One topic I’m frequently asked about by readers is the idea of the “percentage budget,” something that seems to largely come from Elizabeth Warren’s book All Your Worth, which I reviewed previously.

In the book, Warren proposes a very simple budget for people to follow, based on percentages of their take-home income.

+ 50% of one’s income should go to required expenses: housing, food, utilities, transportation, and so forth.
+ 30% of one’s income should go to covering “wants” and enjoying life.
+ 20% of one’s income should go to paying off debts and saving for the future.

That budget has a lot of appeal to it, and people often wonder why they aren’t doing it. For some people, it really does work.

However, there are some issues with it. One challenge with it that I see is that people overload their “required” expenses. Let’s look at an example.

If your household is bringing home $50,000 a year and you have a $1,400 a month house payment, $500 a month in car payments, $200 a month for insurance, $500 a month putting food on the table, $100 a month on gas, $200 a month on electricity, and $200 a month on other utilities, that adds up to almost $40,000 a year.

In terms of percentages, such a household budget looks like this:

+ 80% spent on required expenses
+ 20% spent on wants
+ 0% spent on paying off debts or saving

In other words, the biggest problem with such strict “percentage budgeting” is that it doesn’t work well for different income levels, particularly low ones. For example, I know a teacher who earns roughly the amount described above. She’s a single mother with a house and a new-ish car. Unless there is hidden information that isn’t readily clear, her household budget likely looks something like the budget described above.

The solution is easy on paper but very, very difficult in practice: eliminating “required expenses.” How does one do that? Frugality, really. Frugal tactics seek to reduce the amount that people spend on energy, on food, on other utilities, on automobiles, and so on.

However, there comes a point where frugality no longer helps – there’s only so much meat on the bone, after all. What’s next? Downgrading your home. Selling your new-ish car and getting an old one with good gas mileage and cheap insurance. In reality, those are steps that people rarely take.

Here’s the truth: every budget, even a simple one like this one, is so deeply tied to the personal experience of the person creating it that it simply doesn’t apply to everyone. Following the budget that someone else has prescribed for you (without actually evaluating your specific situation) rarely works.

What does work? You’ve simply got to roll your own budget – in a way.

My technique for doing that was pretty straightforward. I just kept track of every dime of expenses for a month, then sat down and sorted the receipts and cancelled checks and credit card bill entries into groups that made sense to me. Then, I looked at the total of each category – as well as the pieces that made up that category – and I simply asked myself, “What can I do to curb this spending without causing too much pain in my life?”

I then repeated that over and over again until some of the changes in my life became natural.

Successful budgeting isn’t about following someone else’s specific recipe for financial success. It’s about figuring out what your real situation is, then figuring out what elements of it you can change for the better. Your life isn’t my life, nor is it anyone else’s life. Using someone else’s budget won’t really help.

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. Investment choices
2. Changing one’s mindset
3. Tea Party thoughts
4. Angry at myself
5. Thoughts on interest-only loans
6. Importance of debt-to-credit ratio
7. Free running music
8. Christmas gifts from fixed-income folks
9. Can I afford a house?
10. Consequences of Facebook de-friending

You can’t live a perfect day without doing something for someone who will never be able to repay you.
John Wooden

There isn’t a day that goes by in which there isn’t some sort of regret – something done wrong, something left undone. Yet each of us is given the gift of a new day over and over again, and we have the chance to try again and make it right. I can’t undo the past, but I can always try to make the most of the gift of tomorrow.

I am a 22 year old recent grad who is lucky enough to have no school debt and a stable income. I also have a large emergency fund that could take care of most problems that I would face. A few years ago I was given a decent sum of money from my grandparents that I used to set up my first brokerage account. Given my lack of knowledge and income at the time, I invested the money in a simple individual account at one of the online brokers. Now, however, I have a steady job and am saving about $1000 / month that I would like to go towards my retirement. Unfortunately my firm has a policy that you have to be an employee for a year to be eligible for the 401(k) matching program, so I wanted to start a Roth IRA in the meantime. The problem is I would lose money if I liquidated my portfolio in the Individual brokerage account due to the transaction costs. So, I guess my question is: Should I simply ignore the account I already have and begin purely funding a new IRA account with my savings? Or should I continue to use the individual account until the 401(k) kicks in? Any help would be great.
- Jeff

I’m guessing that the “individual account” is simply a normal brokerage account and not a Roth IRA or a normal IRA or any other tax-advantaged account.

If that’s the case, and you haven’t made investment changes in that account in the past year, I would liquidate it and open up a Roth IRA using the money. It sounds from your description like there will be a net loss on the account after the brokerage fees. Remember, such fees are tax-deductible.

The only real reason for an individual to have a brokerage account like that is if you’re saving for a specific long-term goal that’s not retirement, like a home you want to build in ten years or so (which is why I’m using one).

I am 23 right now, recently graduated from college with a well-paying job at a good company. I have a roommate who is in exactly the same situation as me (though he’s a year younger…but we work at the same place, and get paid the same amount) with two exceptions:

How can I help him get into the mindset of spending less, when he’s got such a consumerist mentality? He’s saving for his 401(k) but that’s it, he has no other cash at all on hand. He is living paycheck to paycheck, and when you’re making about $50K in Minnesota (not a super-expensive part of the country), I just don’t understand how he is at the position he is. Any tips on how I can give him some advice without sounding rude or condescending would be great.
- David

It sounds like your friend is very much living in the now, which isn’t exactly atypical for people in their early twenties.

I can speak from experience: when you’re freshly out of college and single, it can seem like you have the rest of your life ahead of you, so why not enjoy what life has to offer today and leave that stuff for “old people.”

That works only if you have no real goals for the future. Some people don’t; they literally drift from one thing to the next for at least some portion of their life. The problem is that eventually you begin to realize that the time you have for all of those dreams is shorter than you think – and you’ve already dug yourself a hole.

I think it’s very much a personal philosophy and personal maturity thing. The best thing you can do as a friend, I think, is to focus on goals. Where do you want to be in five years or ten? Tie that to what you’re doing now – your choices to not spend recklessly build up the path to that goal.

I know you’re politically involved, though you don’t talk about it much on The Simple Dollar. Are you a Tea Partier?
- Shane

I am not a Tea Partier. There are elements of what could be described as the overall Tea Party platform that I don’t agree with for various reasons.

However, having said that, I consider the Tea Party to be an example of what is good in American politics, even if I don’t agree with the political solutions being offered. The Tea Party represents people who are genuinely interested in the political process and are working to make sure their voices are heard.

It’s easy to point to political divides in this country as a reason for why nothing gets done, but the truth of the matter is that the real villain is apathy. The large “middle” of the American political spectrum – meaning people to the left of the Tea Party and to the right of the Communist Party – is mostly apathetic. The only elections where you ever see more than 50% of voters turn out is the presidential elections. Midterm elections fall way below that. Local elections? A lot of them don’t even get 10% of the voters out.

Politicians talk in extremes to the left and to the right because that’s, frankly, where most of the activists are and the groups that produce the highest voter turnouts. They should be doing that – they’re talking to the people who are actually politically active. If someone is “talking crazy” but they keep getting elected, then that “crazy talk” is representing the people who bother to participate and bother to vote.

I might not agree with the politics of the Tea Party, but I do give them a big thumbs up for not being apathetic. They’re out there trying their best to be involved in the political process, which is something every American who cares at all about the future of this country should also be doing.

This last weekend, I gave into a bad impulse when I was out with my friends. I blew $300 in the blink of an eye without really thinking about it at all.

Today I’m just sitting around here [angry] at myself for doing that. That money could have paid the rent or it could have paid off some of my credit card debt.
- Tessa

Being angry at yourself for something you cannot undo is both a waste of time and a waste of energy. It is water under the bridge at this point.

Instead, focus your energy on something positive. Look back at what transpired and figure out what exactly went wrong that caused you to needlessly spend that money, then ask yourself what you can do right now to make sure that never happens again.

You can also take direct action to undo the financial damage. What can you do today to save some money and reduce some of that financial impact? Can you make yourself a brown bag lunch and save $10 on eating out? Can you turn off the heat or the air conditioning before you go to bed and leave it off until you come home from work? Can you simply stay home next weekend and watch a movie with friends instead of going out again?

It’s about the choices moving forward. Looking back does nothing but bring you down.

I’m a 28 year old IT professional, and three years ago I inherited about $65k from my grandparents’ estate. At the time I had about $20k in student loans outstanding, and $9k on my car. I promptly cleared both of those debts and also decided to use a chunk of my inheritance as a down payment on a house. Today, my only debt is the mortgage on my house (no credit card debt or anything).

How do you feel about either strategy? I’m very uncomfortable being in my current loan and want to get out of it ASAP for peace of mind. I love my house and the last thing I want to do is lose it. I still have plenty of time left before the readjustment, but it’s still looming in the back of my mind.
- Andrew

If you’re interested in restructuring your loan, your first step should be to contact your lender directly and see if there isn’t a restructuring that you can directly work out with each other. As you said, lenders are happy today to get such loans off of their books, so they are likely to want to work with you, particularly if you have a great payment history.

You are in the sticky position of having your home worth less than you paid for it. Your improvements may help in this regard, so a reassessment of the value might be in order. However, if you’re looking to restructure, you may want to hold off until you discover if their organization wants to do the reassessment.

Your best move in any regard, though, is to simply live lean and save some cash. Clearly, you love this home. Now’s the time to fight for it through your purchasing decisions. Live lean. Buy generics. Buy $2 wine from Trader Joe’s. Sock away your money for a down payment, for your mortgage adjustment, or for whatever the future may bring.

I just checked my Equifax credit report, and I am concerned that my debt to credit ratio is 78%. This is because the only credit I really have is my mortgage ($67,000 on original $70,000 loan), my car loan ($5,000 balance on original $7,000 loan), and a $6,000 revolving line credit card with a $0 balance. Even though I have very good credit history, with no late payments or anything else negative, I just don’t have much credit. I did not get my credit score, just the free report. So maybe I don’t need to worry. What do you think? Short of applying for more credit cards, what can I do to increase the credit available to me?
- Kevin

This is one of the tricky areas, isn’t it? The problem with a credit score is that the exact formula for calculating it isn’t made public, so we don’t know for sure how various things impact your credit rating.

From what I’ve read, in most credit score calculations, debt-to-credit ratio does not include your home mortgage. Note that this isn’t set-in-stone fact because, as mentioned above, groups like Fair Isaac do not reveal how scores are calculated.

In short, unless you need significant loans in the near future, I really wouldn’t worry about it. If you do need significant loans, seek out a firm that does manual underwriting on their loan products.

About ten years ago, I used to jog all the time with my Discman. For some reason, I gave up that routine, but I’m about to start up again. I have a pocket MP3 player that’s perfect, but I don’t have many mp3s to listen to. Do you know of any low-cost sources for good running music?
- Emily

The best sources I’ve found for free running music is podcasts. There are several podcasts out there that cater to this very need. Here are several of them:

Podrunner: (website, iTunes)
fitMusic: (website, iTunes)
TechnoSweat: (iTunes)
Power Music Workout: (iTunes)

Yes, most of this stuff is instrumental, but it’s often done at a fast pace that encourages you (quite strongly) to get moving. I find it easier to just get in the zone and lose touch with what’s going on around me if the music pushes me forward.

My husband’s grandparents send him a modest check for his birthdays and Christmas, which is terribly sweet, but he’s 34! We both feel very awkward about this – they’re senior citizens on a very fixed income, and it just doesn’t feel right to accept the money, but they mean well of course and we are not ungrateful – is there any way we can tactfully, graciously end this practice, or would the tactful, gracious thing be to continue to accept their generosity?
- Mandy

This is something that troubled me for years with my own grandmother.

After a lot of soul-searching, I finally came to a realization when I was having a conversation with her during a Christmas visit. She got a lot of personal value and joy out of giving me that small gift. It was something that she could still do for me, and during the year she could think that I had done something fun, just for myself, with it, and that made her feel quite good.

After that, I simply realized that it was her decision to do that with her money and that the best thing I could do is to simply respect her wishes. I would usually take that money, do something purely fun with it, then send her a note telling her about it and how much I enjoyed it. Those notes meant a lot to her, I think.

I am 22. I currently live in an apartment (lease expires at end of may next year). I am getting married next year in June (future wife graduates in December). I would like to be able to live in a house once we are married.

I know I may not have included nearly enough details, but what all do I need to consider during this?
- Tim

From what I’ve seen here, you could likely only pull off a single-income family if your stay-at-home spouse was deeply devoted to methods of saving money during the time when she wasn’t working and even sought out small amounts of low-income work that was flexible to her needs.

If your spouse does have work, you could likely pull off your plan, especially if your spouse is also thrifty in her choices and is able to contribute to the saving for a down payment.

The important thing, though, is that if you decide to get married, you completely combine your finances as soon as possible and then view your future decisions through that single combined pool of money, income, and spending. Spend plenty of time making sure you’re both on the same page and you’re both coming to the same conclusions – and if you’re not, tend towards the more conservative option. Do that consistently and you’ll be fine.

You talk about using online tools like Facebook to build up your networking. I decided to take that advice in hand, so I joined Facebook, learned how to use it, and “friended” everyone I know. Now I’m “friends” with one person whose updates disgust me and I no longer want to be “friends” with that person. Are there real-life social consequences for de-friending someone? Or should I just put up with it?
- Ronnie

You always have the option of ignoring that person’s updates while still maintaining a “friendship” with that person – Facebook allows that option pretty easily by just clicking on the X in the upper right corner of someone’s update and marking that you want to ignore their future updates.

However, if I don’t want to be friends with someone on there because I don’t like or agree with the content of their updates, I de-friend them. If someone is posting madness, I really don’t think it’s a social positive for people to go to that person’s profile and see my name on that person’s friend list.

More than anything, though, don’t worry about it. Focus on positive relationships and spend less time worrying about negative ones. Good things will come from the positive relationships; rarely will anything come from a cesspool of negativity.

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.

Many of us (myself included) have an ink jet printer at home for home printing needs. We certainly use ours for lots of things, from printing off forms to making pictures of our children for various uses.

It’s also widely known that it’s possible for people to refill their ink cartridges. It’s fairly simple to do, except that different cartridges have different procedures. Here’s an example of such a procedure for an HP 970CXI printer:

You can find the correct procedure for your particular printer’s cartridges by searching on YouTube and/or Google.

Here’s the real question, though: does this practice actually save money?

I did research on the prices using my own printer, a Canon Pixma MP480. You can purchase a refill kit for this printer type for $24.99 plus $6 shipping, a consistent price I’ve seen from many vendors. This refill kit will refill the cartridges you have approximately six times. The best price I’ve found for cartridges for this printer is $59.88 for a double-sized color cartridge and a double-sized black and white cartridge – two color refills and four black and white refills. Refilling it yourself saves you about $7.50 per cartridge refill, in other words.

There are drawbacks to this plan, though.

First, it can be very messy. When I attempted to refill a cartridge, I got ink on my hands that was very hard to wash off and stayed on my skin for a week or so. This, of course, can be avoided by wearing gloves to protect your skin – something I strongly recommend.

Similarly, there’s a risk of staining your clothes and your work area. You’re going to want to do your refilling in an area that wouldn’t be disastrous if ink spilled all over. I recommend spreading some old rags out and doing it in a garage or on an old table. Similarly, wear your old junky clothes when doing this – jeans with stains on them or old t-shirts are perfect.

Second, the ink is often not as good as normal ink. If you’re just printing off pages for personal reading or forms, you’re probably fine. However, if you’re printing off photographs or items you want to put on display, the color difference is often noticeable. One solution to this is to switch out your cartridges depending on your printing use, but that can turn into a real hassle over time.

One good way to avoid this is to shop around for an ink refill kit with a guarantee on it. You might end up paying a premium for such a kit, but that’s acceptable.

From my own experience, the ink refill kit I used with my own printer cartridges was not worth the savings to me. The cartridge refill did not seem to last long and even after a small number of pages, I was already noticing fading. Since we usually print our own photographs, this was unacceptable to us. According to my back-of-the-envelope math, the cost per quality printed page was very high with the refilled cartridges, higher even than buying new ones.

After this experience, I discussed ink refill kits with several people who I know in the IT field who use printer cartridges in the workplace. Most of them have similar comments – they work fine for internal use where crispness and the deepness of the blacks isn’t a big deal, but for external use, they would either use a new cartridge or a refurbished cartridge with a warranty. Refurbished cartridges generally aren’t available for low-end home ink jet printers; that option mostly applies to larger printers.

My conclusion is simple: ink refill kits work if you’re not printing photographs or other documents that you intend to share or archive. If you mostly just print off recipes and such, ink refill kits will easily meet your needs and save you money. If you’re printing off mostly photographs and high-resolution documents where color and crispness are important, shopping around for the best deal on new cartridges is probably the best use of your time, money, and energy.

In other words, it all comes down to how you use your printer.

Recently, I had to replace the timing belt on our Honda Pilot. I tried to figure out how to do it myself, but the intricacy of it was just too far over my head, so I took it to a shop instead.

This is exactly why it’s good to have an emergency fund. This kind of financial bomb can be devastating without one.

First, a few links to my own work found on other sites.

An Old Camera Creates a Treasure Hunter I wrote this article for HP that tells the story of how my son utilized an old digital camera and discovered a lost item with the pictures he’d taken. (@ hp reimagine roi)

After clicking around on the site above, I noticed that they had a contest where you can win a bunch of prizes by submitting your own story about an item that had an unexpected return on your investment.

Let Uncle Sam Work for You: 4 Great Government Resources for Small Businesses This is another article I wrote over at Open Forum, discussing how to utilize things that are just sitting out there, waiting to be used. (@ open forum)

Now for some personal finance articles from around the web.

Creating a mail center in your home This is easily the biggest organization challenge we have in our home. It has a lot of personal finance implications, too, in the sense that unorganized mail can hide unpaid bills. (@ unclutterer)

The Essential Power of Surrounding Yourself With Like-Minded People… There’s definitely something big to this. However, on the flip side of that coin, you have the problem of missing out on a variety of viewpoints. I think like-minded people can help you move forward in some ways, whereas a diverse crowd can help you in other ways. (@ man vs. debt)

How to Get Rich Quick This formula is pretty certain to work! You just have to have a job that pays $100,000 more a year than you actually spend. Good luck with that! (@ free money finance)

Should You Get Your Bonus When Quitting Your Job? When you’re working for someone, you have a contract. Both sides are obligated to only fulfill that contract. A bonus goes beyond that contract, usually with an employer showing thanks to a good employee. However, unless the contract says so, the company isn’t obligated to give anyone a dime in bonuses. If you bank your future on “two birds in the bush,” you’ll eventually pay the price. (@ darwin’s finance)

60% to 80% of job-related accidents are due to employee stress level.

90% of all diseases are caused by or exacerbated by stress.

60% to 90% of doctor visits are caused by or related to stress.

To put it simply, stress is expensive. Very expensive. You pay in the form of lower energy, more illness, more medical visits and procedures, and, frankly, escapism, too.

In my eyes, one of the most valuable things I’ve ever done for my wallet (and my health) was figure out how to lower my overall stress level. Here are twelve tactics (in no particular order) I’ve figured out that worked for me.

1. Exercise
Few things de-stress me more than simply going outside (or going to the gym) and exercising, pouring out my frustrations either through a brisk pace or through lifting weights. I just simply thrust all of that stress into whatever it is I’m doing. The end result? I’m out of breath, but I’m in a bit better shape and I’ve taken a big part of the edge off of my stress level.

Do it now! Go take a thirty minute walk. While you’re going, admire what’s around you a bit. If you think about what stresses you, that’s okay – just pick up the pace a little.

2. Figure out – and write down – your goals and values
What value does this have? What it does is it puts all of the little stresses in your life in a bigger context: what’s most important to you and what you’re truly working for. You’re not working to please your boss – those are just steps you take along the path to your bigger goals and values in life. Put those little stresses in context.

Do it now! Open up a text editor and write down the five things you value most in your life. Follow that with your primary goal in life related to each value. Give this some thought as you’re doing it, then return to them later with the intent of revising them.

3. Get some sleep
It’s easy to get stressed out when you are tired. Your patience is low. Your thinking is a bit slower. Things that seem easy when you’re normal seem almost overwhelming now – but the expectations of performance remain unchanged. You can fix all that by not staying up as late and simply getting plenty of sleep at night.

Do it now! Go to sleep early tonight so that you sleep long enough that your own biological clock wakes you up instead of the alarm clock. Start your day off normally with a shower and some breakfast, then see how you feel.

4. Keep a journal
Simply sharing the things that are stressing you out can be powerful, but often we don’t have a great place to share these frustrations. The solution is easy – start a journal. Use it to simply pour out the things that are frustrating you. The release of simply writing them all out can be really cathartic and can help you cut through the stress.

Do it now! Fire up your word processing program and start a simple journal. Work through the things frustrating you by writing them down. At the same time, list the things that you were grateful for today. Repeat this exercise each day.

5. Pray or meditate
Just last month, I wrote about the value of meditation and prayer, and it holds true in this context as well. Meditation and/or prayer can do a great deal to lower one’s stress level, while also clearing the mind to deal with the other challenges that a typical modern day provides.

Do it now! Spend a few moments in prayer or simply closing your eyes and trying to clear your mind of all thought. Remain in that state for several minutes and see if you feel a difference when you “come back.”

6. Build friendships and relationships
One of the best de-stressers I have in my life is the time I spend with my friends and family. The companionship and social interaction with others simply melts away the stress in my life. That’s why my wife and I make it a point to host or attend at least one social event of some kind a week.

Do it now! Contact some friends and have them over for a potluck this weekend. Play a game with them, or watch some football with them.

7. Get a pet
If you’re an animal lover, a pet can be an incredible source of joy in your life. As I’ve discussed before, two pets I had when I was younger brought an incalculable amount of happiness into my life. The only thing that keeps me from having one now is allergy issues.

Do it now! Find a local pet shelter, then stop by and see if any of the cats or dogs bond well with you.

8. Volunteer
Virtually every community has a great bounty of volunteer organizations and opportunities. In our community and neighboring ones, there are youth sports that need coaches and referees, parks that need volunteers to help keep them tidy, Habitat for Humanity, food pantries that need coordinators, and countless other things that I’m not even aware of.

Do it now! Find some volunteer possibilities in your local community. Start with your city’s parks and recreation department and also include services like Volunteer Match.

9. Do some stretches
Stretching and de-stressing? It actually works – stretching promotes a de-stressing response in your body. On top of that, stretching directly prevents injury and also reduces many types of pain. On top of that, it can feel really good. I’m almost always happy after a stretching routine.

Do it now! Try out some of the basic stretches over at Web MD. You can do many of them at your desk or in a cubicle or on any floor space in your home.

10. Change your surroundings
Yes, travel is one way of doing this. However, something as simple as a road trip or a camping trip or even a day spent out in the woods can accomplish the same effect. A person’s surroundings influences their thoughts deeply, so if you’re finding yourself in environments full of stress, changing those environments can really melt away the stress.

Do it now! This weekend, go take a day and spend it in a state or national park near you. Pack a couple meals in a backpack and just enjoy the change of scenery and the fall colors.

11. De-clutter
It can be a constant stressful irritant to not be able to find the items you want when you need them. The easiest way to eliminate that irritant is to simply de-clutter by getting rid of as much unnecessary stuff as you can.

Do it now! Go through every item in your home and ask yourself if this item is something you actually need to keep or if it’s just something you don’t use and is simply in the way. Deal with it honestly and you’ll find yourself removing a lot of the unnecessary in your environment.

12. Turn off the television
I can’t watch many television programs without feeling some level of emotional response: anger, sadness, “fight or flight” excitement, and so on. Commercials are constantly trying to do this, as are news programs. My solution is to simply turn off the television and find something else to do.

Do it now! Find something to do this evening that doesn’t involve turning on the television. See if you can repeat it the next night – and the night after that.

This is the first 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 year, I did a chapter-by-chapter review/walkthrough of David Allen’s excellent time management book Getting Things Done (a series which you can read here). Getting Things Done was one of the books that changed my life – it really enabled me to re-think how I was spending my time and how much stuff I was simply letting fall through the cracks. It made me more efficient, more reliable, and much more capable of taking on new endeavors – one of which was The Simple Dollar, which eventually evolved into a new career path.

In 2009, Allen produced a follow-up, entitled Making It All Work, which is the subject of this series. Rather than just re-hashing Getting Things Done and maybe adding a few ideas, Allen took something of a different tack.

Getting Things Done basically described a time management toolbox. It spent almost three hundred pages describing a modular system for organizing all of the stuff a person has to get done – and that system works really well. I use it in my own life to manage this website, polish off the writing of two books in two years, and deal with a household that has three children under the age of five running around.

Rather than continuing to talk about the system itself, Making It All Work is much more philosophical. It instead focuses on how exactly one sets priorities and how one connects all of the day-to-day busywork that people do to the bigger things they want out of life.

When reading Getting Things Done, I felt motivated to get started on accomplishing things. When reading Making It All Work, I found myself reflecting deeply on why I was doing all of this stuff. What was it building towards in my life? What did I want out of my life, and how do I connect that to all of the things I have to do every day?

Allen words that idea a bit differently on page 5:

While Getting Things Done offered a primer and a simple manual, Making It All Work is intended to provide you with a road map – one that will enhance your abilities to process life and work in tandem. The tools for operating your car are different from the manual for fixing it and the map you need to keep you on course and get where you’re going.

Knowing how to drive a car is much different than knowing where you’re going when you’re driving it, yet the two skills work very much in tandem. Having a far-off destination isn’t too useful if you don’t have the means to get there, and knowing how to drive a car isn’t useful if you don’t have anywhere to go.

This all connects back very neatly with the stuff I work on every day. I am much more motivated to work on particular things when I can clearly see why I’m doing this thing. If I don’t have that connection, it becomes just another thing to procrastinate on. Similarly, it’s easier to not work on things that are vague or unclear.

Allen hits this point a bit on page 2:

Approaching work is a game, and one that’s fun to play, as long as we know the purpose, the boundaries, the contents, and the rules. When any of those parameters are unclear, we develop unnecessary stress and are ineffective.

One simple piece of that sums up a big theme of this whole book: “the purpose, the boundaries, the contents, and the rules.” Whenever you’re doing something during your day, can you define the purpose, the boundaries, the contents, and the rules of what you’re working on?

Even more importantly, we tend to avoid those things in our life where those elements are unclear. If a project seems really big and nebulous, most people tend to avoid it. If the end goal of something we’re trying to do isn’t in line with what we want most out of our life, it’s a lot harder to work for it. Getting in shape. Quitting smoking. Success on things like these – and any other project in our life – works best when we know why we’re doing it and we have a clear idea of how to do it (on some level).

The reverse is also true. When we don’t see the overall purpose of a task – or we’re not really engaged in that overall goal – it’s pretty hard to stay focused on that task. How often does your mind wander at work when you’re not engaged in the project at hand or see only busywork in front of you?

On another topic, Allen mentions something that I think is an essential part of reading any book that you want to get value from. On page 10:

I highly recommend that you keep a notepad and pen or other recording device close at hand as you continue to read (or listen to) this book. Doing so would be implementing one of the core principles itself – noticing what you are noticing, which might be something you would want to do something about, and capturing it when you have the thought.

I very rarely read anything without some sort of note-taking device nearby, whether it’s Evernote or a notepad and a pen. I do it for the very reason Allen describes above – if I see a great idea in a book and it makes my mind start to churn, I jot it down so that I can return to that useful thought or idea or task later on.

Of course, a key part of this is to actually process these notes later on, but that’s part of the whole Getting Things Done system.

Finally, here are a couple of final points from this opening chapter that are worth sharing. From page 13:

Nothing is perfect, final, or fixed in this material world. As soon as we are tempted to believe it is, we’ve probably set ourselves up for disappointment.

I devoted an entire chapter in my book to this principle (and an earlier post that covered some of the ideas in that chapter). To put it simply, the future isn’t as predictable as we’d like to believe that it is – and it’s almost always a mistake to bank on the future being perfect, final, or fixed.

This basic idea is what’s behind a lot of personal finance advice. You don’t know what’s coming in the future, so you’re far better off making some more difficult choices today so you’re not forced into very difficult ones later. This means keeping out of debt, having an emergency fund, and so on.

Allen argues the same thing when it comes to managing the things you have to do in the future:

What we’re truly striving for is the permanence that we can count on, amid all the change nad flux. And the most permanent, secure, and stable thing we can possess is a foolproof way to deal with impermanence, insecurity, and surprise.

In other words, skills that enable you to manage all of the stuff that life will bring at you – today or tomorrow – is one of the best investments we can make in our futures. I agree with him almost completely – an emergency fund and a plan for getting out of debt are pretty worthwhile moves for the future, too.

Next time, we’ll take a look at the second chapter, which somewhat provides a “catch up” primer on Getting Things Done.

This is a message to all of those people under, say, forty out there.

Don’t rely on Social Security for any part of your retirement. When you’re thinking about retirement, assume that you’re going to be paying your own way.

That’s not a statement that a lot of people like to think about, but the data pretty much points to this as an inevitability. Let me explain why.

Take a look at the birth rate by year in the United States. During the years when the “baby boomers” were arriving on the scene (the early 1950s, for example), you saw a birth rate of 25 babies per 1,000 people in the population. By the 1970s, this birth rate had dropped to 15 babies per 1,000 people in the population and never really recovered. In fact, the current birth rate is the lowest it’s ever been – 13.5 babies per 1,000 people.

To put it another way, the age of the average American is rising. According to this data, the average American is about 0.2 years older each year and is currently 36.7 years old.

With the population getting older and with fewer babies being born, you have more people reaching retirement age with less people entering the workforce. That means more people are moving to the point of taking money out of Social Security and fewer people are joining the workforce to pay into Social Security.

What happens to any pool of money if you suddenly start paying out more than you’re paying in? It dries up. The sheer numbers say that’s what’s going to happen to Social Security.

Well, why can’t something change? The problem with touching Social Security in its current form is that it’s a political nightmare. Politicians are afraid to touch the issue because people who are retired and receiving Social Security benefits are also the people who often have the most time to vote and to get involved in political causes.

There aren’t very many ways that this problem can be solved. The most likely solution will be to simply raise the benefits age for Social Security – and raise it again – and raise it again. What that would mean is that by the time we retire, we’ll have to be very, very old before we see Social Security money.

What that means is that unless we want to work until we’re in our eighties, we’d better start planning for our own retirement now, not later.

Even if this doesn’t come to pass and a great new solution somehow solves the Social Security problem, saving for your own retirement is still incredibly beneficial, because it allows you to have financial means in retirement that go far beyond the small Social Security benefits.

What can you do? It’s simple. Start saving for retirement now, whether you’re 22 or 35. The earlier you start, the better off you are.

If you have a 401(k) plan at work, that’s usually a good place to start. If your employer matches your contributions, that’s even better. Don’t worry about not knowing anything about investing – it’s far more important to start contributing than to find the “perfect” investment. Head over to your benefits office and get this set up today.

If you don’t have a 401(k) (or a 403(b) or something similar) at work, you can do it yourself by setting up a Roth IRA. It’s really easy to do – just open an account at an investment house (I use Vanguard) and set up an automatic contribution out of your checking account.

Think of it as a little thing you can do right now to help your future self a lot when he or she is in their sixties. Giving up a magazine subscription or something else small now can give you the freedom to control your own destiny when you’re older. That’s a great trade if you ask me.

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. Rebuilding a life post-divorce
2. Freelancing baby steps
3. Power of attorney question
4. Emergency fund or invest?
5. Does prayer work?
6. Getting your spouse to participate
7. Splitting bills with roommate
8. Student loan or emergency fund
9. Asking child to move out
10. The value of study abroad

A while ago, someone spent most of a movie on their cell phone, either texting or whispering into the phone. Normally, I don’t care, but this was in a movie theater, where everyone had paid several bucks to watch a film.

I finally asked the fellow if he wouldn’t mind not talking during the film and he utterly ignored my request after a quick glare in my direction.

Such situations really fill me with distaste and move me ever closer to simply not wanting to go to theaters when I could just watch a film at home with friends.

I’m 49, divorced and live on the west coast. I have two children, 5 and 8, who live with their mother in Europe. I have a GED, and am 70% through a degree in Criminal Justice with an online university, which charges $7500/yr for books and tuition. For a variety of reasons I have only worked 7 months out of the last 8 years, though I earned a six-figure salary before that as a mainframe administrator. Sadly, after living in Europe for several years I seem unemployable in the IT field, and am happy to seek a change anyway. I’d like a decent job and would be more than happy with something basic. At the moment I have the following assets left:

It’s unclear what state the economy will be in next year and by that point I will have worked only 7 months of the previous 9 years! The alternative to going to school seems to be a $9 or $10 per hour job in a warehouse or something, with no health insurance and a shared apartment. I don’t mind working (at whatever), but one needs some hope for the future. I am currently looking for a job to help defray my expenses.
- Philip

First of all, don’t worry about the things you cannot control. You can’t control what happens to the economy. What you can control is your own ability to maximize the value of your criminal justice degree.

What can you do to maximize that value? Hit a home run in your classes. Seek out internships. Ask questions of your professors and learn more about where their professional focus is. Build relationships with your professors and with your classmates.

Don’t worry too much about finding a job right now. Instead, build every possible bit of value you can into your 12 credits a semester. Work only if it fits around that, and don’t be ashamed to take a low-paying but easy job.

I don’t own a TV, a car, or a landline. My work pays for my cell phone and internet. I rent an apartment with a roommate. I rarely go out (maybe once a month, at most), and I don’t buy much “stuff.” (If I lived in the States I’d have a serious problem with bookstores, but I don’t, so all is good.) Ever since I started dieting my supermarket spending has been slashed in half. And in general I try to track my spending and am working on becoming more frugal. My two small dogs are my biggest non-essential expense. I need to pay for a dog walker to walk them at noon and for someone to come give them medication at specific hours while I’m at work. I’m 34 years old and single (unconnected, just for general background purposes).

So I’m feeling pretty miserable. Any suggestions?
- Shawn

My suggestion is to find another place to work. Is there a library available to you, or a coffee shop where you can sit at a table and be productive?

It’s clear from your description that freelance work is a key part of the path you’re taking to your future. That means you have to focus on that work, and that also means you may have to give up some things to make it work (like your evenings). I gave up a lot of evenings in the early days of The Simple Dollar and I’m very glad I did.

Focus on doing the best freelance work you can. If you can’t get it done at home, look elsewhere for a place to work.

Background: My husband has been diagnosed, and is being treated for, Adult ADD. One major problem of ADD is a restricted ability to be disciplined, which particularly manifests in money management. Shortly after we married, he ran up a substantial debt, and I took over all money management for our family.This was prior to his diagnosis. This financial arrangement is not only okay with him, it helps him because it gives him strict spending guidelines and accountability. His counselor approves this as well.

I have a fairly serious health condition which is under control at the moment, but could become an issue at any time. My question is: Is there such a person as a “financial caretaker” or a profession that assists families to manage finances? Given my uncertain health situation, it makes sense (to me) to find someone who could step in should I become incapacitated. If I should become seriously ill, we would need that person more than ever because of medical bills.
- Megan

I think you’re looking for someone to give some degree of power of attorney to. In that case, the first place I’d look is within your family and closest inner circle. Who do you trust deeply enough to open this door to?

In either case, I’d suggest talking to your family lawyer about how to move forward in a way that protects your future. If you don’t have a regular lawyer, then I would ask among friends and family for a good recommended family lawyer to discuss the situation with.

This isn’t a situation to be taken lightly. Spend some time thinking about who you trust most, then contact a trustworthy lawyer and look at your power of attorney options.

I’m in pretty good (not great) financial condition. I’m $1700 away from paying off my debt (a student loan) and am planning to use the non-essential money from my paycheck as well as dipping into my savings (at about $2000) to pay it off at the end of this month. At the beginning of October, I should be debt free with about $1000 in savings plus my monthly budget (around $1700) in checking (and nothing else—no retirement or anything of that nature). It’s not a great position to be in, but I have a very steady job and it’s important to me mentally for the debt to be paid off. I’m two weeks away from my 27th birthday, single with no kids with a take-home pay around $2600 per month and live in a low-cost area of the country. The job I’m in right now does not carry benefits, so I’m responsible for health insurance and retirement contributions.

My head tells me to pay back short-term savings and start an emergency fund, but now that I have no debt, I’m really itching to start investing. If you were in my situation, what would you do?
- Jordon

Built an emergency fund – your head is right. The reason for doing that is because if you do have an emergency, you’re either going to dive right back into debt or cash in that investment, quite likely at an inopportune moment (Murphy’s Law, anyone?).

I would get an emergency fund of $1,000 first. Then, I would make sure that your debt is paid off. After that, I would shoot for an emergency fund that could cover 3 months of living expenses. If you’ve done all that, then focus on investing for the future.

If you don’t have that emergency buffer, you’ll find yourself in a situation where you’re either dipping back into debt or you’re cashing in some of your investments. Either case is a big loser, so just get a good emergency fund in place first.

Do you think prayer works for causing positive change in life?
- Kelly

Absolutely – and it has nothing to do with anything supernatural.

Prayer works because it provides an uninterrupted opportunity to reflect on what’s important to you and where you want to go in the future. You pray for the things you care about, helping you to define what you need to be focusing on. Praying for a good outcome puts a positive image in your mind, helping you to work towards that positive outcome. In short, regardless of whether a higher power is listening, prayer can be a positive thinking tool.

As to whether praying for someone else makes a difference, I’m not sure that it does. If you already believe in an omniscient God (as most religions do), God is already aware of what you desire for an outcome of a given situation.

The best purpose of prayer, I think, is reflection. It gives you a way to talk through the problems in your life, and that’s very rarely a bad thing.

I am a professional credit counselor, and I have couples ask me all the time how to get the other spouse to participate more in their family finances. The truth of the matter is, I don’t know. I’m in the same boat. My husband is not interested in the finances. I pay the bills, allocate money to savings, pay off debt, and handle our portfolio, and after all of that is covered, I tell him what we have left for miscellaneous spending. I’m not even sure if he could answer simple questions like, “What is your monthly household income?” or “What do you pay for cell phone service?” I know that part of the problem is that I’m a control freak about the money – I’m not saying I want him to take all the responsibility – I’m too OCD about our finances to completely hand them over. All I want is him to be interested in how much debt we have, to show an interest in the bills on payday, and to help me track his spending instead of expecting me to figure it out from our online checking. He is getting out of the Air Force in 3 years, and my goal is to have all of our debt except the house paid off in that time. I think to make this work, I’m going to need his complete support. Any suggestions on what I can do to get him on board?
- Melissa

The challenge of this situation is that you’ve already framed your marriage in such a way that you’re simply handling all of the finances. To your husband, this simply means that Melissa is taking care of it and what I have to worry about is maintaining my income and managing my spending allowance.

Marriage is always a division of responsibilities. Some couples divide responsibilities in different ways. Are there some areas where your husband really steps up to the plate so that you don’t have to?

If you want to get your husband involved, start by talking about goals. What do you want to be doing in five years? Ten years? Transition those conversations into what you need to do today to get there. If you start by framing personal finance around things that impact his life (and, on its own, knowing the amount you’re paying for cell service does not impact his life), you can make progress in that direction.

Right now, I have a room mate, and we split the bills and rent. My room mate pays me in cash and then from my account I pay bills with online bill pay, and rent with checks.

Is there any issue in doing this?
- Alvern

The only issue I see is that you’re completely relying on your roommate to always come up with that cash. What exactly happens if he/she doesn’t come up with that cash?

If I’m understanding it correctly, you’re the one with your name on the lease and the bills. If your roommate stops paying, there’s no real skin off of your roommate’s back in that situation.

My advice to you would be to either get your roommate’s name on the bills or maintain an emergency fund that will help you cover the bills if/when your roommate doesn’t come up with the cash.

I am 25 years old, and after some hard work, I have paid off all of my credit cards, etc., and I’m left with student loans that total about $50,000. $35k are government loans that have been consolidated, while the rest are private student loans of various amounts that I can’t seem to find a way to consolidate. (Either it’s not possible, or I’m too dumb to figure it out, so far! It’s also possible that my credit score is too lousy for anyone to even talk to me about it.)

Any advice would be appreciated. I’ve stared at this problem until I’m cross-eyed, and I think another (more experienced) perspective would be extremely helpful.
- Misty

If you have worries about making ends meet in the future, your best bet is to build up that emergency fund as your highest priority.

Think of it this way: in a year, you might have had twelve months of smooth sailing and a well-stocked emergency fund. At that point, you do have the freedom to choose to pay down that debt or to keep that emergency fund.

On the other hand, if you pay down the debt and have a bumpy road over the next year, you’ll be in far more debt trouble than before.

Don’t let impatience get in the way of a smart choice.

I am 63 and recently divorced. My son is 33 years old and he still lives in my home, an arrangement that started when my wife and I were still married. He refuses to leave the house on his own unless it’s for a very specific purpose and then he’s anxious to come back home. He spends most of his time in his room with his door shut. I am not sure how to handle this situation. I cannot afford to retire while he still lives here.
- Jeffrey

The first thing you need to do is lay down some basic rules in this situation. For one, I would simply state that if your son wants to continue to live at home, he has to begin regular meetings with a psychologist.

I say that because a continuing desire to live at home into one’s thirties, coupled with a fear of ever leaving the house, indicates some psychological troubles that are best dealt with via a professional.

If your child is unwilling to do this, you have to make up your mind as to whether you’re going to evict him. I think, for both of your sakes, that eviction would be the best choice if he refuses to take any steps towards improving his psychological situation. Something needs to change here, for both of you.

Do you think a student should study abroad if it means taking on additional debt? I’m a finance major at a public university and would really like to study abroad for a semester or academic year. But, I’ll be financing almost the entire cost with federal student loans (Stafford, Parent PLUS). I don’t want to increase my student loans more than I have to, but I also know I can’t redo the next 3 years. It feels very “now or never”. I view the time spent abroad as an investment in my future with business being so global in today’s world. But I don’t want to use that to easily justify an additional $10,000-$20,000 of debt.
- Ryan

If study abroad is treated as merely a semester or a year of partying in another country, it’s not worth it. If it’s treated as a time to actually grow, build new relationships, and gain experiences and references that were simply not available at home, it is.

Things like study abroad – or, for that matter, a college education itself – only show off their true value if they’re approached by a person who wants to maximize that value, not by a person who wants to skate by or is just looking to goof off.

If you’re approaching this with seriousness, then study abroad is a good choice. If you’re looking at it as an expensive way to see what it’s like to party in some other country, then you might as well just party at home and save yourself some cash.

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.