Quite often, I get emails from readers asking about the “best” way to purchase a particular car that they want. They have their eye on some new model and want me to essentially tell them that it’s okay to purchase it.

I rarely do. Taking out a loan for a car is only a good move if (a) you’re buying your first or your second car and absolutely need one today to commute to work – and even then, you should be buying a used one or (b) you have enough cash to buy the car you want but you’re offered 0% or extremely low financing, making it cost-effective to take out the loan and then sit on your investment (a pretty rare case, but one we found ourselves in recently).

We fully own both of our automobiles and don’t intend to replace either one of them for years. Of course, we’re slowly saving up for their replacements at a reasonable rate, but we’re not paying interest – interest is working in our favor.

Let’s run the math so that you can see, in real dollars, how much is saved by paying cash. You have no cash at all, but you need wheels. What do you do?

Option 1 – Buying New Now
You go to the dealership and take out a $25,000 loan on a new car. That loan is offered to you at 6% for five years, meaning you have a monthly payment of $483.32.

You drive this car for seven years. Each month, you pay $483.32 as a car payment. After five years, you own the car, but you’ve paid out $28,999.20 for the loan – $3,999.20 of that being pure interest. You then start saving $483.32 a month for your next purchase – after two years, your savings account totals $11,715.68 ($11,599.68 in savings, plus $16 in interest).

At the seven year mark, you trade in your used car for $6,000 in trade in and also make an $11,700 down payment on your next $25,000 car. You’re still borrowing $7,300 to buy the car, which means monthly payments of $141.13 over the next five years, totaling $8,467.80 – $1,167.80 of that being pure interest.

At this point, you also need to save $285 a month so that you have $25,000 in cash ready for your next car purchase at the fourteen year mark – seven years after this one. $23,940 of the savings will be cash and the rest will be interest – $1,104.64.

So, after all of this, you wind up paying out $73,006.68 over the course of these fourteen years and find yourself with a new car at the end of it.

Now, let’s look at fourteen years starting in a different fashion.

Option 2 – Buying Used Now
You go to the dealership and take out a $5,000 loan to buy a used car that will work for five years. You make monthly payments of $483.33 each month. For the first year, $430.33 of it goes towards the loan payment, while the other $53 goes into savings. For the remaining four years, the whole $483.33 goes into savings.

At the five year mark, you have just shy of $25,000 saved and the trade-in on your junker puts you over the top. New car time, paid for in cash. You then start saving for your next new car in seven years, saving $285 a month.

At the twelve year mark, you replace that car and keep saving the $285 a month. At the fifteen year mark, you have a three year old car and $10,414.67 in savings.

Over the course of all of this, you’ve actually only shelled out $63,199.80 out of your pocket for these cars.

Comparing These Two Scenarios
Here’s the real take-home message here: simply by buying a low-end used car at first in the second scenario and driving it until the owner could pay cash on a new car (at the five year mark), that owner saves $10,000. In other words, choosing to take out a loan for a new $25,000 car means that $10,000 is simply evaporating out of your wallet.

Remember that from here on out, both scenarios are going to be saving the same amount of money in their savings account to keep up with future car replacements, which essentially means that the money is a car payment.

I like to look at it this way: the owner of the second option is essentially paying himself $2,000 a year to drive a used car instead of a brand new one.

There are a few additional things to point out as well.

First, the insurance costs in the second scenario are lower as well. For those first five years, the person owns a used car which will have lower insurance costs than a new automobile.

Second, considering used cars in your buying decision can save you money. When you run the numbers on your car purchase, always include used cars, particularly ones from model years with a good reputation. Sometimes, those cars can save you significant money over the long haul through insurance savings, plus they allow you to retain some of your cash savings for your next car purchase.

Finally, having the money in the bank puts you in control. If you can buy the car in cash, you’re no longer worrying about your credit history or about whether a bank will offer you a good rate. You have your cash, you find the best deal, and you buy. Simple as that.

I’ll say this much: every time I run the long term numbers with regards to paying cash or taking out a loan for a car, I further reinforce my own plan to never again borrow a dime for a car (unless, as I mention above, I have the money in an investment that offers a better guaranteed return than the interest rate of the car loan).

This is the seventeenth 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.

Why am I here? What is the purpose of my life? How do I achieve that purpose?

At first glance, these seem like rather vague questions. Most people, if you sit down with them, don’t have a purpose in life, at least not one that they can clearly articulate. We just don’t spend much time – if any – thinking of our lives on that level.

There’s a good reason for that, of course. Such thoughts have incredibly low urgency, particulary compared to the business of day-to-day living. Things like “why am I here” often pale compared to the more direct needs of finishing a work project, preparing dinner, cleaning the house, making sure our son makes it to basketball practice, and so on.

As a matter of course, we almost always put the non-urgent things on the back burner and focus on the urgent things, while ignoring how truly important the various tasks are. Never is this more true than when we address the big questions in our lives – there’s always something more urgent to do.

I find a statement of purpose to be incredibly useful not just for my broad life, but for the specific large things I choose to do. Allen riffs on this a bit on page 251:

On an individual basis, an equivalent personal statement of purpose would represent the highest criterion for direction and meaning. “I exist as a human being to…” On more mundane horizons, it could involve clarification of your purpose for having a family, planting a garden, serving as an officer of a local chamber of commerce, or organizing a bake sale for a local charity.

Why do you do such things? Why do you exist as a human being? For that matter, why do you plant a garden? Why do you go to work?

It took me a long time to really piece through such questions in my own life. For the longest time, I was motivated by what I thought I was supposed to be doing or what others told me I should be doing. For me, such things are incredibly poor reasons to do anything, particularly over the long haul.

The longer I looked at my own life, the more I began to realize that I found success with things when I had an internal reason for doing them. The professional projects that I’m most proud of in my life were fueled by some sort of internal desire or drive. I had a “why” for doing each one of them. The same is true for every personal success – my “reason” for dating my wife, for example, was probably the strongest of any woman I ever knew.

In short, if you have difficulty stating “why” you’re doing something – or that reason isn’t something that really moves you – it’s going to be hard for you to succeed. On the flip side of that, the stronger your “why,” the more likely you are to find success.

This realization led me to spend a lot more time thinking about what I wanted out of life. What really moves me? Helping others moves me. Providing entertainment and provoking thinking in others – or in myself – moves me. This explains, to a degree, why I love to both read and write and why I love to both play and design games.

Here’s the thing, though. These conclusions didn’t come to me in a vacuum. They came to me as a result of doing lots of things in life, thinking about the things I’d done and why I’d done them, and figuring out which ones had meaning for me.

Allen touches on this on page 253:

Too often, though, the admonition to discover and clarify life and organizational purpose has created inordinate pressure to have all the answers before their is sufficient commitment to getting involved and being fully engaged.

In other words, starting with your purpose will usually end in failure. Do stuff, then step back and start drawing some conclusions from that. Without some real experiences to draw from, it’s nearly impossible to really understand what drives you forward to accomplish things.

Of course, a purpose rests upon a set of principles – basic rules that govern how we act in life. These work hand in hand with purpose, often channeling the purpose into something more specific that’s deeply in line with what you believe and desire. Honesty. Constant self-improvement. Being supportive of your spouse. Being in service to your community. These are examples of the types of principles people choose to govern their life by.

Why are such things important? Allen really sums it up at the end of the chapter:

As a general rule, the more you explore and identify what you personally consider the most essential factors and features of your life, the more solid your reference point for the times when you have to make tough choices. Is this decision really in keeping with my purpose? Does it line up with what I consider really important? That’s the kind of perspective that provides the greatest ballast for staying in control in deep seas and rough weather.

In other words, the more time you spend refining your purpose and principles and really trying to understand why you’re here, the more they will help you when you need to make decisions, like telling people yes or no at key moments or deciding where to go next at a career crossroads.

Just remember, though, that actions come first. Principles and purpose are drawn from experience. Through experience, we begin to understand what things work for us and feel “right” to us – and which things do not.

This past week, we spent quite a bit of time visiting Sarah’s parents. Her mother kindly bought several items that I would be able to eat or drink throughout the week in advance of our visit (yes, I actually like my mother in law!).

One of the things she picked up for me was a quart of soy egg nog. On my first day there, I tried it… and I liked it! It was quite tasty and it was something I could essentially enjoy without violating my current doctor-ordered diet.

Every day, I’d consider having another glass of it. Every day, though, I’d think “well, if I drink it all now, I won’t have any later in the week, so I’ll wait to enjoy it later.”

Sure enough, the last day of our visit came. Sure enough, there were so many things going on that the egg nog didn’t even cross my mind.

Sure enough, the rest of that egg nog is now sitting in their refrigerator, several hours away, at a house where the occupants likely won’t drink it.

In other words, my desire to conserve that egg nogd meant that much of the egg nog simply went to waste.

This phenomenon pops up all the time with regards to shopping and personal finance. If you buy ten pounds of apples in bulk because the price is right, you need to use them quickly before they begin to rot. If you buy a large container of honey, you need to use it before it crystallizes.

On a straightforward level, good personal finance is about conserving things. You conserve your money. You conserve your splurges. You reuse and recycle things, finding second uses for them. You buy secondhand items, allowing these items to have a longer lifespan.

Yet, when you do this too diligently, you can often waste things – like the egg nog this past week.

After thinking about it a few times the past few days, I’ve come to a few conclusions about this.

First, if you have a desire to use something that can go bad, use it. If that egg nog is sitting in the fridge and you want a glass, have a glass of it. Don’t wait unless you’re waiting for a very specific event – for example, you might be waiting to specifically share a glass with someone who will be there later.

Second, the real decision with regards to being financially conservative with such disposable items happens at the store. Your choice with regards to the egg nog doesn’t happen at home. It happens in the store when you’re deciding whether to buy it. The same philosophy goes with regards to virtually any item you might pick up.

Once you have that item at home, use it. Use it when you want to use it. Use it until it’s gone, then make a decision about whether to replace it.

If you’re preparing a bowl of oatmeal and think to yourself, “I could put honey in this… but I should save that honey,” don’t. Use the honey. If you “save” the honey for some unspecified future event, you’re just increasing the likelihood of finding yourself with honey that’s crystallized into a giant brick in a month or two.

If you’re wanting a drink and think to yourself, “I could use some egg nog right now… but I should wait,” don’t. If you wait and then forget about it, you’ll find yourself with rancid egg nog – and wasted money.

Your decision to buy such treats should happen at the store – or, ideally, before you even go to the store, when you’re assembling your grocery list.

When you make the choice to write the words “egg nog” on your list, the decision of whether or not to have a cup of it in your kitchen a few days later should already be made for you. Otherwise, you’re spending money on items that will go to waste.

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. Car trade-in math
2. Putting others at ease
3. Safe savings
4. Refinancing timing question
5. Board games for young ones
6. Retirement account diversity
7. Personal finance intervention
8. Mortgage readjustment
9. Mortgage prepayment versus savings
10. Blog focus

On Black Friday, I attempted exactly one sale – an online one. I failed to be at the site in time for the sale. No major loss.

Instead, I spent almost all the day with family members and friends, which took the “black” out of Black Friday.

Q1: Car trade-in math
My wife and I just moved out of our house after doing a short-sale. We were fortunate to live there long enough to pay off our credit card debt and essentially wipe the slate clean. Now at the age of 26, we are living with my parents with close to no bills and a decent monthly income and trying to save as much as possible to position ourselves for a better future. We own a 2008 Nissan Titan, which we financed for 27,000 out the door. Its our only real debt and I believe we owe less than its value because we pay slightly more every month than the minimum. I’ve been considering trading it in on a 2011 Hyundai Sonata for a few reasons. Assuming the dealer paid off the Titan in full, I should be able to negotiate a lower monthly payment on the sonata, the insurance is the same, the gas and maintenance would be much less. So all in all, I think by doing so I could save an additional $200 dollars a month to be reinvested. I understand that all the money we’ve paid into the truck would be “lost” but in the “wiping the slate clean” phase we are in, and with the primary goal to be save as much as possible, do you think this would be a wise decision?
- Beau

From what I can tell from your description, you’re wanting to trade in a vehicle that you borrowed $27,000 for (likely giving you payments of about $500 a month, depending on how you purchased it) essentially for the current value of the car in hopes that the amount will be enough to pay it off, giving you a break-even on that car. Then, after that, you want to buy a Sonata, ideally with a loan that gives you payments around $300 a month, “saving” you $200 a month.

I agree with trading in the Titan. $500 a month is pretty steep for a car payment and if you can easily get yourself out of it, that’s a good thing.

I’m not in favor of replacing it with a brand new Sonata if you’re having to take out yet another car loan to finance it. I would get a late model used sedan for about half as much as you’d pay for a new Sonata, pay that off as fast as possible, then save at a significant rate for its replacement.

Why? If something goes wrong in your life – you lose your job, etc. – you either have a paid-off sedan or, in the worst case, a car with much lower monthly payments than if you “bought” a new one.

Never buy a new car unless you can write a check for it.

Q2: Putting others at ease
I noticed you mentioned the ability to “put others at ease” in a couple of recent posts. I am a caseworker for social assistance in Ontario, Canada and I would like to improve my ability to do just that, to help the clients I work with to feel at ease with me. Are you able to recommend any reading on this subject or do you have any further observations in regards to developing this specific skill?
- Kyla

The best book on this is probably Dale Carnegie’s How to Win Friends and Influence People. I would suggest that for detailed reading.

The easiest method I’ve found for putting other people at ease face to face is by figuring out what they most enjoy about their life and asking them about it as a conversation starter. Look for clues. What’s on their clothing? Do they have a keychain with a picture of a child on it? Just look them over for things that identify what they’re passionate about.

When you have an idea or two, ask about them. Get them talking about something that makes them feel good and they’ll begin to feel more at ease with you.

Q3: Safe savings
I’m saving $30,000 for animation school which I won’t be attending for about 3 years. In the interim, I’m going to finish my fine arts degree. After that, I’ll then use the money saved towards animation tuition. While I’m working on my degree, though, what should I do with the $30,000? What’s something that is safer, yet allows my money to grow? It needs to be locked away, essentially, since I’ll be on student loans during the three years. I was thinking GIC’s, but the return is only 2.5%. Others have said I should put a down payment on a house and then sell it. What would you suggest?
- Tighe

I’m pretty certain that Tighe comes from Canada, where GICs are roughly the equivalent of treasury notes in the United States.

The real question is how stable Tighe wants his savings to be. If he has zero tolerance for losing any of the balance – well, in truth, there is no zero-risk investment but you can get the risk pretty small – a GIC is probably a very good choice, especially at 2.5%. Another option would be to simply stick it into a savings account somewhere, wait, and perhaps move it as interest rates rebound over the next few years.

If you start looking at things like buying a house, you’re introducing significant risk into the equation – you’re banking on an open market, where the value of the home can go in either direction. If that specific market falls from where it’s currently at, then you’ll lose money. The risk in buying a house strictly for a return in three years is pretty significant.

Q4: Refinancing timing question
My husband & I are expecting a large investment to pay off in the next year or so. It would pay off half the value of our home. After we make that payment, should we keep paying off the mortgage as it stands (rate of 6.25%) or refinance? Which would prevent us from paying the most interest on a home loan?
- Stephanie

Your best bet is to refinance, considering you can refinance down to 4% or below. Any time you can drop your interest rate more than a percent or so, it’s probably worth it to refinance.

Can you refinance now? If it is possible, now is the best time for you to refinance so that you can spend the next six months or so paying 4% interest instead of 6% interest on your home loan.

Of course, you might not be able to, particularly if you’re underwater. If that’s the case, make your big payment in 2011, then refinance as quickly as you can.

Q5: Board games for young ones
I want to get my 4 yr old twin daughters involved in board games. Could you recommend a couple to get them started. Maybe some that your kids have enjoyed that really get them thinking.
- Justin

I currently have a five year old and a three year old, so my best suggestions for you would be the ones that the two of them request and play together.

The one the two of them most often request is The Kids of Carcassonne, which really helps the younger one with spatial skills. The older one sees a bit of strategy in it and is thus often able to beat his younger sister.

They also have a copy of Travel Blokus that they play against each other quite often. As with the above game, my son sees the game differently than his sister and usually wins.

My older one’s favorite game is Hey! That’s My Fish!, which is similar in complexity to checkers but with much cuter pieces.

Q6: Retirement account diversity
What are your thoughts about having all your retirement accounts at one financial institution? I have a 403B and Roth IRA at Vanguard. My part time job boss is starting a SEP IRA for me and gave me the option of starting it at Morgan Keegan or any other institution of my choice. my initial reaction is just to stick with Vanguard, but what if they go bankrupt? Would I lose all my accounts? Is it safer to put the accounts in a few different places?
- Jennie

Vanguard’s funds (as are those of virtually every investment house) are protected by the SIPC, which ensures that most missing investments are reimbursed. You can read their brochure to find out more.

The SIPC protects your investments up to $500,000 in total value (up to only $100,000 in cash). If you have investments exceeding that, you may want to consider diversifying across various investment houses.

If you’re nowhere close to that, I wouldn’t worry about it at all. Pick the best investment house and stick with them.

Q7: Personal finance intervention
It recently occurred to me (I finally admit) I am dangerous when it comes to my personal finances. I quite honestly don’t know what to do — how to create a budget, how to keep a budget, how to manage monthly expenses… all of it.

I realize I need help… and the best help I can think of is to find someone who can teach me how to manage a budget on a month-to-month basis… kind of like taking piano lessons. I need to take lessons in personal finance. What do you recommend I do as a first step?
- Phillip

The actual “learning” of how to create a budget and use it from month to month is something you can teach yourself. In itself, it’s not challenging.

The challenge comes from sticking with it, and that’s a matter of psychology and motivation. The best thing to do with regards to this is to find a “money buddy” of sorts – someone who you feel comfortable enough with to openly talk about your finances with, both your successes and failures.

There’s no need to pay for someone like this – you probably have such a person in your social network. Do you have a close friend who might also be going through such a period of financial re-evaluation? That’s the type of person you’d want as your “money buddy.”

Q8: Mortgage readjustment
My husband and I recently bought a single family house. We got a loan for 392k after 20% down payment and the interest rate is about 4.5%. The monthly payment is about 1986.21 and I pay 2000 per month. Apart from our mortgage, we don’t have any debt. Both of us work and we don’t have any kids right now. We both put in around 10% of our pretax income into our 401k and have a healthy emergency fund to fall back on. I’m currently searching for a new job and recently sold all the stock that I had in ESPP from my company – around 35k. The question is regarding what to do with this money. We have 2 options – one is to put this money into our mortgage. If we put this down and readjust our mortgage($250 charge), the monthly payment goes down by approx. $200. A concern I have with this option is that with the housing market down, should we put down more money into our house?

Are there any other options I should consider?
- Shanna

One mistake I think you’re making is tying the value of your home to your mortgage. Unless you’re considering walking away from your mortgage – which you shouldn’t even be considering unless you’re way underwater – making extra payments on your mortgage shouldn’t hinge on the value of your home. It should hinge on interest rates and minimizing the overall amount of money you’re handing to the bank in the form of interest.

When you choose to sell your home, you’re going to have to deal with the mortgage on it, regardless of whether you sell sooner or later and regardless of whether your home value goes up or down. The more you’ve paid down your mortage, the more likely it is that you’ll have a surplus when you decide to sell.

In your case, I would absolutely pay down the mortgage first. It’s essentially a risk-free way to maximize the return on your money.

Q9: Mortgage prepayment versus savings
I have ~$450K in retirement savings and $27K in emergency funds (4 months worth). My mortgage has 28.5 years to run at a 4.1% fixed rate, which I can reduce to 10.5 years if I prepay $1K/mo (which would basically require an either/or choice to add to the emergency fund or to prepay). I am 43 years old, job is fairly stable, no looming risks that I can see. With company match, currently contributing 17% of my pre-tax salary to 401(K) with plan to increase that at the rate of 1% per year. Should I be prepaying?
- Brent

Do you want to retire on the first possible day or do you not mind waiting a few years beyond that for a more stable retirement?

That’s really the question here. If you prepay, you’ll have your mortgage gone at age 54 – otherwise, it’ll be at age 70.

If you’re shooting to retire on the first possible day, meaning you’re maximizing your retirement savings, you’re going to have mortgage payments for the first decade or so of retirement, making it much tighter to make ends meet.

Really, the “best” choice relies on being psychic about the future of the stock market – and no one can really predict it.

If I were you, I’d figure out a retirement age at which I’d like to retire, then figure out how much extra I would have to pay each month on my mortgage to make the mortgage vanish at that date (or just a bit before). Then, I’d use the remainder of that $1,000 per month and put it into retirement.

Q10: Blog focus
Sometimes you write posts or include questions in your reader mailbag posts that have little to do with personal finance. Nevertheless, you maintain the focus of The Simple Dollar very well and people seem to enjoy (and request) these little diversions. I’m guessing a lot of that has to do with regular readers wanting to get to know you better. How do you maintain your blog’s focus while allowing for this flexibility?
- Christine

That’s because The Simple Dollar isn’t really a personal finance blog per se.

Yes, on the surface, I talk about money issues a lot. The real focus of the site, though, is finding a balanced life – and I’m using my own life as something of a laboratory for finding it.

Personal finance is a key part of that balance and it was the first part of it that I really understood. Without having your money in order, it’s very difficult to build a better life for yourself.

But it goes beyond merely being all about the dollars. It’s about time management and knowing what you want out of life. It’s about setting goals and reaching them. It’s about relationships with others and the career that you want. These are all tied in with money, of course.

It took me a year or so of doing The Simple Dollar to really start understanding that it wasn’t really about money. It was about finding a better life and using myself as a lab to do it, with the implicit understanding that good personal finance is a very key part of it. That’s what I’ve stuck to ever since – and it allows me a pretty broad range of stuff to write about.

I find that it takes a while for every good blog to really figure out what it’s about. It’s usually not immediate – it takes some time for the idea behind the blog and the person (or people) writing it to really come together. Often, it winds up being something completely unexpected. I didn’t think The Simple Dollar would end up being about the things I write about now when I started writing pure frugality posts in late 2006.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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

A few years ago, I reviewed Jeff Yeager’s excellent book on frugality The Ultimate Cheapskate’s Road Map to True Riches. Quite simply, it was one of the best books on frugality I’ve ever read, with a healthy dose of humor and a lot of useful tips.

His follow-up, The Cheapskate Next Door, appeared on bookshelves earlier this year and I was quite happy when I was able to pick this one up from the library, given how much I enjoyed Yeager’s first book.

This new book involves Yeager interviewing other “cheapskates” and discussing some of the tactics that others use to practice frugality in their own lives. He also draws some general conclusions about frugality that are based upon these interviews.

Sound interesting? Let’s dig in a little deeper.

1 | The Phrenology of Frugality
Yeager opens the book by defining sixteen key features that define a “cheapskate mindset.” I find most of them quite agreeable, particularly “a cheapskate values time more than money” and “shopping isn’t a cheapskate sport.” In fact, I would define these traits as being more about being thoughtful about your money than being a “cheapskate.” In fact, in my eyes, Yeager often uses the word “cheapskate” when I would use the word “frugal” – the only time he seems to veer into what I would call being a cheapskate is when he is obviously joking or being sarcastic.

2 | Good Habits Are Hard to Break
Here, Yeager discusses the perniciousness of habits that result in the spending of excess money. Everything from shopping as a hobby to buying coffee and gadgets and books falls under this umbrella. His best tactic for eliminating such bad habits? Choose your friends carefully. You often mirror your friends in a lot of ways, so if your friends engage in financially poor habits, you vastly increase the odds that you’ll engage in them, too.

3 | Money Management, Cheapskate Style
Spending less than your age? The idea here seems a little strange, but it’s actually pretty sound. The entire point is that the younger you are, the lower your salary is likely to be, and thus the lower your spending should be. Many people don’t do this and instead bank on higher earnings in their future, taking out massive loans and living a lifestyle beyond their actual income. Of course, eventually the chickens come home to roost and you find yourself in middle age with a gigantic stack of debt bills and no hope of freedom. Instead, live lean while you’re young and you’ll find that middle age affords you more money than you’ll know what to do with.

4 | The Oxygen Mask Approach to Raising Kids
“Gratification is a dish best prepared in a Crock Pot: nice and slow.” I particularly like this quote’s applications to raising children. The lessons you teach a child aren’t taught in a day. Instead, they’re built up slowly over time, and you as a practitioner of frugality are a good example of that. If you make meals at home every night (or almost every night), your children will come to see this as the normal. If you spend with reckless abandon, your kids wlll see this as normal and come to adopt it as their own behavior.

5 | Thrift: The Greenest Shade of Green
Yeager makes the case here that many frugal tactics are also green tactics – they help the environment as well as your pocketbook. I can certainly say from my own experience this is true. A big part of frugality is buying less stuff (meaning less stuff thrown away) and reusing what you have, like

6 | Clean Your Plate … and Save $,500 a Year
This almost expands on the previous chapter, as the point is clearly made that throwing away food is like throwing away money. Yeager discusses various methods for reusing food, from using basic ingredients in homecooked meals so that if you have some left over, you can just roll them into the next meal, or freezing remnants that you don’t use. Even food waste can have some valuable turning leftover vegetable scraps into vegetable stock or putting it in the composter instead of just tossing stems and leaves into the trash.

7 | Come on and Take a Free Ride
I’m not a big fan of freebies – most of the time, they’re not worth the hassle or the drawbacks to them. Yet many people swear by the value they find with them and Yeager is no exception. This chapter lists quite a few different resources for finding free things, both online and offline. I myself prefer to swap things, where I’m keeping the number of possessions I have in reasonable check while also getting things that I’d like to have.

8 | We Can’t Retire. We Went out to Dinner Instead
Dining out might seem like a normal routine for some, but if you add up the costs of it over a long period, it adds up to a lot of money. If you eat out twice a week for $30 when you could eat at home for $5, guess how much that adds up to over ten years? $26,000. If you can trim those meals eaten out down to once a week, there’s $13,000 you didn’t have before. Figure out ways to eat out for less or cut back even more on dining out and you put even more money in your pocket.

9 | The Joys of Horse Trading
Bartering and swapping can be a very wonderful thing. It allows you to connect with someone else, give them something that they’ll value more than you do, and receive something you value in return. It’s pretty much a triple win. I barter quite frequently, using services like PaperBackSwap or simply going to farmer’s markets or swap meets locally (I really miss some of the swap meets I used to go to near the end of my college days).

10 | Break the Mortgage Chains that Bind Thee
Cheapskates tend to buy smaller homes (averaging around the size that was the national average home size circa 1970) and buy below their means (meaning they don’t take out every dime they possibly can in mortgages). On our home purchase, we certainly checked off both of these boxes, though we may someday build soemthing different and slightly larger when we can afford it and pay cash for most of it.

11 | Bon Appe-Cheap!
The fine art of cooking food for yourself at home isn’t lost on Yeager – he spends this chapter discussing home food preparation, particularly ways to do it for less. There seems to be some difference of opinion in this chapter among different frugal folks about how to maximize your dollar, but Yeager ends the chapter with a summary of many of the points people do agree on, such as shopping for food only once a week and “laddering” your produce (eating stuff that goes bad quickly early in the week and saving the hardier stuff – like apples – until later in the week).

12 | Don’t Laugh. It Gets Me There … and It’s Paid For.
You should always pay cash for a car. If you can’t pay cash for that car, you shouldn’t be buying that car and should be looking for a less expensive model. Ideally, you’re buying a used car with a good track record for reliability and then driving it until it’s nearly worn out. Doing much beyond this plan will ensure that your car becomes much, much more of a money eater than it already is.

13 | Cheapskates Come out of the Closet
Practicing organization and premeditated shopping in the form of an ongoing “clothes I need” list. Hitting thrift stores instead of new clothing stores. Buying new only if you see deep discounts. These are the tactics of people who spend very little on their clothes budget and yet still manage to dress professionally and respectably. I know that I was surprised the first time I started shopping for used clothes. I expected to find mounds of threadbare stuff – instead, I found mounds of practically new stuff mixed in there for pennies on the dollar.

14 | Insurance: Betting on Yourself
Most of this chapter simply advocates for the power of shopping around for insurance. This isn’t just a “do-it-once-and-forget-it” kind of thing – it’s something that’s worth doing regularly, and you can sometimes get great deals by switching insurers. Yeager does get a little bit political here, advocating for universal health care, so if that bothers you, skip by it.

15 | Cheapskates Just Wanna Have Fun
How do cheapskates have fun? They participate in things. They make up their own fun. They choose activities that are social and active rather than passive. They pick and choose the expensive activities they engage in and rely on a backbone of very inexpensive or free activities. When they travel, they often travel in groups and go off the beaten path for unusual experiences and better prices.

Is The Cheapskate Next Door Worth Reading?
Yeager’s first book, The Ultimate Cheapskate’s Road Map to True Riches, was a very enjoyable collection of frugality tips. This book, however, seems to largely be an add-on to the first one that also incorporates a lot of interviews with people who are committed to frugality. It has the same sense of humor, but much of the advice is just an expansion of what appeared in the first book.

In fact, in many places in The Cheapskate Next Door, Yeager seems to actually say this. He refers quite regularly to his first book, doing it so often that, at times, I felt compelled to just go back and read the first one again.

I would recommend this one to anyone who enjoyed The Ultimate Cheapskate’s Road Map to True Riches and want to read more of Yeager’s stylings on frugality. If you’ve never read the first one, go back and read that one first and decide whether you want a second volume of that material that largely just expands on the first.

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 (November 21 – November 27, 2009)
How to Start a Meal Exchange Exchanging meals with friends and family is not only convenient, but it can also save a lot of money, too.

It’s Not the School, It’s the Student It’s easy to blame schools when something is wrong with your child, but quite often the solution is found at home, not by railing against the school district.

Consumption Smoothing and Why It Doesn’t Work To put it simply, consumption smoothing (on an individual basis) doesn’t work because we don’t know the future, and if we do everything based on some assumption of the future, we end up making bad moves because the future almost always won’t match that assumption.

Two Years Ago (November 21 – November 27, 2008)
Ten Fundamental Steps for Online Career Networking Reaching out to others online is often seen as being merely signing up for Facebook and LinkedIn, but such efforts just scratch the surface of the potential opportunities out there.

When a Treat Stops Being a Treat – and How to Get It Back I find that if something used to be a treat and is now routine, it often improves my enjoyment of that treat to take a long break from it. When I return, it really feels like a treat.

5 Simple Water Conservation Methods: Do They Save Real Money? Most obvious water conservation methods save some water, but they don’t add up to enormous savings.

Three Years Ago (November 21 – November 27, 2007)
The Expenses of a Soda Pop Addiction – And How to Defeat It Soda addiction, like any substance addiction, not only has an ongoing cost, but also has long term health costs. Cracking that addiction is well worth it.

Twelve Important Things To Talk About When Your Relationship Gets Serious Sitting down with your potential life partner and figuring out what your financial future looks like can really help to bond you together – and can also give you signs of potential problems.

Six Ways to Fight Back When You Lose Financial Focus It’s easy to lose focus. It’s a lot harder to regain that focus.

Four Years Ago (November 21 – November 27, 2006)
PayPerPost, Paris Hilton, and Violating the Trust Between You and Me I still stand by this post, even though I’ve been offered impressive sums for selling out.

Money For Nothing: Five Ways To Put Money In Your Pocket With Zero Effort Yes, even lazy people can save money.

What Can A Dollar A Day Get You? And An Inspirational Idea A dollar a day can get you quite a lot if you’re willing to be patient with it.

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 130,000 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!

This is the sixteenth 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.

“What would long term success look, sound, and feel like?”

Again, Allen opens the chapter with a provocative question. What, to you, would success really be like? What would your life be like? What would you have achieved?

In the past, I’ve written about an exercise that I regularly do where I sketch out, in as much detail as possible, what I would like my life to look like in, say, five years. Where am I living? How do I spend my time? What are my children like? What is my relationship with my wife like?

Details, details, details.

But why so many details? The more details I have, the more clues I get as to the types of goals and projects I should be setting.

Allen actually advocates for this type of thought experiment on page 244:

For an individual, writing or crafting a script for an ideal future can serve the same purpose and have the same kind of positive effect [as a simple "what-if" scenario]. Over the years I have experienced innumerable instances in which people I have known (myself included) have simply written a lot of the things they would like to have in their ideal world – from quality of relationships, to living environments, aspects of career, health, and finances – and over time have watched them manifest.

How do you do that?

A more detailed version of this kind of future thinking can take the form of writing out a more descriptive scenario, as if composing a short story about an ideal situation coming into being. If you are particularly visual, creating “treasure maps” can function the same way. Either drawing pictures and expressive icons or cutting and pasting pictures and text from magazines onto a collage can be wonderfully freeing, creative, and deeply motivating.

On some level, this sounds a lot like the whole “positive thinking” often espoused by popular New Age gurus. This is different in one key way, though: this stuff isn’t just manifested by thinking positively about it.

Instead, as I mentioned above, this type of thinking about the future sets the foundation for a lot of projects and goals that will carry you in that direction.

As with my overall goals, I review this sketch of mine about once a quarter, roughly as often as I review my goals. Allen seems to concur with this type of regular revisiting, on page 255:

As is true with the other more elevated Horizons of Focus, revisiting this level could be done on a regular basis as part of an ongoing commitment to keeping a vision active or whenever circumstances require a consideration of the overall situation from this perspective.

I actually keep a Word document on my computer that, within it, contains a handful of detailed descriptions of what I would like my life to be like in the future. I use this document when I sit down every three months or so to review all of my goals, areas of focus, and projects, so that I know that I’m on target with where I want to be going with my life.

During my reviews, I look at that vision. Are all of the things in my life, from the big ongoing initiatives to the smaller projects to the way I spend my day, leading to this picture that I’ve developed? Is this still the big picture of what I want in my life in five years?

Usually, the only time the picture shifts significantly is when I’m taking stock of changes in my life. I’ll add another child to that picture. I’ll change my career goals based on the successes I’ve been seeing and what I feel excited about doing over the past several months. The picture slowly evolves.

What’s powerful, though, is when I see how much of the everyday activities in my life lead to this picture. The most mundane day-to-day things almost always have some connection to this picture, another step in that long, long journey. It is at this stage when I really can connect all of the little things I do to the bigger picture of my life.

It’s powerful, indeed.

Happy Thanksgiving! Today’s a great day to step back and reflect on the positive things that have happened in our life over the past year and the things that bring joy into your life. Here are ten things I’m thankful for today.

I’m thankful for the laughter of my infant son, the bright smile that often comes up on his face, and the look of peace on his face as he sleeps.

I’m thankful for the smile of my daughter, her growing wit, and her ability to bring levity to any situation.

I’m thankful for the growing insight of my son and his already-appearing leadership abilities while still retaining a wonderful sense of caring for others.

I’m thankful for the friendships I’ve been able to build over the past year, particularly the one I’ve built with the husband of one member of our wedding party.

I’m thankful for my readers who have given me the opportunity to write for a living, provide constant feedback and support, and constantly surprise me with their generosity.

I’m thankful for my ongoing health, even as I understand how tenuous it all really is.

I’m thankful for the ability to spend these days surrounded by people I care about.

I’m thankful for beginning to learn how to express myself in musical form, something that I never understood prior to this year. Thank you, Diane.

I’m thankful for the opportunities I have to discuss difficult and sensitive topics with understanding people who won’t judge my perspectives and are seeking answers, just as I am. Thank you, Heidi.

Perhaps most of all, I’m thankful for my wife, who is the yin to my yang in every way. I didn’t understand what it meant to have someone “complete” you until after being with her for many years. She is wonderful, in every sense of the word.