One of the nicest houses in our town recently went into foreclosure. The family that lived there seemed to have “everything” on the surface – a gorgeous house, nice cars, nice clothing, expensive cell phones, and so on.

In truth, though, they were in debt up to their eyeballs. Now that house that they had sunk so much money into is gone, as is the family. They’re living in an apartment, one of the two parents is jobless, and they’re likely facing bankruptcy.

There was a time in my life where I felt really jealous of people who had some of the things that I wanted in life. As time has gone on, I’ve found that all of these people really do fall into one of two categories.

1. They can’t really afford it. They’re piling up debt accumulating things and doing things that are simply beyond their means. Yes, sometimes people get into this situation unknowingly (like people who were scammed into bad mortgages), but most people often start down this path with some student loans partnered with a bit of credit card debt. Then they “buy” a house with a mortgage, toss on some more credit card debt, have a car loan or two, and find themselves really struggling.

They appear to have everything, but the financial and personal stress that you don’t see can be very, very intense.

The “can’t really afford it” group includes those who are living on the money of others. Why? When the money of others runs out, those people are quickly going to be fully in the “can’t really afford it” situation.

2. They can really afford it – and usually deserve it. This includes the people who have worked very, very hard to get what they have. Entrepreneurs who have worked countless hours to build a business. Very bright people who have capitalized on a great idea. People who spent most of their twenties going to school to earn a doctorate in a lucrative field. People who have lived very lean for a while in order to build up a bankroll for themselves.

To get to this point, you either had to make some tremendous sacrifices along the way – often damaging relationships and missing out on life-affirming experiences and going through painful “salad years” without much at all – or simply have had the ability and opportunity to be in the right place at the right time to take advantage of it – to which I say “good for them” instead of really being jealous of them.

When I look at people who have the things that I want, I recognize that they’re in one of those groups. Either they’re struggling deeply to handle what they have (which is making other aspects of their lives miserable) or they’ve worked very hard to get what they’ve got (which means they had challenging experiences in the past and often sacrificed a lot to get where they are).

If I’m dissatisfied, the dissatisfaction is really with my own life. Usually, it means I’m unhappy with some aspect of the choices I’ve made in my life and it’s a sign that I need to sit down and take a look at where I’m at. Should I be doing something different?

I don’t ever want to be the person who can’t really afford it. I’ve been there; it’s scary. Do I want to be the person who can afford it? Sure, but when I step back and look at my life, I recognize that it’s not really the priority.

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 (October 17 – October 23, 2009)
Ethical Frugality Week: Hidden Replacements Is it an honest thing to substitute a lower cost item into the package of a higher cost item in your home?

Ethical Frugality Week: Hotel Visits What items in a hotel room should you feel okay putting into your luggage?

Ethical Frugality Week: Haggling When is it okay to start negotiating for price? What should you expect from haggling?

Ethical Frugality Week: Free Samples How “greedy” should you be when you have the opportunity to pick up some free samples? Is it cool to grab fifteen packets of ketchup and then go home and fill your ketchup bottle?

Ethical Frugality Week: Lifetime Guarantees How long should a lifetime guarantee last? How “abusable” is it?

Two Years Ago (October 17 – October 23, 2008)
18 Things a New Homeowner Should Do Immediately to Save Money I’d give this checklist to any new homeowner. There are lots of great things a homeowner can do to maximize the value of their new home purchase.

When Networking Doesn’t Work: There’s No Value in Just “Touching Base” I think if you’re not giving value to someone or getting value from them, why are you communicating with them?

That First Taste of Financial Success It’s so easy to fall back into bad habits when you begin to feel financial success. Here’s how to not fall into that trap.

Stop Wasting Money on Disposable Things Disposable things mean that you’re going to eventually chuck them and it’s a net loss for you. Look instead for non-disposable items that will last for a very long time, even if you have to pay a bit more up front. You’ll use them forever and they’ll still have value in ten years.

Giving Outside the Box: Generosity on a Limited Budget Give your time. Give your talents. Give your unused or unwanted possessions. There are so many ways to give that don’t involve you busting open your wallet.

Three Years Ago (October 17 – October 23, 2007)
Stumbling on the Simple Things I do this, actually. My biggest stumble? Keeping up with my inbox.

Five Reasons Why Having A Child Isn’t As Expensive As You Might Think Most of the huge costs for raising a child don’t include the areas in which you save by having a child, and some of those can be a tremendous help.

Seven Lessons Learned From The First Issue of Money Magazine I really enjoyed making this article, because it enabled me to read this classic issue of Money.

Twelve Tactics For Defeating the Starbucks Habit I used to have a bad “Starbucks habit.” Breaking it not only saves a lot of money, it can also help your health.

Handling A Child’s Material Wants and Impulses This is pretty much a daily challenge for us, given we have a four year old and a three year old at home. They need different lessons because there’s an 18 month gap between them.

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.

1. Subscribe by email or RSS. Visiting The Simple Dollar’s website is great, but for many people, it’s more convenient to receive the articles in another form. It’s easy to join 60,000 other subscribers and get The Simple Dollar’s content by email or in your RSS feeder (if you’re unfamiliar with RSS, check out Google Reader.

2. Comment. Each article on The Simple Dollar has lively discussion. Just click on the green square in the upper right of each article on the website and join in!

3. Become a fan of The Simple Dollar on Facebook. I put up questions and other materials about once every week or two on Facebook (so you won’t be flooded with Simple Dollar updates). Join in the conversation with other Simple Dollar fans and occasionally get some interesting freebies, too.

4. Follow me on Twitter. I post interesting articles, quotes, follow-up material, commentary, and other material on Twitter. Follow me! If you’re unfamiliar with Twitter, it’s essentially an open discussion forum for people to share ideas and thoughts with other like-minded folks – you just choose the people you want to listen to and their ideas and thoughts are all delivered to you on a single page.

5. Read my story of financial meltdown and recovery. The Simple Dollar isn’t based on what I’ve read in books or learned in school. I’ve made a lifetime of financial mistakes – The Simple Dollar is a record of what works for me during the process of getting my life on a better track.

6. Download my free 49 page e-book. Everything You Ever Really Needed to Know About Personal Finance On Just One Page is completely free. It summarizes all of the key lessons I’ve learned along the way about personal finance in one tidy package – in fact, all of the main principles can be found right on the cover.

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.

8. Send me your questions and suggestions. Send me an email and let me know what you’re thinking, what you’d like to see, and any questions you might have. I try to respond to as many emails as possible and I read them all. I may even use your question in a future article!

9. Become a “Friend of The Simple Dollar.” If you find the stuff on The Simple Dollar valuable and are willing to spend five minutes or so a month to help me out with small things, please consider signing up to be a “Friend of The Simple Dollar”.

10. Email a great article you find to a friend. Find an article that you think your friend would love? At the bottom of each article, you’ll find a link that says “Email this” – just click on that, type in your friend’s address, and send it right along to them!

A simple picture will probably explain things better than any introductory description could.

The jar on the left, obviously, is a “Rainbow Brownie” mix, to which you add just a couple liquid ingredients, pour into a pan, and bake at 350 F for 30 minutes. The one on the right is a soup mix, to which you add 6 cups of water (and, optionally, 1/2 lb. ground beef) and boil in a pot for 45 minutes (or in a crock pot for an afternoon).

The nice thing about jars like these is that you can easily mix the ingredients for yourself and keep them in a jar or a baggie for future use. They won’t look quite as pretty as these jars, but they’ll certainly be functional (see below).

Let’s take a peek at the contents of the two jars.

Soup Jar

In the picture above, we made a pint jar, which is a half-batch of what’s described below. That’s because we’re giving that jar to a couple with one very young child. If you want to give this to a larger family or want to ensure that the recipient has leftovers, make the full batch, as described below.

1/3 cup beef bullion granules
1/4 cup dried minced onion
1/2 cup dried split peas
1/2 cup twist macaroni
1/4 cup barley
2 cups dried lentils
1/3 cup long grain white rice
1 cup uncooked tri-color spiral pasta

We added these ingredients to a quart jar, going right down the list. As you can see above, Joe helped with this.

The finished soup jar has a nice pretty layered look to it, something very cute to put into the cupboard that’s also functional, too.

Of course, if you’d like, you can make the same mix for yourself and keep it in a baggie or a jar. We added all of these ingredients to a few baggies for our own use. A quick labeling with some identification of the contents and some instructions and we have some good meals ready to go for later this winter.

Brownie Jar

We followed a similar procedure with the brownie jar. You’ll need the following ingredients (and a quart jar, of course).

1 1/4 cups flour
1 tsp. baking powder
1 tsp. salt
2/3 cup cocoa powder
2 cups white sugar
1/2 cup pecans or chocolate chips or M&Ms

First, mix the flour, baking powder, and salt together before putting them in the jar.

After that, you’re just going to be adding powdered ingredients to a quart jar. We started with the flour layer, then put the cocoa on top of that. At this point, spend some time to pack down the flour and cocoa mix with whatever you have on hand to push down on the powder; otherwise, you’ll run out of room before you can put in all of the mix-ins.

Put in the sugar next, then top it with the mix-ins (pecans or chocolate chips or M&Ms).

Finishing Steps

On the top of each jar, put an ordinary lid and a ring so that it can easily be opened later. We also put a sticker on the bottom of each jar listing the ingredients (in case recipients have allergies).

We also bought some bulk cloth at a fabric shop and cut it into large squares (5″ by 5″ or so), then tied this piece of cloth to the top of the jar with a ribbon.

To that ribbon, we also tied instruction tags. One side describes the item, the other side explains what needs to be done.

Here’s the text for the soup jar tag:

In large kettle, brown 1 lb. ground beef (optional). Remove tri-color pasta and reserve. Add rest to kettle with 12 cups water. Let come to a boil and simmer for 45 minutes. Add tri color pasta and simmer 15 minutes more.

Here’s the text for the brownie jar tag:

Preheat to 350 F. Grease 9″x13″ baking pan. Empty jar into large bowl and stir to blend. Mix in 1 cup melted butter, 3 eggs, and 1 tsp. vanilla extract. Mix thoroughly. Spread in pan. Bake 25-30 minutes. Cool completely before cutting. Optional but recommended: replace 1 cup butter with 1/2 cup butter and 1/2 cup applesauce.

In the end, you’ve got some cute – and highly functional – gifts to share whenever you need them.

This is the sixth entry in a twenty part series discussing the wonderful time and priority management book Making It All Work by David Allen. New entries in this series will appear on Tuesday mornings and Friday mornings through December 10.

Earlier this week, we talked about the idea of “capturing” – getting everything that’s taking up space in your head out of your head and into some sort of external form where you can manage them.

That kind of “capturing” is actually a pretty tall order. When you walk through all of the stuff in your life that can be captured and collect it all in one place, you’re going to have a mountain of stuff in front of you.

What’s next? You’ve got to deal with that mountain. You have to put some sort of order on that mountain of stuff so that you can actually use it effectively, because without some order, you’ll never succeed.

Some of that stuff are things that need to be immediately dealt with. Some of that stuff refers to larger-scale projects. Some of that stuff refers to life goals. Some of that stuff might never be dealt with at all.

The Organizer as Therapist
In our natural course of life, things we want to do but don’t have the resources (time, money, energy) to accomplish right now build up. It builds up in our mind, on our desk, and in our lives. Allen talks about this a bit on page 105:

In recent years the whole arena of “personal organizing” has experienced quite a heyday. One article in the U.S. national press focused on the phenomenon of the “organizer as therapist,” citing anecdotal evidence of how people had begun to express their vulnerabilities and core life issues when confronted with how to deal with the things that they had accumulated around them. [...] There is a logical explanation for this phenomenon. Usually things remain disorganized when people don’t confront their meaning. To actually decide what you’re going to do with or about something demands that you deal with how you relate to its context, your agreements about it, and how it fits into the rest of your world.

This really hits on a big fundamental truth I’ve found about getting my stuff out of my head and organized. It’s very, very therapeutic. It simply feels good to get all of it out of my head. It also feels good to go through all of it, make some sort of order out of it, and make some calls about what’s actually important and what isn’t.

It moves you from a sense that your life isn’t moving forward very much to a sense that your life is moving forward in a lot of dimensions. That’s transformative. It fills you with hope and energy and a sense of accomplishment and it lets you feel in touch with areas of your life that you’ve felt out of touch with.

Dealing With “Stuff”
During the “collection” discussed last time, we collected everything in our minds, our homes, and our workplace that needed to be addressed. That ends up being a big pile of “stuff.” In allen’s words (page 107):

Basically, “stuff” is everything in the giant in-basket of your work and live, only a tiny fraction of which most people have actually funneled into their working capture lists or trays. Most is floating around the house, office, and psyche, still uncollected, much less clarified.

That stuff “floating around the house, office, and psyche” is a constant drain on you. It reduces your focus. It reduces your positive mental energy. It distracts you, often at inopportune moments. Often, these undone things come back and bite you when you least expect it.

That negative weight is dealt with when you collect all of that stuff and deal with it in a productive way.

Is It Actionable?
This is really the fundamental question you need to ask yourself about every single item in your giant stack of “stuff.” From page 112:

There are two possible answers here – “yes” and “no.” “Maybe” is actually “no, but the item might require action later,” with the assumption that you are clarifying meaning at this moment in time to you.

Go through everything in that giant collected pile and sort it into three groups: stuff you can take action on right now, stuff that doesn’t need an action (they probably need filed or thrown away, then), and stuff you’ll take action on later (probably a calendar entry and possibly a file). Anything that takes less than five minutes that you can take action on now should be done immediately.

Just doing this will take a long time, but it’ll blow through a ton of your inbox and leave you feeling like a productive world beater.

The Fundamental Process
Of course, you’re then left with a big pile of larger actionable stuff (both now and later). To these things, you must apply two fundamental questions (from page 114:

* What’s my desired outcome? What am I committed to accomplishing or finishing about this?
+ What’s the next action? What’s the next thing I need to do to move toward that goal?

What you’re doing is two distinct things.

First, you’re taking that item, whatever that is, and transforming that into a specific goal. Many things are ready-made goals, like “get a birdhouse” or “clean the pool.” Other things are far more nebulous, like “Lisa” (one of my recent notes). What does “Lisa” even mean? What am I wanting to accomplish there? You’ve got to clarify it into a goal – something specific that you want to accomplish that’s very clear in terms of knowing that you’ve achieved it.

The next part is figuring out what the first or next step is for that goal. What can you do right now to move forward with that goal? Maybe it’s something you can do all at once. Maybe it’s something very big that needs further reflection.

What I usually end up with after doing this (and I do it pretty often) is a big list of goals and projects, each of which is ready to produce a series of action steps until I’ve reached that goal.

Success Comes Back to Action
The key to all of this is to clarify what actions you need to be taking right now to deal with all of the stuff going on in your life. On page 119:

As all roads lead to Rome, all success comes back to action. It is the final of the five stages of gaining control, and the ultimate expression of all six horizons of maintaining perspective. If you simply took every item that has your attention, on any level, and forced yourself to determine the very next step to be taken on each of them, moving it toward some closure, you would be amazed at the clarity you would achieve.

This really is about getting stuff done – simply taking care of all of the open things in your life. Doing so really, really makes a difference.

A few days ago on Facebook, I asked the fans of The Simple Dollar what their favorite dirt cheap meal was. The responses poured in, so I decided to pull out 20 of my favorites and share them with you.

Sticky rice, peas, and soy sauce (shared by Leslie) is pretty simple and not altogether different than something I used to make in college. I would just steam some rice, dump a can of whatever vegetables I had around into a dish, heat up the vegetables, then mix the vegetables and rice together with an unhealthy amount of soy sauce.

Black beans and rice (shared by Angela) is something we’re actually having for dinner this very evening here, with some assorted vegetables along with it. We like to add onions, lots of garlic, thyme, and hot sauce to it.

Eggs, black beans, and tortillas (shared by Dolores) is a common breakfast food around here – just really quick breakfast burritos for cheap. Scramble some eggs, toss some beans in the pan as the eggs begin to cook, and wrap the end product in a tortilla. I usually spoon on a bit of salsa and/or hot sauce, too.

Grilled cheese and tomato soup (shared by Colleen) is something that we often make around here for lunches, particularly when someone isn’t feeling good. Our oldest son particularly likes this meal and sometimes requests it out of the blue.

Spaghetti with homemade marinara (shared by Fran, who describes the marinara: “canned tomoates, chopped onion and garlic sauteed together”) is absolutely delicious and can make enough to fill a family of four for about $2, especially if the garden is producing.

Ham hock, beans and cornbread (shared by Amy) reminds me deeply of growing up. Each New Year’s Day, my parents would make an enormous pot of ham and white beans and then invite lots of friends and family to eat with us. My mom would make a huge pan of cornbread and the mixture of the aromas would just fill the house. That aroma today still makes me happy.

Japanese rice balls with meat/fish inside (shared by Salvador) are usually called onigiri and are really easy to make. Just make up some sticky rice, cook and chop whatever meat or fish you’d like into small pieces, then just make balls out of the rice and meat, with the meat forming the center and the rice packed around the outside. I love dipping them in sauces, too.

Oatmeal + mashed banana (shared by Sam) is a staple at breakfast-time around here. We are adherents to steel cut oats these days and we just mix in whatever fruits we have on hand.

Can of refried beans, leftover meat (best is a leftover chicken sausage), chicken stock, greens thrown in a pot (shared by Barrie) reminds me of our children’s favorite meal, which is literally just leftover taco ingredients mixed together in a bowl and sometimes moistened with whatever stock we have on hand. It’s really tasty.

Lentil stew (shared by Maria) is described as “2 C lentils, 1 big can diced tomatoes, 3/4 of a stick of butter, 1 chopped onion, 1 clove garlic (minced), and 1 Tbsp dried dill. Put it all in a big pot, add some water and then bring to a boil. Lower the heat and cover and let it simmer for about 45 minutes, stirring to make sure the lentils aren’t too dry. Add salt and pepper to taste at the end.” We make a stew quite a lot like this in the crock pot, usually starting it early in the day and just letting it sit all day. The house smells incredibly good by the end of the day.

Trash chili (shared by Cynthia) is described as “I save leftover tomatoes, ground meat, beans, tomato sauce etc in a container in the freezer. Then, when I have enough for soup, I add whatever I have on hand for chili: a can of sauce, stewed tomatoes, some beans, pasta and seasoning.” One thing we commonly do is keep “leftover” tubs in the freezer for various things. We have a “vegetable stock” leftover tub, for example, that collects vegetable scraps so we can make vegetable stock. I think we might have to start a “trash chili” tub.

Skint pie (shared by Seamus) is something he didn’t directly describe, but seems to be what we always called shepherd’s pie. In our mix, we mostly just cooked whatever vegetables and meat we had on hand together into a really thick stew, then made a batch of mashed potatoes and coated the top of the stew with the potatoes. This is then baked in the oven for thirty minutes or so until it’s sublime.

Peanut butter and jelly sandwich (shared by Kendell) is something I have for lunch twice a week, at least. Twelve grain bread, some great peanut butter, and some homemade jelly slathered on the top … mmmm.

Ratatouille (shared by Inge) is, in her description, made of onions, eggplant, zuchinni, tomatoes, basil, and oregano with rice. We made a slightly different ratatouille during the summer meal series earlier this year.

Matzo ball soup (shared by Ann) is something I’ve tried a few times and would love to try it again. It was pretty similar to the wonderful chicken and dumplings my mother would make when I was a kid.

Stuffed cabbage rolls (shared by Diana) are another staple from my childhood. Essentially, you just make several small meatloafs and wrap them in a large cabbage leaf. Pour some pureed tomatoes on top and bake them in the oven at 350F covered until the meat is warm enough.

Shockey Slurp (hilariously named and shared by Nicky) is described as “whatever cut of meat is in the freezer, onion and tomatoes simmered on the stove served over rice.” This just sounds delicious, especially when seasoned well with pepper and salt.

Mashed potatoes, with a soft boiled egg (shared by Patrice) actually involves mixing the soft boiled egg straight into the mashed potatoes. This could be a really good side dish with the stuffed cabbage rolls, perhaps.

Pancakes with slices of apple (also shared by Inge) is what we have for breakfast about every other weekend (either pancakes or waffles). We usually put fruit on top, or we use jam or a bit of syrup.

“Pizzas” made with thick slice bread or english muffins (shared by Jennifer) is as easy as it sounds. Take a piece of bread, put all of the toppings you would use for a pizza on it, and bake it in the oven for seven or eight minutes or so. Delicious.

All of these sound good enough for me to use them for lunch and, in many cases, for our family supper as well.

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. Living on less
2. Retirement or debt?
3. Strategic foreclosure
4. Help partner or yourself?
5. Which retirement plan?
6. Paying student loans early
7. Exceptional Microsoft Office deal
8. Estimating costs after dependent leaves
9. Debt payment and marriage
10. Stale checks

In November, I’m going to participate in National Novel Writing Month, which is basically an initiative to encourage writers to buckle down and get a rough draft of a novel of minimum 50,000 words finished before the end of the month. You’re allowed to develop outlines and other such materials earlier, but you’re supposed to write the entire novel within the given month.

I’ve already signed up and you can follow the novel as I write it. I’ve already got some outlines and character notes.

It might be good. It might be awful. I’ll let you know how it’s going when I get started, so you can read it if you’d like.

Q1: Living on less
I am 35, a single mom of one child (7 y/o girl). I live in southern Georgia. I have what I consider to be a great job which I love. I am fortunate enough to get signifacate yearly wage increases. In 2 years with this company I have went from $18,000.00 to $31,000.00. However it never seems to be enough to pay off credit cards etc. I got to the point where I have taken out a title loan on my car to help pay bills. Yes, I’m still paying on the stupid title loan. I have made some poor choices with lack of guidence. I feel like I walk around with this huge rain cloud over me and the bottom is going to fall out at any time. I have no savings, no emegency fund. My question is..Can I live off of only $1000.00 a month? Is it realistic? Do you have/know of any resources or articles to guide me in the right direction? Any guidence would be greatly appreciated.
- Stacy

You can, but you’re helped greatly by your location. You’re living in southern Georgia, which, frankly, has very solid cost-of-living numbers. I don’t know exactly where you live, but I do know that compared to many other areas, your cost for housing and many other items is very strong.

For the short term – and always keep in mind that this is all about the short term – you’re going to have to make some painful cuts. Look for the lowest-cost housing you can, even if it’s tiny. If you live in a smaller Georgia town, look for someone who is renting out a room or two in their home and see if you can live there for a while, perhaps with rent lowered or eliminated in exchange for some household help. Housing is likely one of your biggest costs, so minimize it as much as you can. Ask around – a great place to start is by getting involved at a local church, because at the local level, they do a very good job in terms of social help.

From there, move on to eliminating every dime of your debt that you can. Get an emergency fund of $1,000 or so in the bank, then focus hard on getting rid of that title loan.

You’re going to have a plate full in front of you, but keep in mind you’re living lean now so that you don’t have a scary existence later on. You’re making sacrifices now to build a great foundation for five years down the road.

Q2: Retirement or debt?
I am a 25 year old young professional getting ready to transition into my second job within the next 6 months. I have $4,795.43 in credit card debt and $53,999.83 in student loans (I just consolidated 2 federal loans which will take 2 payments totaling $308.51 down to a payment of roughly $180.00 and then I have an additional loan payment of roughly $180.00

I struggle with what to do because I know the more I put into retirement (with the market still down right now) and the earlier I do it the better I will be in the long run.
- Jarrett

Don’t worry about the market timing. You might invest today and the stock market stays level for seven years or drops 20%. You can’t predict the future, so don’t worry about it and be aware that much of your gains will come in the form of dividends, not growing stock price.

Given that debt load, I wouldn’t cut retirement savings. Instead, I would focus on paying down the higher interest debt first (probably that credit card). Your debt isn’t big enough to be strangling you.

Remember, though, the faster you can get the cards paid off, the better off you are, especially if you don’t touch your retirement savings.

Q3: Strategic foreclosure
My husband and I bought a condo at the peak of the market in Los Angeles for $452,000. It is currently worth about $350K and several units in our building are foreclosing and will drop that price even further. While we can afford the payments, we do not want to live in it forever; it is too small for our growing family. We cannot rent it out for nearly what our monthly mortgage payment is. We have spoken to the bank several times but they will not work with us to refinance because we owe more than what the condo is worth. We could sink a huge amount of our savings into the condo and probably refinance. But then we would lose almost all of our savings and still be stuck with renting the place. We are contemplating foreclosure, trashing our credit and renting for the next 5-7 years before looking to buy another home. What are your thoughts on “strategic foreclosure?” We have two very stable incomes and enough money in savings that we can afford to buy everything else we need, including bigger purchases such as cars, with cash.
- Ansley

Strategic foreclosure is something I go back and forth on. On one hand, you’ve made an agreement with another entity and are obligated to maintain it.

On the other hand, though, I’ve read a number of books about how mortgage companies and large banks behaved during the housing crisis and to describe some of the behavior as unethical almost feels like an understatement. Many groups had a great deal of insider knowledge about the reality of the housing situation and they knew they were issuing negligent loans. They were utterly failing to do any form of due diligence on the loans and were using insider knowledge to pawn off some awful arrangements on potential homeowners.

Given all of that, I completely understand the case for why people would walk away from their mortgages.

Now, does it make financial sense? What is your game plan for after the foreclosure? How does that directly compare to the situation if you chose not to walk away? If I were you, I’d run the numbers on both scenarios in detail, recognizing that your various forms of insurance will probably go up if you do walk away. Make sure to look at scenarios where one or both of you lose a job, too.

I don’t have enough of your financial picture to say which side is better. Good luck.

Q4: Help partner or yourself?
My soon to be fiancé and I recently started living together. We live in a very expensive part of the country in a small apartment. He is currently in grad school. It is an expensive program, and he has some student loans to cover tuition and living expenses. We did Financial Peace University after he had accepted the loans. Neither of us have any consumer debt. We have budgeted so that he is spending way less than the loan money he has been given (about $4000 less each term, so about $12 K less each year of a two year program), and I am spending less than I earn as well. The extra money from his loans is sitting in his bank account, and he will use it to immediately start paying down the loans after graduation. I currently work full-time at a stable job, making about $46K. We currently split the expenses down the middle—me paying for my half with my paycheck, him paying for his half with his loan money. I am currently putting about $1000 into my savings each month. He has about 20K saved in his savings from before grad school, not including the student loan money. I have about $15K in my emergency fund and feel comfortable with that number. My questions: Would it be better for me to pay for all of our joint living expenses for the remainder of his degree, so that he can use less of his loan money, or is it more important that I continue to save that $1000 per month? What would be the best way for us to jointly manage our money and the loans? For whatever reason, it seems like a really confusing decision for us.
- Midge

It comes down to this: are you guys going to be together over the long haul? Is marriage really going to happen?

At some point – and that point varies a lot – you’re going to need to effectively merge your finances on some level, because you’ll be operating as one entity, sharing housing and electricity and water and meals without borders. Any debt that either one of you has will affect you both.

When does this transition occur? That’s very much a matter of your relationship with him. You might feel it’s the right time to do it now. On the other hand, I see nothing wrong with hedging your bets and continuing to save until your wedding, then at that time using a big chunk of your savings to wipe out a lot of his loans at once. This way, if you don’t make it to the wedding, then you still have the money you’ve saved.

Q5: Which retirement plan?
I work for the University of California and I have to say, the benefits are none too shabby. Aside from the medical benefits, I’m already taking advantage of the 401k contributions, (and I’ve set up a separate Roth IRA with Vanguard) but I just discovered that there are a bunch more retirement account options that I’ve never heard of. 403b, 457B, DCP? I’m lost, and the material I’ve found online is a little over my head. What are these plans, and how do I know if they’re right for me?

Maybe I’m getting a little bit ahead of myself…I’m 24 and I have a good chunk of debt from student loans. I’ve set myself on a course to pay off the entire $23k by the time I’m 30, while still allowing for contributions to my 401k and Roth IRA plans in between. Since I only make $30k per year and I’m nowhere near maxing out my 401k and Roth IRA contributions, would opening more retirement accounts even be a wise decision, or should I just focus on what I’ve got right now?
- Lauren

The number of retirement options can be confusing. I’ll try to simplify your options as concisely as I can.

A 403(b) is pretty much identical to a 401(k). A 457(b) is almost the same as the other two, except you can make early withdrawals without the 10% penalty, but you’re also not able to open up a Roth IRA. A DCP is a deferred compensation plan, where you agree to have some of your salary paid to you at a later date by your employer (usually with cost-of-living increases added in).

I wouldn’t really worry too much about the tons of options available to you. Just keep putting money into your 401(k) and Roth IRA as you have been. The only reason you might want to consider changing your 401(k) plan is if you discover that the specific investment choices are better with the 403(b) or 457 offerings. I would skip out on deferred compensation unless you’re making a lot of money and can afford to basically say “pay me 50% of my salary now and 50% in 15 years.” That’s a good deal for some but not so good for a younger person with a starting salary.

Q6: Paying student loans early
I’ve done some searching about my situation and I came across a problem you figured out about a guy with who had three loans to be paid off with three different interest rates. I tried to translate it to my loan situation but I couldn’t figure it out. Which leads me to emailing you and it would mean a lot of you could help me figure this problem out. Here goes:
Loan #1: $16,732.17 Interest Rate: 5.0 Minimum Payment: $122.67 Paid off in: 16yrs,11mths
Loan #2: $62,573.15 Interest Rate: 3.25 Minimum Payment: $302.18 Paid off in: 25yrs,5mths

My question is what would be the most beneficial to my current situation as far as dividing up the extra $197.82 I put towards loan #2? Do I put the extra month towards the smaller loan amount or continue paying as I am? Also, how do I calculate what my outstanding principle will be years into my loan after making minimum or putting extra towards the payments?
- Bob

I would put that entire $197.82 – let’s just round it to $200 – towards loan #1 and make minimum payments on loan #2.

There are two reasons for this. One, the first loan has a higher interest rate, which means that for every dollar in that loan, it’s directly costing you more to leave it unpaid. Second, the first loan has a lower balance, which means that with extra payments, you’ll eliminate the loan faster than you would eliminate the second one with an identical extra payment.

If you can knock out the higher interest loan faster than you can a lower interest loan, always knock out the high interest loan first. You win in terms of both cash flow and overall interest paid.

Q7: Exceptional Microsoft Office deal

Is this a scam?
- Jeff

It’s not a scam at all, just some smart business by Microsoft.

For some companies that buy Microsoft Office for their business, Microsoft throws in a sweetener – deeply discounted copies of Office for the employees of those companies for personal use. I know of at least two people who are in similar situations.

It works pretty much as that page describes. If you have a valid email address for the company and the correct passcode, you can log in to download the deeply discounted copy of Office you’re entitled to as a work perk.

In other words, it’s a great offer, but it’s heavily restricted as to who can use it. Yet another reason why it’s worthwhile to check out your benefits at work.

Q8: Estimating costs after dependent leaves
My daughter is in her first year of college. She is attending out-of-state because she and my husband were convinced that none of the in-state schools that accepted her would meet her educational needs. She has a car which she needs for work because she can’t get a job on campus because they are all need-based and her parents have too much income. From what we can tell, she does get some discount on her car insurance because she is on our policy, but she is also penalized because her father has a fairly new and expensive car. She is also on our health insurance policy. We are trying to find out if it makes financial sense for her to live off campus so she can declare herself independent from us and next year qualify for need-based scholarships and jobs, but we can’t get a straight answer on any of the numbers in order to determine what course she should follow. Are there any sources you know of which would enable us to estimate her costs if she were no longer our dependent?
- Lisa

The best source you have is your college’s financial aid office. This is pretty much the reason why such offices exist – to help people get such affairs in order.

The office will have a much greater insight than I do as to her eligibility for jobs and additional scholarships and grants when she’s independent versus dependent.

My speculation is that there will be a benefit overall for her financially, but it might not be as big as you think and it might be subsumed by the tax benefits you get with her as a dependent.

Q9: Debt payment and marriage
My boyfriend and I are both 23 and we’re trying to pay off our debts in the hopes that in a year or two we can get married. We feel we want to enter into such a large commitment without any extra stress. I have about $1300 in credit card debt and he has about $10,000 in auto loan debt (that he is aggressively paying off). Neither of us has an emergency fund since all of our extra money goes towards these debts. I only make about $700 a month and with the combination of paying my bills and paying $200 towards my credit card, I don’t have much left over (and what I do have left goes to my credit card). What more do you think we could do to aid our path to a debt-free life together? Should we both begin an emergency fund now, along with both of us making aggressive payments towards our debts?
- Rhiannon

I think you’re doing the best thing you guys can possibly do to make sure your relationship off on a financially firm foundation.

If you have no emergency fund at all, I would encourage you to save up $1,000 for such a fund, perhaps a shared one for the both of you. This will help create a buffer against the unforeseen and allows you to be independent of the whims of the credit card industry when you need that money for an emergency.

Aside from that, you’re doing great. I strongly commend you for getting things started in such a sensible fashion.

Q10: Stale checks
We have stumbled across a financial issue that is tough for us to answer both legally and ethically. We were contacted by our previous landlord today who said that he found a check yesterday (9/27/10) from us, dated October 2009, that he forgot to deposit. We switched banks this summer, so even if the bank would have cashed it, that account is now closed. It’s only for parking ($50), but still, not something that we are eager to pay since we are paying down our debt snowball, and really have a use for every dollar.

Are we now obligated to issue them a new check, or is it their loss for being irresponsible?
- Shannon

I don’t think you are obligated to do so.

According to the Uniform Commercial Code, a check is outdated after six months and a bank does not have to accept it. I think the same thing would reasonably apply here – the bank probably wouldn’t accept that old check, and that’s their negligence, not yours.

I would politely tell them that you issued them payment when they needed it, the check is now stale and invalid as per the banking policy stated above, and that you’re currently in a strapped financial position. That should be the end of the subject.

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.

Two days ago, I wrote an article discussing the damage done to my often-used iPod Touch and my decision-making process when it comes to a replacement for it. A great many of you encouraged me to straight-up replace my iPod Touch with a new one, and I appreciate the comments. I thought I’d walk a bit more thoroughly through my replacement decision and discuss what I ended up replacing it with.

How I’ve Used My iPod Touch in the Past
As I mentioned, I originally received one as a gift in 2008. I used the item extensively (averaging multiple hours a day, I’d bet) over the past two years. Here’s a list of the nine significant uses I’ve found for the item (in no particular order).

1. I’ve used it as a pocket notebook.
2. I’ve used it as a podcast and music player during thrice-weekly exercise.
3. I’ve used it as an exercise tracker as it records my distance and pace via Nike+.
4. I’ve used it to check email and reply to it.
5. I’ve used it to entertain my children, particularly on car trips.
6. I’ve used it for music in the car on long car trips.
7. I’ve used it to quickly record lots of small pieces of data here and there.
8. I’ve used it to check some internet services (Facebook, Twitter).
9. I’ve used it to keep my listened and unlistened podcasts synchronised.

Are These Uses Now Met By Other Devices?
Now that I’m in a situation where I need to replace the item, I need to ask myself if each of these significant uses is met by another device at this point. So, let’s walk through each of them.

1. I’ve used it as a pocket notebook.
I often use the free program Evernote to jot down notes using the iPod Touch. However, I do find myself alternating between using Evernote and simply using a pocket notebook, mostly because the input on the pocket notebook is so much more efficient (though I do sometimes end up re-recording the note in Evernote when I’m at my computer, it is very easy to type it in). Moving just to a pocket notebook isn’t a major loss to me.

2. I’ve used it as a podcast and music player during thrice-weekly exercise.
This is an existing need that isn’t replaced by anything I have.

3. I’ve used it as an exercise tracker as it records my distance and pace via Nike+.
This is an existing need that isn’t replaced by anything I have.

4. I’ve used it to check email and reply to it.
I can now do this on my cell phone with similar efficiency to the iPod Touch.

5. I’ve used it to entertain my children, particularly on car trips.
The “entertainment” that it used to provide was the ability to watch a children’s movie on it, like WALL-E, on a long road trip. For Christmas this past year, we received an in-car DVD player as a gift, which pretty much eliminates the entertainment aspects of the iPod Touch.

6. I’ve used it for music and podcasts in the car on long car trips.
Other than the dodginess of radio, this is an existing need that isn’t replaced by anything I have.

7. I’ve used it to quickly record lots of small pieces of data here and there.
This is a similar situation to the pocket notebook. It’s far easier in the moment to just record the information on my pocket notebook, but I have the additional burden of often having to re-record it. I think moving fully back to a pocket notebook isn’t a major loss.

8. I’ve used it to check some internet services (Facebook, Twitter).
I can now do this on my cell phone with similar efficiency to the iPod Touch.

9. I’ve used it to keep my listened and unlistened podcasts synchronised.
This is an existing (minor) need that isn’t replaced by anything I have.

What Are My Usage Needs for an iPod Touch Replacement?
This leaves the following factors as features that I want a replacement for.

1. I’ve used it as a podcast and music player during thrice-weekly exercise.
2. I’ve used it as an exercise tracker as it records my distance and pace via Nike+.
3. I’ve used it for music and podcasts in the car on long car trips.
4. I’ve used it to keep my listened and unlistened podcasts synchronised.

In other words, I’m looking for a device (or devices) that can do the above things.

It’s easy to find a device that handles 1 and 3 – pretty much any mp3 player will do that. The trick comes in with the other options.

I could simply buy a good pedometer or exercise watch to take care of the second option to some extent.

The fourth choice is very tricky. From what I’ve seen, the only devices that manage to pull this off well are iPods and Microsoft’s Zune device.

So, to put it simply, I can buy a low-end device (like the Sansa) that will handle just needs 1 and 3, and I can pick up a good pedometer ($30) to somewhat handle need 2 or a good exercise watch ($100 or so) to really handle need 2. This leaves the fourth need in the realm of some sort of additional manual management, which can be a pain.

Also, I could buy a Zune for $95 that would handle all but the exercise uses. Or, I could buy an iPod Nano for $135 that would handle all four needs in one device.

Of course, I could spend $200 on the iPod Touch replacement, which would also nail everything but mostly give me redundant features compared to the Nano and the items I already have.

My Decision
I picked up a Nano – and it works like a charm. I saved $65 over just replacing my Touch and I’m not missing out on any important needs.

Why So Much Effort?
In truth, this thought process took much less time than it did for me to write it – and probably for you to read it. I spent, all told, about 45 minutes actively evaluating what my real needs and wants were and what the various options were.

The easy choice would have been to just directly replace the Touch. However, spending some time really looking at my needs added up to a $65 savings, money that can certainly be well-used elsewhere in my life.

Why write it out in such detail? It shows, quite clearly, the value of thinking about whether you actually have a real use for something, what those real uses are, and what you can buy that meets those real uses. I cut away the fat to show what I actually used the iPod Touch for, then I looked at what other things I have already take care of those needs, then I just looked at the factors that were left. Doing that helped me to buy a lower-cost player, a decision that saved me $65 over just buying without thinking.

That’s what I call a win.

I just wanted to mention something that I think is a great value for those of you who own a Wii or a PlayStation 3 – you can now get a free Netflix streaming app from the app store on your console. If you have a Wii, just visit the Nintendo Store; if you have a PS3, it should have magically appeared in the Video section of your system menu.

Netflix streaming is pretty much replacing cable for us at this point. For $9 a month, you get access to a huge library of titles that you can watch at your convenience, plus you get new releases in the mail on DVD (or BluRay, if you have a PlayStation 3). The selection of movies and television shows on there, in conjunction with what you can watch in terms of new programs on the web, leaves us almost without any need for cable at this point.

Technologies I Live Without – and Save Big Eliminating these technologies certainly can be a money saver. (@ saving advice)

Experiences Are Worth More Than Stuff I agree strongly with this idea. I’m looking far more forward to traveling to Seattle next summer with my children than I am looking forward to any sort of material item I might acquire. (@ one million and beyond)

Taking Extra Jobs This is actually a comic, but it illustrates a great point: a side job (like delivering pizzas) can help whack down your debt and make your life a whole lot easier. (@ credit card finder)

It’s Your Fault That You’re Still Unemployed There’s a good point here, but I think there will be some rage at the conclusion. I agree with the idea that many people are often going into job hunts with unrealistic expectations and refuse to “settle.” (@ yes, i am cheap)

Where’s Frugal Dad? Some great reflections on what really matters when it comes to careers and moeny. (@ frugal dad)