that specific area.

In other words, don’t focus so much on what’s necessary and what’s unnecessary, at least not at first. Just try to group things into piles that make sense to you. Budgeting books often offer suggestions of categories, but don’t be afraid to go beyond them and have categories like “lunches eaten out” or “comic books” or “makeup” or “video games.”

Then, when you’ve got those specific categories and how much you spent in each of them each month, focus on those categories one at a time and ask yourself, “How much of this is necessary? How much can I trim from this?” Different people will come up with different answers here, but the more you cut without significantly altering your standard of living, the easier it will be to find financial freedom.

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. Adding partner to credit cards
2. Partners and rentals
3. Healthy use of emergency funds
4. Services you’re not knowledgable about
5. Short-term investment choices
6. Low-income money advice
7. Pre-tax or post-tax retirement
8. Outspending your income
9. Mortgage prepayment at low interest?
10. GTD without a partner

My two oldest children are enjoying two new experiences this week.

First, their fall soccer league is starting and they’re both on the same team in that league. They’ll be competing against other preschool aged children in some friendly three-on-three soccer matches in the coming weeks. Our four year old has participated before, but this will be the first time for our daughter.

We also enrolled both children in a private preschool. In Iowa, the state funds private preschools up to a certain limit, meaning that the cost of a private preschool is minimal or nonexistent (depending on the specific school). We’re both happy with the school we’ve chosen and next year, when we have to make choices about kindergarten and so forth, we’ll revisit what we want to do for education (likely public schooling, because our local school district is incredibly strong).

I’m recently engaged, but we won’t be getting married until after I finish graduate school (2 years). Currently I have 2 credit cards that I’ve had for a couple of years. I’ve never carried a balance, always pay on time, etc. and though I have a relatively short credit history, what I have is good. I was thinking of adding my fiance as an authorized user on these cards because I was thinking it might improve our collective credit scores for down the line when we’re looking at applying for a mortgage. He wouldn’t even be using the cards, but this would be more in the interest of adding his name in order to improve his credit history (what he has is good, but since we’re both fairly young, it’s not much). My questions for you are: do you think this is a good move? is it worth it to do this now, or would the effects be negligible? can you add someone as an authorized user if they’re not related or married to you?
- Kelly

Most cards allow you to add anyone you wish as an authorized user, provided you give permission for it.

The thing I would make sure of is that you’re both using the card wisely, because this card is tied to both of your credit scores. If one of you makes a “mistake” with the card, it hurts both of you. I would encourage you to actually use the card a bit, but be careful what you do with it. Use it to buy gas and things like that and keep track of what you’ve put on it.

A note: at various times, FICO has considered dropping authorized users from their credit score calculation formula. Although it hasn’t happened, it may happen at some point in the future. Also, some credit companies don’t report authorized users at all when reporting credit information to the credit bureaus, so this may not help your partner’s score at all.

I am planning on moving in with my boyfriend within the next few months. This has been a long time coming and we are not taking it lightly. We’ve been together for nearly 5 years and have talked about doing this for years, but don’t want to rush or do it for the wrong reasons (saving money is the wrong reason, it had to be about our relationship). Of course money does come into the discussion because we’ll both free up some money. We each own our own homes and we’ll be living at his place because we both vastly prefer his neighborhood to mine and my place will attract more stable renters. The agreement we both think is fair is that we’ll each pay our own mortgages and we’ll split the rental income 50/50. So if my house is ever vacant, then I don’t give him anything in rent, and when I do have renters I give him 50% as my rent to him. It seems perfectly fair and like a great solution. But now I’m not so sure. Moving to his house is across a state line for me, and my income taxes will go up 8%. Also, I set aside some money each month in a targeted savings account for home maintenance, with renters I feel I should increase those savings since any repairs must be done more urgently and more professionally than with me living there. Based on other rentals I’ve seen in my neighborhood, I expect to rent my house for around $1000 (mortgage payment is $1450 – housing bubble hit hard around here) so bf and I would each get $500, but the net income for me would be closer to $300 plus the stress of being a landlord. Suddenly our agreement seems less fair and I find myself a bit resentful. Any suggestions? (These numbers don’t count any of the significant savings we’ll both enjoy from not driving back and forth 20 miles each way several times a week, having only one set of utilities between the two of us, no more pet sitter to medicate my cat when I have to travel for work, and likely much less eating out.)
- Jackie

It seems like you have a very strange arrangement.

In my eyes, the fair way to do this would be for you guys to let go of the idea of “mine” and “his” and look at this as a mutual situation. You have a shared pool of money. From that pool comes all mortgage payments. Into that pool comes all rent checks. You’re responsible to each other for what comes in and out of that pool.

In the end, if you’re that serious about the relationship, these things are effectively both of yours. If one of you is in a financial situation, the other one is in it, too.

My husband and I are both 25 and working to get our finances under control. We currently have about $5,500 in credit card debt, and $2000 in an emergency fund. Every month, we contribute approximately $1,000 towards erasing our debt, so we plan to be out of debt in the near future. However, the unexpected expense pops up every now and then. This month, it is a $300 dentist bill. Do you suggest paying for expenses like these out of an emergency fund, or paying less on our credit card for the month? (At this point we have no “regular” savings account, and won’t until we are debt-free.) We just arent sure which is the lesser of two evils: depleting a very modest emergency fund or putting off complete debt freedom.
- Lauren

If I were you, I’d just have a certain amount – a small amount – going into the emergency fund each week or month. Let’s say it’s $50 a week.

Whenever you hit a speed bump like an unexpected dentist bill, you certainly can pay it off from your emergency fund. If you’re adding constantly to your e-fund, you don’t have to worry about replenishing it and you also don’t have to worry about that bill.

The reason for doing this is so that if a big emergency hits you, it doesn’t force you to backpedal into more debt. That’s the exact kind of situation that halts the forward progress people make, over and over again. They begin to believe it’s impossible to pay it off because they see every step forward being met with a step backward.

Don’t fall into that. Keep an emergency fund.

Recently, my kitchen faucet handle came off. I could put it back on but when I looked under the sink the faucet was leaking and I found black mold around the pipe.

Confusing? What options do I have if a semi-emergency plumbing incident again.
- Linda

$400 to replace a kitchen faucet and a pipe under the sink? That seems high to me, even if you’re in an urban area where plumbers charge an arm and a leg. That’s a pretty simple repair.

Your best bet is usually to get estimates from multiple plumbers for non-emergency situations like this, especially the second one.

For most people – those who are able to get under the sink – I would usually suggest having some plumbing tape at home so that when such a leak occurs, you can wrap the leak thoroughly in plumbing tape for a short-term fix before calling around for estimates. However, in your situation (with arthritic knees), that may have just been an emergency you had to deal with.

I recently received a severance package from a layoff and am re-employed. From this severance, I paid off credit card debt and my car and now have $33,000 remaining in savings. I would like to ear-mark this for my 16-year old son’s college education which is coming up in a couple of years. Where should I put this money in the mean time? CD’s are earning awful returns!
- Jenny

Cash is probably the best place to keep it if you want to retain the balance.

There are no conservative investments that are returning very well right now, for various reasons. Thus, it’s not surprising that people are trying to find a better return for their money than would be offered in cash or CDs or bonds.

The problem is that the options that have the potential to return more are pretty unstable, especially over the short term. I would not put my money into stocks or real estate if I had to pull the money out in just two years – the risk is too great.

Your best bet is probably to open a 529 college savings account, put the money in there in something conservative, and wait.

I just graduated from school in May. I’m trying to make it as a writer because it’s what I love to do. At least to start, I’m not going to be making a lot of money. I have about $1,800 in my checking account. I’m still living at home, but will be working full time for a magazine, where I’ll get $750 dollars a month for 6 months. Then, the position hopefully will turn into a salaried one. I just opened a checking and savings account with ING. How much money should I keep in each account? Also, is there any way I should be saving for retirement now? I have about $4,000 in stocks and bonds from my grandparents, as well as $2,000 in another account from them. Would you recommend moving this money anywhere? I’m kind of lost right now. I’d really appreciate any advice.
- Ryan

Writing – especially early in a career – has extremely uneven income. There’s just no way around it – you’re not a known entity, so you’re going to have a heavy luck factor when it comes to finding work. You might get a bunch of it – or you might get nothing for months.

Because of that, I wouldn’t jump the gun on retirement savings until I had some sort of income stability. Instead, I’d hold the cash as an emergency fund.

As for the other assets, since you’ll probably be needing them for living expenses in the next year or two, your best bet is to move the money to someplace safe. I’d put all of it into savings for the time being, then perhaps move it into retirement or elsewhere if you find yourself in a stable financial position.

I am 23 and I started working at a new job, straight out of college and I am maxing out my retirement account contributions. My question is, should these contributions be going in pre-tax or after-tax? My income is very high for my age (~75K), so I am not sure of the benefits of pre-tax vs. after tax. I am currently contributing pre-tax money. I have heard this is a greatly debated topic. I also have a Roth IRA that I have maxed out since I was 18. I would like to take the money out tax free when I retire, but would that hurt me since my tax bracket may be a bit high right now?
- Eric

My gut feeling is that if you possibly can, you should be putting the money in post-tax accounts, like a Roth IRA. The exception to this is if you are getting matching in your 401(k)/403(b)/TSP at work, in which case you should get every dime of that before contributing to a Roth.

Why? Every indication is that income tax rates are at historic post World War II lows. There’s really nowhere for them to go but up. Our nation’s budget has an emormous annual deficit and at some point, it’ll have to be repaid. Social Security will have to be propped up. The way to do that is simple. Raise income taxes.

Thus, I’d always bet on post-tax investments right now so you avoid paying taxes on the gains later on.

My dearest childhood friend is in a situation that makes her miserable. She and her long term boyfriend both work less than 40 hours a week at low paying jobs. They want to have more money to spend, but they are both unwilling to seek a second job or find work on the side. Although they have a lot of free time, all of the things they want to do cost money. When we go out together, I try to make suggestions of cheap or free things to do, but they are not interested.

I don’t want to see my friend unhappy, but she and her boyfriend have unrealistic expectations. They don’t want to work more hours. They don’t jobhunt for a higher paying positions, and they are not interested in going back to school or otherwise improving their earning potential. Yet they are constantly strapped for cash and are not interested in a frugal lifestyle. They live hand to mouth with no savings, and they will finance any unexpected expenses on their credit cards. They are frequently depressed and feel trapped. How can I help my friend in this situation?
- Sara

I don’t think there’s anything you can do to help them. They feel depressed and trapped by their own actions. At some point, they have to come to the realization that they’ve created their own problems through overspending.

Your best option is to just be supportive. Don’t fight them on how they choose to spend their money – just make wise decisions about your own.

One move you could make is to just drop a copy of a strong personal finance book on their laps, something like my own book or Your Money or Your Life. You’d want one that discusses people extracting themselves from tough situations and finding financial freedom. However, it’s up to them to drink from the water.

I recently refinanced my mortgage (Just over $100k) to an adjustable rate mortgage that won’t change rate for 5 years. This gave me a very low interest rate (in the 4% range) and a monthly payment of $500, a $230 per month savings (and I was actually paying an additional $100/month toward the principle, so in reality, I have an extra $330/month). My plan with the mortgage is to pay it off in 5 years, which I think is a very manageable goal for me at this time. (My annual salary is around $110k, I already have $40k that I could pay toward the mortgage at this moment, and I have no other debts.) In retrospect, I should probably have paid the $40k and just remortgaged $60k but for some reason that thought did not occur to me until too late. Should I pay toward the principle bit by bit or save the money myself in an account that I would not touch until the time comes to pay it off? I’m leaning toward the 2nd option because I’d get to keep any interest generated from the money, rather than allowing my mortgage holder have the money early. I am very disciplined and do not think I would be tempted to use the money for some other purpose. If I should save the money myself, what do you see as the best way to do so? I think I could put the $40k somewhere and deposit $1000/month for the next 5 years and that would make my goal. (This $40k is basically money I’m not needing for anything else, I wouldn’t consider a part of my emergency fund or retirement funds, and I don’t have another use for it at the moment)
- Laura

There’s nowhere out there that will return 4% to you without taking on significant risk right now. So, if you just want a riskless 4% return on your money, prepaying the mortgage is a good idea, especially when you consider that the rate will adjust in the future.

The big benefit of being rid of the debt is the monthly cash flow. It eliminates a huge monthly required bill, which gives you a lot of freedom, career and otherwise.

Don’t second-guess or dwell on missed opportunities. It’s really a waste of time. Just learn what you can from it and move on with life. Dwelling on past mistakes means your vision is looking backwards, not forward to the opportunities ahead of you.

The one thing I’ve struggled with since adopting the Getting Things Done tools is that I really struggle with watching my wife NOT using these strategies and knowing that many things she agrees to will slip between the cracks and never get done, or if they do get done, it will only happen when it’s an emergency (i.e. car maintenance, paying bills, etc.). Do you have any suggestions on enjoying the benefits of GTD but not allowing frustrations with others in your life not using the system to boil over into arguments? I would love to help her adopt the system, since she is incredibly busy and could really benefit from the lower stress level that results from using GTD, but she doesn’t seem to have any interest. Any advice would be appreciated.
- Matt

You have to determine which one of you is responsible for which things within your marriage, then use GTD to take care of the things you’re responsible for. You can’t both pay the water bill, for example.

Then, focus on taking care of the things you’re responsible for. Leave it up to your spouse to determine a plan for the things she’s responsible for.

Obviously, if you’re bothered by her inability to complete some of the tasks she’s responsible for, you need to sit down and have a conversation about it. The best solution may be to trade responsibilities around a bit.

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.

One of the most interesting parts of being a popular internet writer that reviews a lot of books is that, over time, I’ve wound up on the mailing lists of various publishing companies. They send me piles of books that might be of interest without me even asking – and most of them aren’t bad, but aren’t particularly exciting, either. I usually end up giving away most of them, passing them on to people who will get some use out of them.

When I’m going to invest the time in reading and/or reviewing a book for The Simple Dollar, I usually look for a book that has one of two things (or, ideally, both). It either must challenge or deeply entertain me in some way (a la Your Money or Your Life) or it must offer some very specific advice that’s not entirely duplicated in other works that I’ve read (a la The Complete Tightwad Gazette). If a book doesn’t seem to have either, I either don’t read it or, in the case that I’ve discovered this while reading the book, I don’t usually review it. Again, it’s not a matter of a book being bad, it’s just not a rewarding read.

This brings us around to the book I’m reviewing this week, 9 Steps to Work Less and Do More by Stever Robbins, who podcasts at Quick and Dirty Tips as Get-It-Done Guy (a podcast I listen to semi-regularly). This book was one of those “random” ones sent to me by the publisher and, after leafing through it, I quickly placed the book in that second category – a nice collection of very specific advice and tips that offers a few new ideas and some encouragement on things I should already be doing. In this case, the focus is on time management and efficiency, a subject area I find goes deeply hand in hand with financial success.

Step 1: Live on Purpose
A successful day is any day where as many of your actions as possible have purpose. In other words, the less time you spend in idle activity – doing nothing, or merely doing something to “burn time” or out of boredom – the better off you are. Many people equate this with having no leisure time, but I wholly disagree. I engage in a lot of different hobbies, but even within those hobbies, there’s purpose. I want to finish a certain book or a certain reading list, which builds my understanding of a certain topic. I want to master a video game, improving my ability to think under fire and my hand-eye coordination. I want to master a piano piece, improving many levels of cognitive ability. It’s all about goals leading the way, particularly big goals broken down into small bits that fill your day with purposeful activity.

Step 2: Stop Procrastinating
I reallly liked Robbins’ suggestion for beating procrastination in this chapter. It borrows a bit from Getting Things Done, but it’s really clever. For every short-term and medium-term project you have going on (everything less than a few months down the road), perform an action related to that project every single day without fail. He calls it an “action pack” – I call it a pretty good idea. Just keep a list of your projects with you and each day, come up with an action you can take that moves you along for that project. Write a page of that paper. Clean out that closet. File those papers. Whatever little step it is, take one of them every day.

Step 3: Conquer Technology
Technology can make communication much easier. That’s simultaneously a benefit and a problem, because when it becomes easy for someone to send you a message, you wake up to an inbox with a thousand messages in it. Sometimes, I’m basically forced to follow the advice in this chapter and just declare an email bankruptcy – I just empty my inbox and start over after reading as many as I can, as much as I try to keep on top of things. Why? The deluge is just too great to deal with at times – if I dealt with every single message, I would literally get nothing else done some days. Robbins’ argument is that if something is really important, you’ll be contacted another way.

Step 4: Beat Distractions to Cultivate Focus
For me, the best practice here is to just shut off distractions. I often turn off my cell phone and my internet access when I’m trying to write, simply to minimize distractions (and to make it harder to distract myself). Distractions slow down the writing process, not only due to the interruptions, but the time it takes to re-focus after an interruption. This is true of any process that requires focus. Multitasking simply means you’re switching your attention back and forth (with a little bit of re-focus time between each switch), which means that if you’re multitasking between two things, you’re giving less than 50% to each of them. This might work if the things are extremely simple, but you’ll just end up producing subpar work if you multitask with important things on the table.

Step 5: Stay Organized
Once you have a system in place, it’s worth a bit of time each day to make sure that your system keeps running, because the consistency of that system is what makes it worthwhile. One of the “shocking” things about GTD (a system I mention often) is that you spend time each day maintaining the system by processing your inbox and so on. It can feel like time lost, but when you actually take in the breadth of what you’re able to accomplish by having a truly trusted system that works, it far more than makes up for itself.

Step 6: Stop Wasting Time
Here, Robbins seems to distinguish between the various categories of things we have going on in our life – “not important, not urgent;” “important, not urgent;” “urgent, not important;” and “important and urgent.” Take note of the times when you find yourself doing things that are “urgent and not important” because they are the ultimate time wasters. For me, many phone calls fall into this category – they’re urgent (the ringing phone) but not important (a telemarketer or some other needless call). Thus, I’ve trained myself to basically ignore the phone when working.

Step 7: Optimize
The real key to this entire chapter is to never stop polishing what you’re doing. You should always look for better ways of doing the things you need to do, whether it saves time or saves money or allows you to accomplish more with the same resources. Robbins offers several ways of doing this, but for me, the best key is to just listen to myself and observe what I’m doing. If I’m not doing something or something isn’t working, I don’t beat myself up over it – it just means I need a better solution for that problem.

Step 8: Build Stronger Relationships
I am a huge believer in stronger relationships. A core set of relationships in your life can sustain you and help you with anything that goes on in your life. Spend some time figuring out who the really important people are in your life, then go the extra mile to cement each of those relationships by reaching out regularly to those people, helping them when they need help, and involving them in your life. The more you do it, the stronger the core group around you will be and the more they’ll support you during your crunch times.

Step 9: Leverage
The book concludes with an encouragement to use the skills that you have to every advantage. If you’re exceptionally good at something, use that skill as often as you can. Trade using that skill. Negotiate with that skill as a bargaining chip. Share that skill with friends. Barter using that skill. If you can accomplish something easily that’s very difficult for someone else, you’ve got something valuable there. Use it – and often.

Is 9 Steps to Work Less and Do More Worth Reading?
9 Steps to Work Less and Do More is a very solid and easy read with a lot of good little tips and ideas strewn throughout – much like the podcast, in fact.

It’s not an all-encompassing time management system, nor will it solve all of your problems. Instead, it’s just a collection of specific tactics that you can pull out and use in your own life, a piece here and a piece there, to make your situation stronger. Some of the ideas are excellent, too, like the “action pack” concept.

I enjoyed the book. If you’re thinking about time management, you probably will, too.

I get a lot of emails from people with the above statement, usually followed by some sort of plea for help. I have a lot of sympathy for their situation. I can’t even imagine how painful it would be to not have a steady income, have no luck finding work, and have others depending on you to provide an income.

Whenever I see an email like this, though, I usually respond with many of the same points (often tailored to a specific situation, of course, but the ideas are constant). What follows are the things I almost always tell people who are having difficulty finding work right now.

First of all, don’t waste another second passing blame for this situation. Yes, the economy isn’t particularly strong. Yes, depending on your political beliefs, it’s all the Republican Party’s or the Democratic Party’s fault. Yes, the president (Bush or Obama, choose one based on your political ideas) is/was a horrible individual who is trying/has tried to destroy the country.

Guess what? All of that time and energy spent thinking about or fretting about who or what to blame only reduces your own chances of finding work. You have an immediate problem on your plate that needs a solution. That solution requires all of your energy and your focus, and burning away that energy and focus by passing blame off to politicians or government or employers or former coworkers just takes away from what you need to be doing right now. Save that spitfire for the next election cycle, when you’ve got a good job. If you’re unemployed, don’t waste your energy on it – spend it on getting employed.

Remember, no one owes you anything. People don’t “deserve” things, they earn them.

The same thing goes for activities you do that help you “unwind” or “escape.” So often, I hear from people who say things like “I can’t find anything, so I spend all day at home surfing the ‘net.”

Yes, it’s good to relax a bit, but treat your unemployment like it’s a job and spend at least forty hours a week specifically looking for work. If you need to unwind, do it in the evenings. I like to unwind with a glass of wine and a game – maybe for you it’s a television show or a movie or surfing the ‘net. However, I also know that I should only be unwinding if I have something to unwind from.

So, how can you spend that time searching for a job?

One big thing you need to do is expand your search horizons in several different directions. You need to look for jobs outside of your local area and accept that you may need to move to find work. Look nationally – and even internationally – for jobs that match the skills you bring to the table.

Similarly, you may have to seek out a job that’s “beneath you.” No job is “beneath you.” I always think of that snippet from National Lampoon’s Christmas Vacation when I hear that someone won’t apply for a job that’s “beneath” them…

Clark: “How can they have nothing for their children?”
Ellen: “Well, he’s been out of work for close to seven years.”
Clark: “In seven years, he couldn’t find a job?”
Ellen: “Catherine says he’s been holding out for a management position.”

If it came down to a choice between picking vegetables for minimum wage or losing the house my children have lived in since they were born, I’d pick green beans from sunup to sundown, go home, and work on job applications. The same goes for flipping burgers in the kitchen at McDonalds or any other job that might be “beneath” me – because, frankly, they’re not.

At the same time, you should always be searching for jobs in your field of expertise. Start by polishing that resume until it shines. Go over it and over it again. Have friends review it. Submit it to resume experts – even bloggers who might use it for a post on their site. Get it perfect – and make sure it highlights the best of you very clearly, so that you stand out.

You should also keep your skills sharp and, at the same time, promote yourself. How do you do that? Get involved in the community of people online. Dig into projects that utilize your skills. Never stop learning new things. Open a Twitter account and join in the conversation in your field (and link to your Twitter feed everywhere you can so that it comes up first when people Google you). This is not only part of the job hunt, it’s part of what will make you successful in your field.

The final key piece of advice? Don’t give up. Never, ever stop searching for the perfect job for you. Yes, you might find yourself working in something that you don’t believe matches your skills, but that doesn’t mean you don’t spend your spare time getting yourself ready to find that perfect job.

Good luck.

When I was sixteen, I bought a cigar box full of 1960s baseball cards for $5 from someone who was cleaning out their mother’s attic. I sold one single card in the box – a 1965 Topps Mickey Mantle in excellent condition – for $200.

Several years ago, I was at a yard sale. The person running the yard sale had a box full of trading cards sitting there that her son had left behind when he went to college. I offered $5 for the box and proceeded to resell them on eBay, netting almost $1,000 in the process. (The cards were Magic: the Gathering cards from the Unlimited and Arabian Nights sets.)

About a year ago, I bought a pile of used video games at a yard sale. I picked them up for $2 apiece – 15 games for $30. Several months later, I piled these up and traded them at a local gaming store for approximately $200 in store credit, which (in combination with other traded-in items) I used to pick up a Playstation 3.

What do these little stories have in common?

First, in each case, I took advantage of a hobby of mine to turn a substantial profit. I’m familiar with the value of many types of trading cards, video games, and other certain types of collectibles because they’re hobbies of mine. Thus, when I notice these items, I can inspect them carefully and often evaluate their prices.

Second, I routinely put myself in situations where I’ll stumble across these items without a proper valuation. Yard sales and garage sales are a great start, but there are lots of places to look: going out of business sales, estate sales, and so on.

Third, I knew how to re-sell the items. There are many collectibles and other items that have theoretical value, but if you don’t know how to re-sell them for that value, they don’t have any value at all.

Let’s look at how you can use each one to not only have a lot of fun enjoying a hobby of yours, but also turn a profit sometimes, too.

Know Your Hobby
This is the easiest part of the three. Almost every hobby involves some sort of equipment or materials. From rock collecting to gardening to more obvious things like movie collecting, hobbies usually involve the acquisition of certain items.

Simply by being involved with the hobby, it’s often easy to be aware of the values of many of the items associated with the hobby. Keep your ears and your eyes open and you’ll soon have a grasp of the value of many items within the hobby, as well as good resources for identifying the value of items you’re unsure of.

Know Your Situation
It gets a bit trickier when you’re looking for ways to find such bargains. Above, I named several avenues for finding such items. Here’s some specific notes on these avenues.

Yard sales and garage sales These are almost always my best bet for finding huge bargains on hobby-related items. The trick, of course, is knowing how to separate the junk from the valuable. If the price is cheap enough, I’ll often jump on board even if I’m not 100% sure of the value of the item because the profit potential is so high.

Going out of business sales I never miss these, particularly for independent non-chain businesses. Often, items are priced as a discount off of MSRP – and often they’re cleaning out everything they can find from their back rooms. Sometimes, this means older and rare items that have a lot of value are out there for less than they should have sold for new. If you know what you’re looking for, this can be a treasure trove.

Estate sales and auctions This is similar to a yard sale. It can work well for certain types of items. Your best bet is to simply peruse listings in advance to decide if the sale is worth your time.

Odd jobs Whenever you have the chance to perform odd jobs for independent businesses – or even do things like help someone clean out the house of a deceased family member (which is a nice thing to do anyway) – you can just stumble upon all kinds of great things. I’ve found great items in the back room of an independent coin shop and in the closets of a deceased cousin of a friend.

Know Your Outlet
Of course, just because you find an item that has significant theoretical value, that doesn’t mean that you’re going to make a profit. Thus, I only pick up items if one of these two statements are true.

The item must immediately be resellable at a profit. Can I go list this item on eBay and turn a profit on it? Or, can I take this item to some sort of trader or retailer and immediately get more for it than I paid for it?

The item must have immediate use. An item I might use doesn’t cut it. I must be able to immediately put the item to some reasonable use within my hobby. Ideally, the item continues to retain some value as well.

If I can’t immediately validate one of these two statements, I don’t make the purchase.

Knowledge Is Money
In simplest terms, knowledge is rewarded here, as is participation. The more you know your hobby, the more likely it is you’ll be able to identify potential bargains. The more you participate in events where such bargains appear, the more likely you are to find it.

That’s why my wife and I often go to garage sales on weekends – and why we often go away empty handed. We usually go only to look for specific items – things we need, like children’s clothes, or things we know we can profit from.

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 (August 22 – August 28, 2009)
Eating What You Have On Hand My wife and I do these kinds of “pantry dives” every once in a while. We do it to go through the stuff we’ve bought in bulk before it gets too old – things like dry pasta and the like.

Are Poor People Lazy? First of all, let’s distinguish between “poor” (people who don’t have money because of external influences) and “broke” (people who don’t have money because of personal choices). I have a lot of sympathy and desire to help the poor – not so much with the broke, because they can help themselves (though I will give them advice because lack of knowledge can be at work there).

That’s Just the Way It Is? Very few things are “just the way it is.” You can make choices to impact almost everything in your life. It’s really up to you and what you make of it.

Eleven Things You Can Do Today to Fall Behind Financially Yes, fall behind. These are common things that people do all the time.

Cultural Divides There are so many cultural concerns that change the choices we make as adults. The more we can learn from other cultures and adapt our own choices, the better off we are.

Two Years Ago (August 22 – August 28, 2008)
Starting a Bulk-Buying Co-op with Your Friends, Family, and Neighbors You’re never going to use those 36 rolls of toilet paper at Costco? Why not split the cost of the jumbo pack with three friends – each of you paying 25% – and keep nine rolls each at a much lower cost than you’d get elsewhere?

Personal Finance 101: Money Market Accounts Versus Normal Savings Accounts There are some differences – they’re subtle differences, but worth knowing.

Is a Positive Attitude Enough? A positive attitude alone won’t change the world, but a positive attitude is often the difference between success and failure.

Buying Things Because They’re on Sale Is an Awful Way to Save Money This is a big reason why I don’t use general coupon sites. I don’t want to wind up buying stuff I don’t really need or don’t really want just because it’s a “sale.”

Nine Things to Do When the Going Gets Tough There comes a time for everyone where tightening the screws makes all the difference.

Three Years Ago (August 22 – August 28, 2007)
Evaluating My Magazine Subscriptions: Which Ones Are Worth It And Which Ones Aren’t? I do this on a regular basis – and over time, my subscriptions have changed. When I “retire,” they’ll change again (because there are several periodicals I love to read, but I simply don’t have the time to keep up with).

Having A Second Child? Seven Frugal Tips For Getting Ready I remember these days fondly, when we just had our oldest child.

Getting Over The “Taboo” Of Generics And Store Brands I really like the idea of just taking the labels off of stuff. It helps a lot with resisting brand imprinting.

The Real Scoop On Rewards Credit Cards They work … if you’re careful with them.

The Lawn Care Dilemma: How Much Time And Effort Should You Spend? I don’t think there’s an absolute formula for everyone. However, I also think it’s one of those things that’s worth thinking about, because lawn care has both a time and a money cost.

If you’d like to browse through more of the archives, visit the chronology, where all posts are listed in chronological order.

Ten Ways to Get More out of The Simple DollarUpdated!
This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are ten great ways for new readers to dig deeper into The Simple Dollar.

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7. 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.

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